New AML/CTF legislation approved by the committees of the European Parliament

The Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees of the European Parliament have given their approval to three draft legislations that aim to strengthen the EU’s anti-money laundering and counter-terrorist financing (AML/CTF) regulations.

One of these draft legislations is the “single rulebook” regulation, which aims to standardize AML/CTF policies across various domains. The regulation covers topics such as crypto-currencies, new financing methods like crowdfunding, company ownership, “golden” passports or visas, and customer due diligence. The regulation received strong support from MEPs within the committees, with 99 in favor, 8 against, and 6 abstentions. According to the new rules, providers of gambling services must conduct due diligence when collecting winnings, accepting wagers, or both, for transactions that exceed €2,000.

“We cannot tolerate the corrupting influence of dirty money in our political system any longer,” said Spanish MEP Eva Maria Poptcheva. “In the wake of Qatargate, Parliament heard this message loud and clear.

“Dirty money is not just a threat to our democracy, it also fuels inequality and injustice,” she added. “Ordinary citizens struggle to make ends meet while criminals prosper with the complicity of systemic corruption. This has to end.”

Caps will be implemented on specific types of transactions, including a €7,000 limit for cash payments and a €7,000 limit for cryptocurrency transfers where the customer’s identity cannot be established.

Possible exemption for gambling

Under the new regulation, member states have the ability to exempt certain gambling services from the rulebook, except for casinos. These exemptions can be granted based on the business’s small scale of operations or proven low risk. Member states must conduct a risk assessment to identify potential AML/CTF vulnerabilities and mitigating factors related to the size of transactions, payment methods, and geographic area where the gambling services are provided in order to qualify for the exemption.

Although the practical implications of this exemption are not yet clear, it is possible that jurisdictions previously scrutinized by international anti-money laundering watchdogs like the Financial Action Task Force (FATF) may face increased AML/CTF requirements.

Updating of 6AMLD

The second element of the legislative package involves updating the 6th Anti-Money Laundering Directive (6AMLD), which was first introduced in 2021. The revised directive includes provisions that standardize the supervision and operations of Financial Intelligence Units (FIU), which are government bodies established at the member state level to prevent, report, and combat money laundering and terrorist financing.

To identify money laundering schemes and freeze assets promptly, FIUs and other competent authorities will be granted access to information on beneficial ownership, bank accounts, and land registers. Furthermore, information on certain high-value assets that are attractive to criminals, such as yachts, planes, and cars worth over €200,000, will be aggregated at the member state level. FIUs will collaborate with one another on a global level, as well as with the new EU-wide money-laundering organization that has been established as another provision of the new legislation.

“We are losing the battle against money laundering, which costs society up to two trillion US dollars annually worldwide,” said MEP Paul Tang. “That is why parliament worked together on finding effective ways to fight money laundering, by demanding the registration of expensive cars, boats and planes and by obliging the disclosure of all goods stored in free zones.”

Establishment of new authority

The final piece of legislation pertains to the European Anti-Money Laundering Authority (AMLA), which will be granted supervisory and investigative powers to ensure adherence to AML/CTF obligations.

The new organization will assess threats from both inside and outside the EU and categorize financial and credit institutions according to their level of risk. It will have the authority to require companies and individuals to provide documents and other information, conduct on-site inspections with the approval of a judge, and impose sanctions of up to €2 million or 0.5-1% of annual revenue for rule violations.

Moreover, the AMLA will have the power to impose fines of up to 10% of total revenue for the preceding business year on entities found to be in violation of AML/CTF regulations.

“We need to draw a clear distinction between national supervisors’ powers and the direct supervisory powers of AMLA,” said MEP Emil Radev. “In addition to directly supervising selected entities, AMLA will promote high standards, convergence, and the creation of a common culture among national supervisors.

“It will also help us overcome problems arising from a lack of coordination between various national supervisory authorities and Financial Intelligence Units. In the end, we hope that the newly created authority will guarantee more financial security in a cross-border environment where risks have been constantly growing.”

Advancing through the committees is a crucial milestone, but the legislative package still requires approval from the Parliament. Following the April plenary, MEPs will initiate negotiations on the proposed legislation.