The European Union has created a new agency, the Anti-Money Laundering Authority, to combat money laundering and the financing of terrorism. This was the decision taken by the 27 member states this spring as part of a wider AML package. Although the Frankfurt-based authority will officially begin operations in mid-2025, it has in fact already been set up and certain aspects have been in force since 26 June.
Manfred Hoffmann, counsel in the investment management department at the law firm of Arendt & Medernach, explained that “Amla already has the power to influence the market by producing guidelines, recommendations and technical standards”. And it does so on the basis of the new AMLR regulation, another key part of the European package: “Even though this text will not apply until 2027, Amla is the body responsible for interpreting it”.
Amla could make the procedures either very restrictive or more manageable.
Practical example: “In 2025, the authority should probably start publishing technical standards on reasonable customer due diligence, which is a fundamental element,” said Hoffmann. “This will have a real impact, because we will know what documents we need for this purpose. The way in which Amla applies these rules is crucial: it could make the procedures either very restrictive or more manageable. Whatever the decision, it will affect all players in the same way, which is in itself a major change.”
Hoffmann cited a second example, specific to the fund industry: “In most funds, the board of directors assumes collective responsibility for compliance with anti-money laundering standards. This will change with the new AML regulation: by 2027, a specific individual will have to be designated. The Luxemburg Financial Sector Supervisory Commission (CSSF) will probably wait for Amla’s recommendation before aligning itself.”
From now on, national authorities will have to take account of Amla’s guidelines.
The situation is also changing for professionals and supervisory authorities alike. “Until now, national authorities have enjoyed a degree of flexibility in transposing and applying the rules. From now on, they will have to take account of Amla’s guidelines", said , a partner at Arendt Regulatory & Consulting.
Périot said the arrival of the authority is a positive development: “Many players expect clear common technical guidelines, which was sometimes lacking in the past. Practices can vary significantly from one country and one sector to another. It is therefore essential to have the same interpretation everywhere. With Amla, we expect to see harmonisation that should also improve the customer experience across Europe. In a way, the authority will act as the guardian of the temple.”
While Amla is essentially working behind the scenes at the moment, not everything is happening “behind the curtain”, stated Arendt & Medernach partner . “Over the next two years, there will also be consultations, some of which will focus on future guidelines, recommendations and technical standards. These consultations will play a key role. They are crucial because they present proposals to the market and solicit feedback, creating a ‘democratic’ interaction between the authority and stakeholders.”
This is the first time we have seen super-supervision in this area.
From 2027, Amla will move up a gear, directly supervising 40 entities and groups. According to Arendt, this is a “real revolution” in institutional terms. “This is the first time we have seen super-supervision in the fight against money laundering and the financing of terrorism”, commented Meyer. “Within its scope of supervision, the Authority will have the same powers as a national authority, including the ability to impose sanctions.”
Amla’s institutional framework is somewhat similar to the Single Supervisory Mechanism, where the European Central Bank supervises major banking institutions. However, the approach takes into account the specificities of the fight against money laundering and terrorist financing, with a focus on risk rather than size. “Amla will consider cross-border activities and use its own methodology to assess risk. The entities with the highest residual risk will be selected for direct supervision,” explained Meyer.
At least one Luxembourg entity
Unlike the SSM, which focuses solely on banks, Amla will have a broader scope of supervision, encompassing various entities in the financial sector. Non-financial entities will remain supervised at local level. “But Amla will play an indirect supervisory role, by establishing a convergent supervisory methodology at European level”, said Meyer. “There will be intense collaborative work with national authorities to ensure uniformity of supervision across all member states.”
As part of its forthcoming selection process, Amla will select at least one entity per member state for direct supervision. Who will be the lucky one in Luxembourg? Arendt does not expect it to be an investment fund manager. “Considering the cumulative risks and the volumes managed, it is likely to be a banking entity," observed Meyer. “But even if at least one Luxembourg bank is selected on the basis of this principle, other subsidiaries or branches of a large European banking group located in Luxembourg could also be included because they belong to a group selected in another member state.”
Read the original French version of this report