The EU is in the process of cracking down on suspicious financial transactions, which represent more than 1% of the bloc’s GDP. Markus Spiske/Unsplash

The EU is in the process of cracking down on suspicious financial transactions, which represent more than 1% of the bloc’s GDP. Markus Spiske/Unsplash

The European Commission is set to unveil plans for a pan-EU dirty money watchdog later this month, which opens up the question of whether or not it will be located in Luxembourg.

The  and  reported this week that the EU will set up a new Anti-Money Laundering Authority. The move is a rebuke of the current system of national regulation, loosely coordinated by the European Banking Authority, and a response to the and scandals.

“Europol estimates the value of suspicious transactions in the hundreds of billions of euros--at an equivalent of 1.3% of the EU’s gross domestic product,” the European Court of Auditors wrote in a issued on 28 June. “Global estimates are close to 3% of world GDP.”

The AMLA will be the “centrepiece” of a common set of anti-money laundering and counter terrorist financing rules, the news outlets said, citing leaked European Commission documents. The agency will employ around 250 staff, be set up in 2024 and start direct supervision in 2026, and be empowered to issue fines of up 10% of a firm’s annual turnover or up to €10m (whichever is greater).

When approached by Delano, the European Commission declined to comment on the articles or on the leaked documents. However, the commission is expected to present new anti-money laundering legislation in a few weeks’ time. Officials have previously indicated that the package would contain a €10,000 cash limit and the creation of a new EU agency.

Sven Giegold, the German Green MEP, the proposals (which he called “a major step forward against money laundering”) would be released by the European Commission on 20 July. The rules then need to be approved by the European Parliament and European Council.

Luxembourg government in favour

The grand duchy’s government backs the package, but would like it expanded beyond the banking sector.

“Luxembourg supports the option of creating a new European authority,” a spokeswoman for Luxembourg’s finance ministry told Delano on Thursday. “This authority will most likely be inspired by the good experiences and modalities of cooperation between national and European authorities in the field of banking supervision. Luxembourg also believes that a cross-sectoral and inclusive approach is necessary. The scope of action of this future European authority should therefore go beyond the financial sector and include actors from other economic sectors.”

“Luxembourg is also in favour of harmonising the relevant legislation through a directly applicable European regulation,” she stated.

Located in Luxembourg?

The FT wrote that: “The proposals do not suggest a location for the body.”

There is an argument to be made for placing the AMLA in the grand duchy. Luxembourg is home to several of the EU’s judicial and auditing bodies--including the European Court of Auditors, European Court of Justice and European Public Prosecutor’s Office--and several of the EU’s financial bodies--such as the European Investment Bank and European Stability Mechanism.

So, could the new agency be based in Luxembourg? The finance ministry spokeswoman told Delano: “For projects at this early stage, it is usually first a matter of defining areas of responsibility and tasks. The question of a location is usually decided later. Therefore, it is too early to express an opinion on this issue.”