The new EU anti-money laundering agency (see EUROPE 12720/16) will be the centrepiece of the new framework that the European Commission will present on 20 July. The draft legislative texts, obtained by EUROPE, give a taste of what might be on the table.
The package of measures should include: – a regulation establishing a new European anti-money laundering authority; – a regulation establishing a single set of rules on money laundering; – a recast of Regulation 2015/847 on information accompanying transfers of funds; – and an amendment to the 5th Anti-Money Laundering Directive. These measures are in line with the Commission’s action plan of May 2020 (see EUROPE 12482/8).
A brand new authority
The Commission had already hinted for some time that it would opt for the creation of a new decentralised EU agency rather than using the European Banking Authority (EBA).
“It was examined whether existing EU agencies would be able to take up the full range of tasks proposed for the new Anti-Money Laundering Authority, and it was concluded that for legal and other reasons, this was not the case”, says a draft version of the regulation creating the new authority.
The EBA’s competences in the field of anti-money laundering, which were granted to it by the revision of the European financial supervisory architecture (see EUROPE 11864/1), will therefore be removed and transferred to the new agency.
Direct supervisory powers
According to the draft text, the authority will exercise direct supervision over “a limited number of the riskiest cross-border financial sector obliged entities”. The selection of these entities will be made every 3 years, based on “objective criteria”.
Entities with activities in a number of Member States and which have been classified in the highest risk category by the national supervisory authorities of a number of those Member States, based on a harmonised risk assessment methodology, are expected to be subject to such supervision.
The draft text specifies that only credit institutions established in at least seven Member States—including through subsidiaries or branches—should be included in this selection process. For other financial institutions, the requirement would be operation in at least 10 Member States, including through direct provision of services or through a network of agents.
The supervision of these entities is intended to be carried out by joint supervisory teams led by the authority, but also including staff from national supervisory authorities.
In addition, the new agency will have the power to issue binding decisions to these entities and to impose administrative penalties of up to 10% of their turnover or up to €10 million, whichever is higher.
It should be noted that direct monitoring activity is not expected to begin until early 2026.
Indirect supervisory powers
The agency will also have indirect supervisory powers over other non-selected obliged entities and obliged entities in the non-financial sector. Its role here will be to coordinate and supervise the national supervisory authorities and to provide them with advice and recommendations.
It will also be empowered to develop technical regulatory and enforcement standards as part of its tasks and to advise the European institutions.
A procedure is also foreseen in the draft text to allow it to substitute itself for national supervisory authorities in the supervision of any obliged entity in the financial sector in “emergency circumstances” or if there are indications that breaches of EU money laundering rules are not being dealt with effectively and adequately by a supervisory authority.
However, the transfer of powers could only take place after a procedure ending with a decision by the European Commission.
Support for financial intelligence units
The future authority will also serve as a “support and coordination centre” for national financial intelligence units (FIUs), according to the draft text.
In particular, it will assist them in the joint analysis of suspicious transaction reports and suspicious activity reports with a significant cross-border footprint.
The authority will also host, manage and maintain the FIU.net platform—the communication network between EU FIUs—which is currently hosted by Europol and is expected to be transferred to the European Commission in the near future, pending the establishment of the authority.
Governance
The authority will have two collegiate governing bodies: an Executive Board composed of six people, including the chairperson of the authority and five other permanent independent members with voting rights; and a General Board composed of representatives of the Member States.
The General Board will have two alternative compositions: one consisting of the heads of the public authorities responsible for anti-money laundering supervision and another consisting of the heads of the Member States’ FIUs. It will adopt draft regulatory and technical standards, guidelines, and recommendations.
In turn, the Executive Board will take all individual decisions concerning obliged entities or supervisory authorities.
Both boards will be chaired by the authority’s president, who will be appointed by the EU Council, after approval by the European Parliament. An Executive Director will be responsible for the day-to-day management of the authority.
An Board of Appeal will be established to deal with appeals against binding decisions of the authority addressed to obliged entities under its direct supervision. The decisions of the Board of Appeal may be appealed to the Court of Justice of the European Union.
Budget
The new authority will be financed partly by the EU budget and partly by fees collected from certain obliged entities as well as by “any voluntary financial contribution from Member States”.
The methodology for selecting the entities that will pay fees will be defined in a Commission delegated act at a later stage.
The Commission estimates total annual expenses will be €45.6 million once the authority is fully operational. About three quarters of this should be financed by fees paid by obliged entities, it says. In terms of staffing, the new agency is expected to be staffed by 250 people. It should be noted that the resources allocated to the EBA to carry out its anti-money laundering mandate should be transferred to the new authority.
According to the draft text, the agency should be established at the beginning of 2023, in order to allow sufficient time after the entry into force of the regulation to set up its establishment at the location where it will have its seat. The latter issue is to be decided by the EU co-legislators.
See the draft regulation: https://bit.ly/3hDWt8q
A single corpus of rules
As committed to in its Action Plan, the Commission is also expected to present a corpus of rules, through a regulation, to further harmonise the application of the rules in the EU.
“The present proposal goes beyond transferring provisions from the existing Anti-Money Laundering Directive to a Regulation”, the draft regulation stresses, however.
A number of changes and new definitions have indeed been made. The list of obliged entities is furthermore expanded, and the rules are more detailed in several areas, such as policies, internal controls and procedures, customer due diligence, and transparency of beneficial ownership.
Note that a provision limiting the use of cash by retailers for a single purchase of more than €10,000 has been inserted.
See the draft regulation: https://bit.ly/3jR6Loh
A new directive
To complement this proposal for a Regulation, the Commission is expected to present a proposal for a Directive, taking over several elements of the 5th Anti-Money Laundering Directive (2018/843) and inserting some new provisions for which a directly applicable Regulation has not been deemed to be the appropriate tool.
The draft text maintains, for example, the obligation for Member States to keep registers of beneficial owners, but new provisions in case of doubt about the accuracy of the information provided have been added, where the beneficial owner cannot be identified or in case of discrepancies in the information.
The obligation for the Commission to carry out a periodic EU money laundering risk assessment is also maintained, but the frequency of this assessment has been modified: it will take action every 4 years.
The draft text also contains a series of new provisions relating to FIUs and self-regulatory organisations, as well as clarifications regarding cooperation and supervision.
See the draft directive: https://bit.ly/3AE1xCk
More transparency on crypto-assets transfers
Finally, the Commission is also expected to present a proposal to recast Regulation 2015/847 which seeks to ensure full traceability of money transfers in order to extend its scope to transfers of crypto-assets carried out by service providers related to crypto-assets.
According to the draft text, these providers would be obliged to collect and make accessible certain data concerning the principals and beneficiaries of the virtual asset transfers they carry out.
In practice, this amendment aims to transpose into European law Recommendation 15 (known as the ‘travel rule’) of the Financial Action Task Force (FATF).
See the provisional version of the regulation: https://bit.ly/2UssyZ4 (Original version in French by Marion Fontana)