“Where will the AMLA office be?” This question has created a lot of interest and discussion about the new European Anti-Money Laundering Authority, while some have speculated it might be in a city like Dublin, others suggested a financial hub such as Frankfurt. Finally, Frankfurt has been chosen to host the EU’s new anti-money laundering authority. However, apart from the excitement about its location, a more fundamental question arises: What exactly is AMLA? Why has it been established? And which is the potential impact on national financial supervisory authorities?
The first aspect to highlight is that the new established authority will have two main areas of activity: AML/CFT supervision and supporting EU Financial Intelligence Units (FIUs).
With the AMLA will be established a single integrated system of AML/CFT supervision across the European Union, ensuring uniform application of the EU framework across borders, their mutual support between national AML/CFT supervisory authorities and cooperation. Moreover, the Authority will organize and oversee activities in the non-financial sector.
AMLA will have the authority to directly oversee entities that pose a high risk of financial misconduct, will operate on a two-tier supervisory model. This includes European direct supervision of entities most exposed to AML High-risks, such as cross-border financial institutions and crypto asset service providers, and enhanced coordination of national supervision across EU member states.
The EU Authority will replace national supervisors only as a supervisor of a small number of cross-border financial sector entities in the highest risk category. The AMLA will oversee up to 40 financial institutions considered at the highest risk for money laundering or terrorist financing. This includes at least one institution from each EU country, expanding the AMLA’s direct supervision beyond the initial European Commission proposal of overseeing 12 to 20 institutions.
As we previously mentioned, the Authority will directly supervise certain financial institutions, and this supervision will be determined in two main ways:
First, the Authority will select financial institutions that operate in many Member States and have a high risk profile in several of them. This selection will be based on clear risk and cross-border activity criteria. The list of these institutions will be updated every three years. Before the first selection, the process for determining the risk level of these entities will be standardized to ensure fairness. The first selection using this standardized method is set for 2025, and the supervision of these selected entities at the EU level will begin in 2026.
Secondly, the Authority can also choose to supervise a financial institution directly if it’s not meeting its anti-money laundering and counter-terrorism financing obligations and poses a significant risk. This can happen even if the institution doesn’t meet the usual criteria, especially if the national supervisor isn’t able to address these risks quickly and effectively. In such cases, the Authority can ask for a Commission decision to place the entity under its direct supervision.
AMLA will also coordinate the supervision of other financial entities by national authorities. In cases of disagreement between national authorities. Additionally, AMLA will coordinate the work of national Financial Intelligence Units (FIUs), support joint analysis efforts, and host the FIU information sharing platform, FIU.net. It would play a supportive and coordinative role, particularly in enhancing information exchange and cooperation between national Financial Intelligence Units (FIUs). It would not be a FIU itself but would assist in the conduct of joint analyses of cases and manage the FIU.net platform for better information sharing.
AMLA would also be responsible for developing and maintaining the AML/CFT database, assessing risks and vulnerabilities of selected entities, and conducting periodic reviews to ensure national supervisors have adequate resources and necessary powers.
For non-selected obliged entities, supervision would remain primarily at the national level. National supervisors will retain responsibility and accountability for direct supervision. AMLA would assist them in enforcing the single rulebook and ensuring uniform, high-quality supervisory standards, approaches, and risk assessment methodologies.
AMLA would have the authority to conduct peer reviews of non-financial supervisors, investigate possible breaches or incorrect application of Union law, and request investigations into breaches of obligations by obliged entities. It would also adopt regulatory and implementing technical standards and issue guidelines or recommendations addressed to obliged entities, national supervisors, or FIUs.
The plan is for the Authority to employ about 250 people. Approximately 100 of these staff members will focus on directly overseeing specific entities required to comply with regulations. These staff will be part of Joint Supervisory Teams (JST), which will also include members from the national supervisory bodies of these entities. This integration could mean that officials of Nationals Authorities will be part of these teams, working alongside AMLA representatives in supervising high-risk entities.
One of the main role of the JSTs is to conduct regular on-site inspections. JSTs are led by staff members from the AMLA and include staff from relevant national supervisors. The team is led by a JST coordinator who is stationed in the Member State where the supervised entity has its headquarters. The placement of the JST coordinator is strategic to ensure that the team has an adequate understanding of national specificities, which can be crucial for effective supervision.
For direct supervision, the AMLA, through the JSTs, has the authority to adopt binding decisions and impose pecuniary administrative sanctions. This gives the JSTs substantial power to enforce regulations and penalize non-compliance effective
Where We Stand Today:
On December 13, 2023, European Union lawmakers reached a provisional agreement on legislation to create AMLA as part of a broader anti-money laundering package. Looking ahead, the formal sign-off of the AMLA Regulation and the rest of the Anti-Money Laundering Package is expected early in 2024, with AMLA set to become operational in the second semester of 2024. However, direct supervision of high-risk institutions is likely to begin in 2026 or 2027.
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The views and opinions expressed in this article are my own and do not reflect the official policy, position, or opinions of any financial institution, or other organization.
The content of this article is based on personal research of the author and understanding of AML (Anti-Money Laundering) and compliance topics.
I am Diego Ofano, a Compliance and Anti-Money Laundering professional based in Luxembourg. I serve as Conducting Officer and RC/MLRO for a financial institution, overseeing regulatory compliance for EU-domiciled funds. My responsibilities include AML/CFT frameworks, due diligence, regulatory advisory, and training. I regularly deal with complex regulatory and operational matters, with a focus on pragmatic and risk-based solutions in the investment funds industry.
I hold a Law Degree from the University of Bologna, a Master in European Business from ESCP, and certifications like CAMS, keeping me current in compliance and technology.
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