Frankfurt will host the new EU Anti-Money Laundering Authority (AMLA)

Frankfurt will host the new EU Anti-Money Laundering Authority (AMLA)

Frankfurt is set to become the epicenter of the European Union’s efforts to combat money laundering and terrorist financing with the establishment of the new Anti-Money Laundering Authority (AMLA) in the city. Scheduled to start operations in mid-2025, AMLA will be staffed by over 400 dedicated professionals, all working towards the common goal of reinforcing the EU’s anti-money laundering and counter-terrorism financing (AML/CFT) framework.

The creation of AMLA represents a pivotal moment in the EU’s ongoing fight against financial crimes. With its comprehensive supervisory powers, AMLA will directly oversee and regulate entities obligated under AML/CFT laws, ensuring a more coordinated and effective approach across member states. Moreover, AMLA will have the authority to impose necessary sanctions and measures, further solidifying its role as a central figure in the EU’s AML/CFT efforts.

The decision to select Frankfurt as the host city for AMLA was the result of a transparent, fair, and equitable selection process, jointly conducted by the Council and the European Parliament. This collaborative approach ensured that all member states vying to host AMLA were given a fair chance, with Frankfurt ultimately being chosen in an informal inter-institutional meeting. This decision marks a significant milestone, as it is one of the first instances where the seat of a decentralized EU agency was determined through a joint agreement by the co-legislators, reflecting a united front in the EU’s commitment to enhancing its AML/CFT measures.

The establishment of AMLA in Frankfurt follows the European Commission’s legislative package introduced on 20 July 2021, aimed at strengthening the EU’s AML/CFT regulations. This included the proposal for setting up AMLA, which was part of a broader initiative to revamp the EU’s approach to preventing money laundering and terrorist financing activities. The selection of Frankfurt as AMLA’s seat is a testament to the city’s robust financial infrastructure and its strategic importance in the EU’s financial landscape.

As AMLA prepares to commence its operations in Frankfurt, the EU takes a significant step forward in its efforts to create a safer and more transparent financial environment. AMLA’s role in harmonizing AML/CFT practices across member states will not only enhance the effectiveness of the EU’s regulatory framework but also reinforce its position as a global leader in the fight against financial crimes.

Supervisory powers

In an era where financial crimes transcend borders, the European Union is bolstering its defenses with the introduction of the Anti-Money Laundering Authority (AMLA). AMLA’s mandate to supervise high-risk financial sector entities across the Union marks a significant leap in the EU’s efforts to combat money laundering and terrorist financing. This initiative aims at entities operating in multiple Member States, either through physical establishments or the freedom to provide services within the EU, where supranational supervision by AMLA promises substantial added value.

The Rationale for Supranational Supervision

AMLA’s supervisory powers are designed to eliminate the complexities and inefficiencies inherent in the fragmented supervision conducted by national authorities. By centralizing oversight for entities that pose a high risk and have extensive cross-border activities, AMLA ensures a cohesive and harmonized regulatory approach. This supranational supervision eliminates the need for coordination between home and host Member States, thereby streamlining regulatory efforts and enhancing the effectiveness of the EU’s anti-money laundering and counter-terrorist financing framework.

Group-Wide Risk Assessment

A pivotal aspect of AMLA’s supervisory strategy is the group-wide risk assessment of financial entities. This approach ensures a holistic understanding of the money laundering and terrorist financing (ML/TF) risks associated with entities that are part of a group. By evaluating the risk at the group level, AMLA can assign a single group-wide risk score, which is crucial for the selection process of entities subject to direct supervision. This method ensures a uniform and detailed analysis of cross-border entities, enhancing the precision of the supervisory process.

Dynamic Selection Process

Given the dynamic nature of financial markets and the varying risk profiles of entities, AMLA is equipped to adapt its supervisory scope. In its initial phase, AMLA will have the capacity to directly supervise up to 40 groups and entities, chosen based on their high-risk profile and cross-border activities. This selection process is both progressive and dynamic, ensuring that AMLA’s resources are optimally allocated to oversee a diverse range of high-risk groups and entities.

Criteria for Selecting Entities

The selection of entities for direct supervision by AMLA is based on stringent criteria. In instances where more than 40 entities qualify based on their risk profile, AMLA will prioritize those operating in the greatest number of Member States. Should this criterion not suffice—particularly when several entities operate in an equal number of Member States—AMLA will further distinguish among them by considering the ratio of their transactions with third countries to their total volume of transactions. This ensures that AMLA’s supervisory efforts are focused on entities with significant cross-border activities and potential exposure to ML/TF risks.

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