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European parliament committees approve raft of new AML/CTF legislation

| By Zak Thomas-Akoo
MEPs from the Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees have approved three pieces of draft legislation that aim to tighten EU anti-money laundering and counter terrorist financing (AML/CTF) rules.

The first piece of legislation is the EU “single rulebook” regulation, which aims to standardise AML/CTF policy among a number of different domains. The bill includes provisions on crypto-currency, new financing methods such as crowdfunding, company ownership, “golden” passports or visas and on the conduction of customer due diligence.

MEPs within the committees overwhelmingly backed the text of the regulation at 99-8, with six abstentions. Under the new rules, a provider of gambling services will be required to apply due diligence upon the collection of winnings, the wagering of a stake, or both, when carrying out transactions that amount to at least €2,000.

“golden” passports and visas are to be banned

 “We cannot tolerate the corrupting influence of dirty money in our political system any longer,” said Spanish MEP Eva Maria Poptcheva. “In the wake of Qatargate, parliament heard this message loud and clear.

“Dirty money is not just a threat to our democracy, it also fuels inequality and injustice,” she added. “Ordinary citizens struggle to make ends meet while criminals prosper with the complicity of systemic corruption. This has to end.”

New caps are to be set up on certain kinds of transaction – with a €7,000 cap for cash payments, and a €7,000 cap for cryptocurrency transfers where the customer cannot be identified.

Possible gambling exemption

The regulation does allow for member states to exempt certain gambling services from the new rulebook “with the exception of casinos”. This may be done on the basis of proven low risk, or the small scale of the business’ operations.   

In order to qualify for an exemption, EU Member States will be required to carry out a risk assessment looking at possible AML/CTF vulnerabilities and mitigating factors of the gambling service, the risks linked to the size of the transactions and payment method and the geographic area where the gambling services are administered.

While it is not clear exactly how this will work in practice, it may mean that jurisdictions that are on or have been on the radar of international money-laundering watchdogs like the Financial Action Task Force (FATF) may find themselves subject to an increased AML/CTF burden.

Updating of 6AMLD

The second item in the legislative package is an updating of the sixth Anti-Money Laundering Directive (6AMLD), which was first issued in 2021. The new text contains provisions harmonising the supervision and operation of Financial Intelligence Units (FIU), which are government bodies set up on the member state level to “prevent, report and combat” money laundering and terrorist financing.

In order to detect money laundering schemes and freeze assets in time, FIUs and “other competent authorities” are to be given access to information on beneficial ownership, bank accounts and land registers.

Information on certain goods considered attractive for criminals – such as yachts, planes and cars worth over €200,000 – is also to be aggregated on the member state level. FIUs are to cooperate with each other internationally, as well as with the new EU-wide money-laundering organisation set up as another provision of the new legislation.

“We are losing the battle against money laundering, which costs society up to two trillion US dollars annually worldwide,” said MEP Paul Tang. “That is why parliament worked together on finding effective ways to fight money laundering, by demanding the registration of expensive cars, boats and planes and by obliging the disclosure of all goods stored in free zones.”

Establishment of new authority

The final piece of legislation concerns the European Anti-Money Laundering Authority (AMLA), which is to be given supervisory and investigative powers to ensure compliance with AML/CTF obligations.

The new organisation is to monitor threats from within and outside the EU and classify a number of financial and credit institutions by risk level. The body will be able to mandate companies and people to hand over documents and other information, conduct on-site visits if approved by a judge, and impose sanctions amounting to up to €2m, or 0.5-1% of annual revenue for breaches to the rules.

The AMLA will also be able to fine entities up to 10% of total revenue for the preceding business year.

“We need to draw a clear distinction between national supervisors’ powers and the direct supervisory powers of AMLA,” said MEP Emil Radev. “In addition to directly supervising selected entities, AMLA will promote high standards, convergence and the creation of a common culture among national supervisors.

“It will also help us overcome problems arising from a lack of coordination between various national supervisory authorities and financial intelligence units. In the end, we hope that the newly created authority will guarantee more financial security in a cross-border environment where risks have been constantly growing.”

While progressing through the committees is a significant step forward, the package still needs to be approved by the parliament. MEPs will begin negotiations on the legislation after the April plenary.

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