European finance ministers agree plan for single rule book and centralised supervision of anti-money laundering

The European Union’s ECOFIN council, following a video conference yesterday, gave its backing to the European Commission’s aim to present legislative proposals early in the new year.

The plans would represent a shift from a directive approach, under which nations have flexibility to pass their own regulations to meet broader aims, to direct regulation set at the EU-level.

Parts of the Anti-Money Laundering Directive would be transferred to a directly applicable regulation “to allow for a level playing field in the common market and for an even application of the provisions throughout the Union”, the council’s conclusions said.

Ministers agreed that the new regulation should take into consideration:  types of obliged entities; customer due diligence requirements; provisions on due diligence for domestic and foreign politically exposed persons; record keeping; internal controls; group-wide compliance; third party reliance and outsourcing provisions consistent with sectorial legislation; reporting obligations; provisions on determining beneficial ownership; provisions on cooperation and exchange of information; supervisory measures and sanctions.

The proposed new EU anti money laundering supervisor would be responsible for supervising a “selected number of obliged entities that have high inherent money laundering or terrorist financing risk”

Ministers also said the Commission should focus particularly on achieving high due diligence with regard to the identification and verification of customers’ identities and the nature and purpose of business relationships.

The council also wants to widen the scope for the use of data and information-sharing and wants clarification on how to reconcile the AML/CFT framework with data protection laws, notably GDPR.

Olaf Scholz, Finance Minister of Germany, said: “The fight against money laundering and terrorism financing is a top priority for the German presidency.

“Recent alleged money laundering cases, including in the EU, underline the urgency to act. More harmonised rules and EU-level supervision will allow us to be more effective and to strengthen the EU’s anti-money laundering framework. It is an important sign that we all stand united for tough anti-money laundering measures.”

Timeline: strengthening EU AML regulation

June 2018: The fifth anti-money laundering directive (EU) 2018/843 entered into force, in order to:

• improve transparency in the ownership of companies and trusts
• strengthen checks on risky third countries
• address risks linked to prepaid cards and virtual currencies
• enhance cooperation between national financial intelligence units
• improve cooperation and exchange of information between anti-money laundering supervisors and the European Central Bank

October 2018:  Further directives are introduced to combat money laundering by criminal law.

May 2019: The fifth capital requirements directive is published, clarifying the role of prudential supervisors. They are responsible for identifying and disciplining weaknesses of financial institutions involved in money laundering and terrorist financing.

December 2019: The role of the European Banking Authority (EBA) was strengthened. An amendment to the founding regulations gave the EBA and its supervising authorities a legal duty to contribute to preventing the use of the financial system for the purposes of money laundering and terrorist financing.

May 2020: The Commission presented a revised methodology for listing high-risk third countries. It also presented an updated list of high-risk third countries – not yet based on the revised methodology – which entered into force in July 2020. 

May 2020: The Commission put forward a package designed to further strengthen the EU’s framework to fight against money laundering and terrorist financing. In particular, an action plan outlines the next steps and proposals for EU legislation for the coming 12 months.