Changes in AML laws and regulations

New AML EU regulation and reform in short

The European Commission is putting the Action Plan from May 2020 into action. The new legislative package was presented in July 2021 and will next be discussed by the European Parliament and Council. The four key points of the new regulations’ proposal package, which aims to make the AML regime more effective, are:

• EU AML Authority (AMLA): The new AMLA would facilitate the AML/CFT supervisory cooperation across the EU countries as well as directly supervise certain financial institutions with significant presence and risk across the region.
• EU single rulebook on AML/CFT customer due diligence: This regulation would apply directly at the local level and therefore replace those sections in the local AML laws that relate to customer due diligence. The EU Commission expects the single rulebook on AML/CTF to significantly increase the AML regime’s efficiency through alignment. The regulation will create a set of customer due diligence rules that are directly binding on all the member states.
• EU’s 6th AML/CFT Directive: The new directive would regulate the cooperation between the competent authorities across the member states as well as update the rules on common registries such as the beneficial owner registry.
• Transfer of Funds: The revised 2015 Regulation on Transfer of Funds would make the transfer of crypto-assets subject to the similar information rules as transfer of other funds.

Big changes expected for virtual currencies

The revised 2015 Regulation on Transfer of Funds proposes that crypto-asset transfers need to accompany information on the transfer originator and the beneficiary similarly to what we have in place for transfer of funds. Additionally, another new proposed regulation known as Markets in Crypto Assets (MiCA) is on its way. MiCA was not presented as part of this AML/CFT legislative package, but it complements the sections on virtual currencies.

Moreover, the AML/CFT obliged entities is explicitly expanded to cover crypto-asset service providers, which would since need to comply with the AML laws as well. The EU Commission intends to bring more transparency to the crypto-asset transfer flows to help the EU combat money laundering and terrorism financing.

Key impacts on financial institutions

The EU single rulebook on AML/CFT could impact most immediately to the obliged entities as they will need to satisfy the single rulebook’s requirements instead of following the local AML laws for customer due diligence. The financial institutions will most likely need to recalibrate their current AML/CFT processes to align with the EU single rulebook. This will, however, alleviate the pressure from trying to satisfy the diverge local customer due diligence requirements that the multinational obliged entities face across the European Union.

The banking industry should follow closely the development of regulations, and the current proposals can be utilized as a sounding board for the future regulatory direction – keeping in mind that the legislative package is still a proposal and the details might change during the forthcoming Parliament and Council discussions.