EU's New Stricter AML Rules Agreement

The EU's Landmark Agreement on Stricter Anti-Money Laundering Rules

The European Union, represented by the Council and Parliament, has reached a significant provisional agreement on parts of the anti-money laundering package, marking a pivotal step in the EU's efforts to bolster defenses against money laundering and terrorist financing.

Enhancing AML/CFT Framework

This new agreement is integral to the EU's revamped anti-money laundering system, aiming to enhance the operational efficacy of national systems against money laundering and terrorist financing. It seeks to close any loopholes that fraudsters, organized crime, and terrorists might exploit to legitimize their illegal proceeds through the financial system.

Read also about AML regulations in other countries in article: Hong Kong's New AML Regulations: Implications for Your Organization and VASPs

Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS)

The agreement includes several key components:

• RTS on ICT Risk Management: These standards focus on harmonizing tools, methods, processes, and policies related to ICT risk management, complementing the provisions of DORA. They specifically cater to financial entities subject to a simplified regime, proposing a simplified ICT risk management framework.

• RTS on Classifying ICT-Related Incidents: This element specifies criteria for classifying major ICT-related incidents, aiming for a harmonized process across the financial sector.

• RTS on ICT TPP Policy: These standards are about governance arrangements and risk management concerning the use of ICT third-party service providers, ensuring that financial entities control their operational risks and information security.

• ITS on Register of Information: This component involves maintaining and updating templates for registers of information on contractual arrangements with ICT third-party service providers, crucial for ICT third-party risk management.

Expanding Obliged Entities List

The agreement expands the list of obliged entities to include sectors like crypto-assets service providers (CASPs), requiring them to conduct thorough due diligence on customers and report suspicious activities. This expansion also includes luxury goods traders, professional football clubs, and agents, though member states have the flexibility to adjust this list based on risk assessment.

Enhanced Due Diligence and Cash Payment Limits

Specific enhanced due diligence measures are introduced for cross-border correspondent relationships, particularly for CASPs. The agreement also establishes an EU-wide maximum limit of €10,000 for cash payments, with member states having the option to set lower limits.

Beneficial Ownership and High-Risk Third Countries

The agreement aims for more harmonized and transparent rules on beneficial ownership and imposes enhanced due diligence measures on transactions involving high-risk third countries.

Supervisory and Risk Assessment Measures

The agreement ensures adequate and effective supervision of all obliged entities and introduces supervisory measures for the non-financial sector. It also emphasizes the importance of both EU and national risk assessments in mitigating money laundering and terrorist financing risks.

Next Steps

Following this provisional agreement, the texts will undergo finalization and require formal adoption by the Council and the Parliament. This legislative package is part of a broader initiative launched by the Commission on 20 July 2021, which includes establishing a new EU anti-money laundering authority (AMLA) and other regulations aimed at strengthening the EU's AML/CFT framework.

This agreement represents a significant step forward in the EU's commitment to upholding financial integrity and safeguarding its financial system from illicit activities. The harmonization of rules and the expansion of the scope of regulated entities reflect the EU's determination to adapt to the evolving landscape of financial crime.

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