Understanding the EU AML Package: A Comprehensive Overview

The Three Pillars of the AML Package

1. EU Single Rulebook Regulation: This regulation encompasses provisions related to conducting due diligence on customers, ensuring transparency regarding beneficial owners, and regulating the use of anonymous financial instruments, including crypto-assets. Additionally, it addresses emerging entities like crowdfunding platforms and includes provisions concerning "golden" passports and visas.

2. 6th Anti-Money Laundering Directive: The 6th AML Directive comprises national provisions regarding supervision, the functioning of Financial Intelligence Units, and access for competent authorities to essential and reliable information. This information encompasses beneficial ownership registers and assets held within free zones.

3. European Anti-Money Laundering Authority (AMLA): AMLA is a new supervisory body with investigative powers. Its primary role is to ensure strict and harmonized compliance with Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) requirements throughout the European Union.

European Regulatory Process

Since the adoption of the AML Package in July 2021, the final stage of examination is now underway. The EU Parliament has given the green light to initiate trilogue negotiations on April 17th, 2023, with the goal of accommodating any necessary adjustments. Trilogues involve discussions between the EU Commission, the Parliament, and the Council of the European Union, allowing all institutions to reach a political agreement on regulatory matters.

However, several critical points of contention remain unresolved, including:

• Defining beneficial ownership

• The scope of large payments

• Considerations for third-country jurisdictions

• Framework for due diligence

• Operational aspects of the proposed regulations

What's on the Horizon?

Notably, key components of the EU AML Package have broader implications for other regulatory frameworks, such as the Markets in Crypto-assets (MiCA) regulation. The EU Transfer of Funds Regulations (TFR) governs the "travel rule," a crucial element of the crypto-asset regulatory framework. To comply with beneficial ownership rules and originator identification, Crypto-asset providers (CASPs) transacting on behalf of their clients will be required to collect data. This requirement applies to all crypto-assets, regardless of the transaction amount.

Originally, the AMLA regulation was slated to establish the authority by early 2023, but it is now expected after the EU Parliament election in 2024. The TFR is set to come into effect in January 2025, with MiCA following in July 2024.

As these regulations evolve, financial institutions and stakeholders must stay informed and adapt to the changing landscape of anti-money laundering measures within the European Union.

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