AMLA Europe: The New European Anti-Money Laundering Agency

Key takeaways

AMLA is the new European authority against money laundering that will operate from Frankfurt starting in 2025, centralizing the fight and redefining the rules for financial entities and obliged subjects throughout the European Union.

AMLA's key functions include direct supervision of high-risk entities, coordination with national FIUs, regulatory harmonization, and sanctioning power to strengthen the prevention of money laundering in the EU.

The impact of AMLA on obliged subjects will result in changes in supervision, new compliance obligations, and opportunities to improve prevention systems, with sanctions of up to 10% of annual turnover for entities under its direct supervision.

AMLA's implementation schedule establishes that it will start operations in 2025, reach full performance by the end of 2027 with 430 employees, and begin direct supervision of 40 selected entities on January 1, 2028.

The European Union is about to mark a new milestone in the fight against money laundering with AMLA, the new European Anti-Money Laundering Authority. The more than 1.87 trillion euros annually laundered in European territory (this amounts to between 2% and 5% of the entire GDP of Europe, according to Europol) underscores the need for more coordinated actions at the continental level.

In response to this urgent need, AMLA is born, headquartered in Frankfurt. This new authority, which will begin operations in 2025, will centralize the fight against money laundering and redefine the rules that both financial entities and other obliged entities must follow throughout Europe.

What is AMLA? Definition and importance within the European financial system

AMLA stands for the new European Anti-Money Laundering Authority. Its purpose: to strengthen and unify financial supervision in matters of money laundering. This new agency is part of an ambitious AML/CFT regulatory package from the European Union, and positions itself as the cornerstone of the European global strategy to combat money laundering and terrorist financing.

But, why is AMLA important for the financial system within the EU? We can identify several key aspects:

• Direct supervision: AMLA will be able to directly supervise higher-risk financial entities, which represents a significant change in the approach to supervision at the European level.
• Regulatory harmonization: By establishing common standards and coordinating supervisory practices, AMLA will contribute to creating a more uniform regulatory framework within the European Union, reducing discrepancies and frictions between member countries.
• Better collaboration: AMLA will facilitate greater cooperation between the Financial Intelligence Units (FIUs) of the Member States, thus enhancing the effectiveness in detecting and preventing suspicious activities.
• Strengthening of the financial system: AMLA will help protect the integrity of the European financial system by focusing on the fight against money laundering. In this way, the Union will be better prepared to combat new challenges that arise, with a more centralized approach.

AMLA's headquarters in Frankfurt: Reasons and implications

Frankfurt was chosen as the location for this new European Anti-Money Laundering Authority. Why was Frankfurt chosen as AMLA's headquarters? The choice of Germany's financial capital was not casual, and its role as the nerve center of European finance reinforces this option.

The truth is that Frankfurt already hosts other important financial institutions of the European Union, such as the European Central Bank (ECB) or the European Insurance and Occupational Pensions Authority (EIOPA). The choice of Frankfurt over other candidates like Madrid allows for greater synergy and collaboration between all these bodies, facilitating more effective European supervision and regulation.

Frankfurt's location is also key. The city has a strategic enclave in the heart of Europe, making it an ideal connection point to coordinate all efforts in the fight and prevention against money laundering across the continent. In addition, its excellent infrastructure and connectivity will facilitate cooperation between AMLA and the different national authorities of the Member States.

Also from a financial point of view, the choice of Frankfurt has certain implications that should be considered. Firstly, it reinforces the city's position as a center of excellence in financial regulation and supervision, which could attract more companies looking to establish themselves in a safe and stable environment. On the other hand, institutions will feel greater regulatory pressure, so in many cases they will have to redouble their efforts in prevention and regulatory compliance to avoid possible sanctions and reputational damage.

Key functions of AMLA in the fight against money laundering

The new European Anti-Money Laundering Authority (AMLA) is set to revolutionize the European strategy in preventing and detecting illicit financial activities. Its key functions will be supervision, coordination, and implementation of common regulations for all Member States. AMLA is expected to begin operations in 2025 and reach full performance in 2027.

Direct and indirect supervision

One of AMLA's most prominent functions will be the direct supervision of financial entities considered to be at highest risk. This will allow for closer monitoring of institutions that may be more vulnerable to money laundering activities. Officials from this new agency will be able to conduct on-site inspections, request detailed information, or impose sanctions when necessary. It is anticipated that AMLA will directly supervise up to 40 groups or entities in a first round.

In addition, indirect supervision will also be exercised over other obliged entities through national supervisors. This risk-based approach will ensure that resources are allocated to the areas of greatest risk, thus strengthening the overall effectiveness of the anti-money laundering framework.

Coordination with Financial Intelligence Units (FIUs)

AMLA will play a fundamental role in improving coordination between the Financial Intelligence Units (FIUs) of the different Member States. This new European Agency will facilitate information exchange, provide strategic analysis on money laundering trends and patterns, and support cross-border investigations.

This coordination function will be vital to address the international nature of financial crime and will serve to detect possible suspicious activities at the European level more quickly.

Regulatory standardization

Another key function of AMLA will be the development and implementation of common standards for the prevention of money laundering throughout the European Union. This means developing guidelines and recommendations for obliged entities, harmonizing supervisory practices among Member States, and proposing updates to European AML/CFT regulations.

These common standards will help reduce discrepancies between countries and strengthen the overall effectiveness of prevention measures. Additionally, AMLA will establish a single list of obliged entities for all member countries, thus ensuring a consistent approach.

Sanctioning power

If there is a serious, systematic, or repeated breach of money laundering prevention requirements by any obliged entity selected for direct supervision by AMLA, it will have the power to impose administrative sanctions and corrective measures. These fines could reach up to 10% of annual turnover or 5 million euros, which provides a strong incentive for rigorous compliance with the rules.

AMLA's structure: How this new agency will operate

This new European Anti-Money Laundering Authority (AMLA) has been designed with a governance structure that seeks to ensure its effectiveness and transparency.

AMLA will have two main governing bodies:

• The General Board: It will be composed of high-level representatives from the competent authorities of all European Union Member States. It will be responsible for making strategic decisions and setting the agency's priorities.
• The Executive Committee: It will be in charge of AMLA's daily management. It will be formed by the President and five full-time independent members.

AMLA's funding and resources

The funding for this new European Authority will come mainly from two sources:

• Contributions from the European Union budget
• Fees charged to supervised entities

Once fully operational by 2026, it is estimated that AMLA will have about 250 employees.

How AMLA will affect obliged entities: changes in supervision and compliance

The implementation of AMLA will bring significant changes in the relationship with obliged entities. Let's see how they will be affected:

In both cases, obliged entities will need to review and update their policies, procedures, and internal controls to align with the standards that AMLA will establish, always promoting a more harmonized and rigorous approach to money laundering prevention.

We're talking about standardizing information, having more reinforced due diligence processes, or a greater emphasis on identity verification and its updating (reusable KYC).

An opportunity to improve prevention

Regulatory changes are not usually well received by many companies. However, the standardization of this new regulatory framework offers many opportunities for obliged entities, especially in terms of strengthening their money laundering prevention systems.

Compliance-first approaches will be better positioned to adapt to this new regulatory landscape, turning regulatory compliance into a competitive advantage.

When will AMLA start operating? Key dates for its implementation

It is estimated that AMLA will begin to function at full capacity by the end of 2027. During 2025, the main foundations of the organization and its evolution in subsequent years will be laid.

Identity verification (KYC), a fundamental pillar in the prevention of money laundering under AMLA

With the arrival of AMLA, the importance of Know Your Customer (KYC) processes in the fight against money laundering and terrorist financing will be reinforced. The role of KYC in preventing financial crimes is fundamental, as it lays the foundation for effective due diligence and compliance with AML/CFT regulations.

AMLA will likely establish more rigorous and uniform standards for Know Your Customer processes and KYC verification throughout the European Union, which will require financial entities and other obliged entities to adopt more robust and efficient identity verification solutions to meet the expectations of this new authority and effectively prevent money laundering.

In this context, having an advanced identity verification solution that complies with regulations becomes an imperative need for companies seeking to adapt to the new regulatory landscape imposed by AMLA.

At Didit, we offer a free, unlimited, and forever KYC verification service, regardless of company size. We help companies comply with regulations and reduce their operational costs.

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