European Parliament Approves Robust Legislation to Combat Money Laundering and Terrorist Financing

The European Parliament has passed a significant package of laws aimed at bolstering the European Union’s capacity to combat money laundering and terrorist financing. These new measures provide a comprehensive framework that ensures greater transparency, enhanced due diligence, and the establishment of a central supervisory authority.

European Parliament Approves New Legislations – Enhanced Access to Beneficial Ownership Information

A cornerstone of the new legislation is the provision that grants immediate, unfiltered, and direct access to beneficial ownership information. This access is extended to those with a legitimate interest, including journalists, media professionals, civil society organisations, competent authorities, and supervisory bodies. The information will be accessible through national registries, interconnected at the EU level, and will include data spanning at least five years. This move is intended to improve transparency and facilitate the detection and prevention of illicit activities.

Empowering Financial Intelligence Units

The legislation significantly enhances the powers of Financial Intelligence Units (FIUs). These units are now equipped to analyse and detect cases of money laundering and terrorist financing more effectively. They are also empowered to suspend transactions that are deemed suspicious. This development is expected to strengthen the EU’s ability to intercept and address financial crimes swiftly.

Comprehensive Due Diligence Measures

New due diligence requirements form a critical part of the legislative package. These measures mandate stringent identity checks for customers by obliged entities, including banks, asset managers, crypto-asset managers, and both real and virtual estate agents. These entities are required to report suspicious activities to FIUs and other relevant authorities. From 2029, these due diligence requirements will also extend to top-tier professional football clubs involved in high-value financial transactions. These clubs will need to verify customer identities, monitor transactions, and report any suspicious activities, thus closing potential loopholes in high-value sectors.

Vigilance Over Ultra-Rich Individuals

The new laws introduce enhanced scrutiny over ultra-rich individuals, defined as those with total wealth exceeding EUR 50 million, excluding their primary residence. Additionally, an EU-wide limit of EUR 10,000 on cash payments has been established, except for transactions between private individuals in non-professional contexts. These measures aim to reduce the risk of money laundering and ensure compliance with financial sanctions.

Establishment of a Central Supervisory Authority

To oversee the implementation of these robust measures, a new authority named the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) will be established in Frankfurt. AMLA will directly supervise the riskiest financial entities, address supervisory failures, and act as a central hub for national supervisors. The authority will also mediate disputes between supervisors and oversee the enforcement of targeted financial sanctions. This centralised approach is expected to enhance the efficiency and effectiveness of anti-money laundering efforts across the EU.

Legislative Approval and Future Steps

The Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) package includes three key components: the sixth Anti-Money Laundering (AML) directive, the EU “single rulebook” regulation, and the AMLA regulation. These components were adopted with significant majorities in the European Parliament, with the AML directive receiving 513 votes in favour, the single rulebook regulation receiving 479 votes in favour, and the AMLA regulation receiving 482 votes in favour.

The legislative package still requires formal adoption by the Council before it can be published in the EU’s Official Journal. This step is anticipated to be a formality, given the strong support in Parliament. These positive steps are major step in the right direction to combat financial crime networks and money laundering head on.

The European Parliament, like many regulatory bodies are keen to protect economies across Europe and they are not the only body stepping up plans to combat money laundering. The UK’s Treasury is urging for better AML reporting while also pushing for more refinement on AML regulations, The Serious Fraud Office (SFO) have announced a five-year strategy to combat financial crime meanwhile, in Australia, the government is set to invest over $160 million to bolster their AML and CTF measures.

The future is looking bright in the battle to combat money laundering and financial crime. The new legislations approved by the European Parliament will play a significant part and enable more businesses to protect themselves from potential risk.