Legal Framework
Primary EU law applicable to the new AML/CFT supervisory system is Article 114 TFEU (‘harmonisation’ of national rules).
Secondary EU law includes, among others,
- a regulation establishing a new EU AML/CFT Authority;
- a regulation on AML/CFT requirements;
- a funds transfer regulation (recast);
- a directive (6th) on national mechanisms for ML/TF prevention; and
- acts developed by AMLA such as regulatory technical standards, guidelines, recommendations, and opinions.
It is within that framework that AMLA is entitled to fulfil its mandate.
‘High-Risk’ Entity
Only a limited number of obliged entities (expectedly 40) will be directly supervised by AMLA.
To qualify, the entity must
- belong to the financial sector (including crypto-asset service providers);
- operate in at least six member states through multiple establishments or the freedom to provide services; and
- have a residual risk profile classified as ‘high’ under the relevant risk methodology.
Decentralised Agency
The new AML/CFT supervisory system comprises AMLA and national authorities with an AML/CFT supervisory mandate (national AML/CFT supervisors).
Direct supervision of ‘high-risk’ entities will be undertaken by Joint Supervisory Teams led by AMLA, including staff of national AML/CFT supervisors.
With respect to other financial sector obliged entities and non-financial obliged entities, AMLA will act as an indirect supervisor through oversight of national AML/CFT supervisors.
What Is To Be Done?
The establishment of AMLA will result in enhanced AML/CFT supervision for all obliged entities as national AML/CFT supervisors will come under increased scrutiny by AMLA.
BaFin has already pointed out that it will step up its AML/CFT oversight and audit activities, including special audits under Sec. 44 German Banking Act (KWG).
As a primary step, obliged entities should review their AML/CFT risk analysis, internal policies, procedures, and controls, also regarding the implementation of targeted financial sanctions, to minimise risks of sanctions and penalties.
