Europe is drowning in dirty money, and the cracks in its financial systems are widening.
For years, criminal enterprises have used the continent’s banks as a playground for laundering illicit funds.
Laws have been passed, but enforcement? That has been a fragmented mess.
Banks, reluctant to bear the cost of rigorous checks, turn a blind eye too.
National efforts? Ineffective against Europe’s wide-open financial borders.
The stakes are high, and the clock is ticking.
According to estimates by Europol, around 1% of the EU’s annual GDP is involved in suspect financial activity. Given the fact that the European Union’s total GDP was around 17.1 trillion euros in 2023, around 170 billion of the EU’s money is contaminated- let that sink in for a while.
Europe needed to act now, or it risked becoming a permanent haven for the world’s dirtiest cash, so what did it do? It introduced a new solution: The EU’s new AML package. It will create a new regulatory authority, the Anti Money Laundering Authority (AMLA), and introduce more robust compliance measures for high-risk financial institutions.
But despite the new AML policies and its grandeur promise of eliminating money laundering, can this anti-money laundering package break the iron grip of financial crime and terror financing?
So what is this new EU AML Package, and why is it relevant to all stakeholders involved? Financial criminals and regulators both. Let’s find out.
The Gravity of the Problem at Hand
Money laundering remains a significant issue within the European Union (EU). Many recent cases highlight how the previous laws have failed.
To tackle the issue, what has the EU done so far? Frankly- not much.
The EU has implemented several Anti-Money Laundering Directives (AMLDs) to strengthen financial regulations and enhance cooperation among member states. Despite these efforts, money continues to be laundered- thanks to inconsistent implementation patterns across countries that fail to adapt to the methods adopted by complex criminal networks.
But is everything about to change now? The EU AML package is definitely a step in the right direction. But what is it all about?
Breaking Down The New AML Package
This Regulation is part of a broader effort to strengthen the EU’s rules on preventing money laundering (AML) and the financing of terrorism (CFT).
Together with Regulation (EU) 2023/1113, Regulation (EU) 2024/1624, and Directive (EU) 2024/1640, it will create the legal framework that sets out the AML/CFT requirements for obligated entities and supports the EU’s institutional structure for fighting money laundering and terrorism financing.
1. The Creation of AMLA- Anti Money Laundering Authority (operational in 2025)
Purpose: A Frankfurt-based regulatory body to ensure uniform AML compliance application across the EU.
- Regulate multiple high-risk financial institutions that operate across EU states.
- Supervise ‘high-risk obliged entities- that are operational in at least six EU countries.
- Sanction institutes that do not follow AML compliance
- Coordinate with national regulatory bodies to share information.
2. Detailed and Advanced Verification Processes
Purpose: Ensure the EU knows its customers thoroughly and is able to catch ML or TF instances that are more nuanced and evolved.
- Enhanced due diligence for high-risk third countries doing business with the EU.
- Use of third-party sources to verify customers and beneficial owners.
- Assessing the nature of business relationships to detect any illicit activity.
Continuous scrutinization of transactions and dealerships to ensure money is not laundered at a later stage of the dealing.
3. Stringent and Stricter Customer Due Diligence
Purpose: Ensure that CDD rules are applied consistently across EU member states and non-EU entities dealing with EU members
- High-risk customers and transactions: Stricter rules
- Low-risk Customers and Transactions: Less Stricter Rules
- Beneficial Owners: Identify all the BO
- Non-EU entities: Requirement to disclose information before dealing with EU members
4. New Entities Incorporation
Purpose: Curb money laundering and terror financing in non-traditional financial entities like crypto
- CASP inclusion: Non-traditional financial institutes like Crypto-asset service providers will be supervised by AMLA.
- Mortgage lenders and consumer credit intermediaries are included
- Retention of traditional entities like insurance companies and banks.
5. Greater Transparency of Beneficial Ownership
Purpose: Ensure criminals can not use complex corporate structures to hide their crimes.
- AMLA will be able to identify any information regarding multiple beneficial owners of a company. It will adopt a single approach for all member states for disclosing BO’s. Additionally, through this regulation, beneficial owner registers can verify information. Moreover, non-EU entities will have to comply with stricter disclosure requirements to reveal information.
- Reveal information about EU entities.
- Reveal information about non-EU entities that are doing business with the EU
6. €10,000 for cash Payments Across All Member States
Purpose: Assess ML risks for transactions exceeding the cap amount
- The same cap limit for any business or institute that deals with high transactions.
- It will include many non-traditional entities such as car dealers, real estate agents, or art dealers.
- Member states can tweak or alter measures after assessing the risk threshold for specific entities.
7. A Centralized Register for all bank accounts within a state
Purpose: Detect and mitigate any harm caused by a financial institute within a member state
- The centralized bank account will have important information regarding all the bank accounts, small and big, within a member state.
- The Financial Intelligence Units of member states will have access to this centralized register.
- In the future, the EU may also streamline operations by interconnecting all state registers and creating a central access point for them.
8. Periodic Assessments of Financial Supervisors within the Union
Purpose: To ensure AML compliance features adapt to evolution in technology.
- Periodic and continued assessments to see whether financial supervisors have the proper resources, knowledge, and strategies to perform CFT/AML tasks.
- Ensure coordination between staff and sharing of information between different financial supervisors within the Union.
- Intervene in the functions of financial advisors in appropriate circumstances.
What Financial Institutions Need to Know
The new AML package introduces categories of financial institutions.
- Selected obliged entities
- Non-selected obliged entities
- Obliged Entities
Category | Description | Examples of Entities |
Selected
Obliged Entities |
They are directly supervised by the
EU AML authority and are primarily high-risk entities in the financial sector. |
|
Non-Selected
Obliged Entities |
They are overseen indirectly. This
means that they have to comply with EU standards but faceless direct scrutiny. |
|
Additional
Obliged Entities Under EU AML Package 2024 |
New entities, such as obliged entities,s
are added, including sectors such as crypto services, crowdfunding, and luxury goods traders, but their level of supervision may vary. |
|
1. Authority’s On-Site Inspection Powers
The AML package grants the Authority expanded on-site inspection powers. Inspections can occur on both business and private residences with judicial approval. This means that financial institutions need to show readiness for thorough scrutiny. They will need to ensure regular updates to their procedures to avoid any fines.
2. Enhanced Administrative Measures for Compliance
The authority will also get the power to enforce corrective actions on selected financial institutions. These measures include
- Issuing recommendations,
- Mandating compliance actions
- Restricting operations
- Altering governance structures.
This means that financial institutions should promptly address deficiencies in policies or risk exposure. This increases accountability but also demands significant operational adjustments to avoid public penalties or limitations.
3. Stricter Due Diligence
The AML package enforces rigorous identity checks and due diligence for
- Banks
- Asset managers
- Crypto platforms
- Real estate agents
These “obliged entities” will now need to report suspicious activities to Financial Intelligence Units (FIUs).
Note: From 2029, even professional football clubs engaging in high-value transactions must comply. This signals a push to extend oversight to unconventional sectors tied to significant financial flows.
4. Tighter Controls on Wealth and Cash
The New EU AML package also targets ultra-rich individuals with net assets over EUR 50 million. But this will exclude their primary residence.
Additionally, the transaction cap limit will mean that financial institutions and high-worth individuals can no longer launder money using luxury markets.
An EU-wide sanction strictness means that high-value cash dealings will also be thoroughly scrutinized now.
5. Expanding Oversight to Emerging Technologies
The AML package widens its scope to include crypto-asset service providers and crowdfunding platforms, recognizing their vulnerability to money laundering risks.
These entities, central to modern financial ecosystems, must now align with FATF standards.
This move increases reporting and compliance obligations. It will also ensure better detection and prevention of illicit fund movements in these growing sectors.
6. Vigilance in Innovation-Driven Markets
The new EU AML package also takes into consideration the evolution of technology and the advancements.
Financial institutions and service providers need to closely monitor innovative products and services to identify emerging vulnerabilities.
The expanded legislation ensures that technological evolution doesn’t outpace regulatory safeguards, maintaining the integrity of financial systems across all levels.
The Cost of Non-Compliance: Penalties under AML Package
European Commission
Another important thing financial institutions need to know is the penalties for money laundering or non-compliance with reference to the AML package EU.
- The authority can impose fines on entities that breach EU regulations either intentionally or negligently.
- If the Authority finds that a breach is serious, repeated, or systematic, it must impose sanctions in addition to or instead of other administrative measures.
- Penalties depend on the seriousness of the breach and whether it was identified in one or more Member States. For example, for serious breaches involving customer due diligence or reporting in two or more Member States, fines range from EUR 500,000 to EUR 2 million or 1% of annual turnover (whichever is higher).
- Penalties can be adjusted based on aggravating or mitigating factors, as well as the benefits derived from the breach or the losses to third parties caused by it.
- If the selected obliged entity is a subsidiary, the penalty will be based on the parent company’s total turnover, not just the individual entity.
- The periodic penalty payment shall be effective and proportionate.
Conclusion
As more sectors, both financial and non-financial, are increasingly being subjected to stricter Anti-Money Laundering (AML) regulations, businesses across various industries are facing mounting compliance challenges. This expansion of AML requirements means that entities outside traditional financial services, such as real estate, legal services, and certain non-profit organizations, may now need to enhance their compliance measures to align with evolving regulatory expectations.
Additionally, recent changes in regulatory frameworks may necessitate significant adjustments to existing AML and sanctions compliance programs. Organizations must ensure that their policies and procedures remain effective in the face of evolving threats, such as increasingly sophisticated methods of financial crime.