Why the EU Anti-Money Laundering Authority brings both promise and challenges

4. Improving risk management

AMLA should improve risk management practices through a more coordinated and consistent approach to supervision. This includes better communication with supervisors and more fluid interaction with other regulators. Around 80% of interviewees said the new regulatory package would make Member States’ financial intelligence units (FIUs) more effective.

Respondents also expect AMLA to adopt a risk-based approach and systematic flexibility, which will help organizations better manage AML/CFT risks. By maintaining a comprehensive database of Ultimate Beneficial Owners (UBOs) and promoting transparency in ownership structures, AMLA aims to prevent the misuse of corporate vehicles for money laundering, thereby strengthening risk management across the EU.

5. Enhancing regulatory dialogue

AMLA should foster more constructive dialogue between regulators and organizations. Interviewees emphasized that it should develop regulatory technical standards aligned with leading market practices and focus on operational execution. To enhance interactions with regulators and obliged entities, they said AMLA should employ structured questionnaires, data requests, and joint supervisory teams. Interviewees said AMLA should also identify trends and developments across different segments to create a more consistent and coordinated approach to supervision.

6. Developing training and expertise

Interviewees see significant potential in education and training for professionals. They said existing initiatives in compliance governance and tax integrity should serve as valuable examples for AMLA. Universities were identified as key players in creating training programs and certification courses in collaboration with AMLA, FIUs and obliged entities. Interviewees also value AMLA’s future role in raising public awareness about anti-financial crime measures. Academic institutions highlighted their own potential to host training seminars and workshops and share expertise in emerging threat analysis.

7. Creating a more data-led supervision approach

To enhance cross-border AML/CFT operations, interviewees said AMLA must leverage technology and data analytics. Centralized data collection and analysis should improve coordination between AMLA, national regulators and FIUs, enabling swift identification of cross-border risks and effective response to emerging threats. In particular, AMLA’s supervision model incorporates advanced data analytics, AI and machine learning for proactive, real-time financial crime detection. By maintaining a comprehensive database of UBOs and promoting transparency in ownership structures, AMLA aims to strengthen data-driven oversight and prevent the misuse of corporate vehicles for money laundering.

Like any major transformation, the establishment of AMLA also presents challenges. Our interviewees expressed concerns about initial operational difficulties, resourcing issues and the application of new regulations.

The head of financial crime strategy and reporting at one major bank explained that the challenge isn’t regulatory change itself, which is constant, but rather the speed of change. “The key, as an organization, is to be flexible enough to tackle regulatory changes and adapt smoothly," they said.

Overall, we identified seven main challenges posed by AMLA’s creation, in three broad areas.

Initial challenges

1. Lack of clarity and potential overlap with national obligations

Interviewees expressed significant concerns about the lack of clarity in how AMLA will operate, what data it will request, and the criteria for penalties – making it difficult for organizations to prepare. They also worried about duplicate reporting requirements and potential overlap with national regulators’ standards, which could create confusion and inefficiencies. Some feared AMLA could undermine national regulators’ progress in adopting a risk-based approach, leading to a more rigid and less effective regulatory environment. One particular concern was the standardization of customer due diligence (CDD) across Member States.

2. Operational and transitional challenges

The transition to AMLA's oversight is expected to pose significant operational challenges. Interviewees anticipate having to update internal systems, data management and compliance workflows. Adequate staff training on new AML/CFT measures will also be crucial for a seamless transition.

Operations and resourcing

3. Resourcing and effectiveness

Respondents are worried about AMLA's ability to operate effectively if it does not get sufficient funding, technological infrastructure and skilled personnel. It must address such concerns, they said. “AMLA needs to be able to upscale and hire the right people quite quickly. If it does not, the whole exercise is a bit at risk,” said the head of financial crime at a major insurance company.

4. Data privacy and data sharing concerns

Increased data collection and sharing for AML/CFT compliance raises significant privacy concerns. Protecting sensitive information while meeting regulatory requirements will require careful design and oversight of data-handling systems.

Application of the new regulations

5. Increased scrutiny and potential penalties

Respondents anticipate that AMLA's stricter measures will require more monitoring and reporting, leading to higher compliance costs. This heightened enforcement environment creates a strong incentive to prioritize AML/CFT compliance but also increases the potential costs and risks of non-compliance.

6. Challenges in a rapidly changing technological landscape

The rise of digital finance, including cryptocurrencies and virtual assets, presents new AML/CFT compliance challenges. Regulation 2024/1620 imposes specific obligations on virtual asset service providers (VASPs) to implement robust measures and cooperate with authorities in monitoring and reporting suspicious activities. The fast pace of technological innovation requires obliged entities to continuously update systems and practices, necessitating significant investment in technology, ongoing employee training, and potentially upskilling or hiring staff with specific expertise, such as those related to data.

7. International cooperation obligations

Cross-border obliged entities are expected to help ensure consistent and effective AML/CFT controls in all jurisdictions where they operate, even where local regulations are less stringent than those within the EU. This requires a deep understanding of the international AML/CFT landscape and the ability to adapt compliance practices to different regulatory environments.

Reflecting their support for AMLA and recognition of its benefits, interviewees offered constructive views on how it can operate effectively from the start.

Chief Compliance Officer at a wealth manager summarized respondents’ common desires: “Less bureaucracy, more agility and greater communication with obliged entities, with basic criteria established from the beginning."

Based on our interviews with all respondents, we identified key suggestions for AMLA:

• Have a clear mandate and scope:
  Interviewees said the organization must have a well-defined mandate and scope of operations. To foster credibility, AMLA should provide clear and consistent benchmarks that simplify compliance and reduce uncertainties for obliged entities.
  
  
• Employ experienced and skilled personnel:
  Interviewees said it’s essential that AMLA attracts knowledgeable supervisors with real-life industry and AML experience to effectively oversee firms. Three quarters of those we spoke to expect AMLA’s establishment to create a thriving and competitive market for AML professionals in the Frankfurt region.
  

• Drive stakeholder engagement and communication:
  Engaging with stakeholders, including obliged entities, is crucial for AMLA's success. This requires open communication and agility in interactions. Interviewees emphasized that AMLA must guide, educate and communicate, rather than merely supervise, to foster a collaborative environment for a smooth transition. Timely practical support to address technical concerns will also be essential.
  
  
• Foster effective ecosystems:
  AMLA should promote close collaboration within the financial crime ecosystem of regulators, FIUs and obliged entities, as well as develop an innovation ecosystem of research agencies, universities and start-ups.
  
  Interviewees identified “technology and innovation” and “education and legal compliance” as the two most significant benefits. They also envisaged the development of specialized labor markets in technology, finance, compliance, data and legal services, and improved information sharing between national FIUs and other authorities.

• Encourage technological adaptation and innovation:
  AMLA should leverage advanced technologies such as AI and machine learning to enhance monitoring and enforcement. Engaging with technology providers to develop real-time compliance tools and transaction monitoring, and understanding leading practices from obliged entities, would also significantly improve efficiency and detection. The analytical tools applied by AMLA should also be chosen and continuously enhanced in close cooperation with law enforcement agencies.
  
  
• Embrace sector-specific guidance:
  AMLA must consider the specificities of different standards when developing RTS and guidelines. Given its harmonizing role across the EU and the range of sectors it will cover, AMLA will need to reflect the unique situations and dynamics of various industries. The rapid pace of technological change, which affects sectors differently, makes this even more crucial.
  

Firms must prepare effectively for AMLA and the new regulations it will enforce. Drawing on our experience and interviews, we identified key next steps to help firms prepare:

• Prepare for direct supervision:
  Although 40 firms will initially be directly supervised, we do not yet know which specific firms they will be. This number is also expected to rise. Firms should therefore consider the possibility of direct supervision and be ready for its implications if appropriate.
  
  
• Enhance AML/CFT control frameworks:
  Obliged entities, beyond those directly supervised, will need to adapt their technical and operational processes to meet AMLA’s requirements. This includes enhancing regulatory control frameworks and reporting systems and upgrading technology to align with AMLA’s evolving standards. Notably, 30% of interviewees have already discussed compliance with technology partners and another 30% plan to.
  
  

• Prepare for supervisory presence in non-financial sectors:
  AMLA’s remit extends beyond financial services to sectors including real estate, legal professions, high-value goods merchants, gambling, manufacturing and potentially others.
  
  
• Anticipate increased scrutiny and reporting obligations:
  Firms should prepare to enhance their AML/CFT control frameworks as supervisory standards increase, including potential direct supervision by AMLA. They must also be responsive to FIU requests for information on suspicious transaction reports (STRs) and suspicious activity reports (SARs) within five working days, or less than 24 hours in some cases.
  
  
• Engage with AMLA early:
  Start interacting with AMLA to understand its future approach, reporting, data and platform requirements. Early engagement helps firms better prepare for changes. AMLA will also develop guidelines, recommendations and opinions to help ensure consistency in supervisory methodologies, which can provide valuable guidance.
  
  
• Consider broader transformation and innovation:
  The new regulations may impact resourcing, cross-border alignment and implementation strategy. They could also affect customer experience and broader transformation programs. Firms should seize the opportunity to effect broader innovation and transformation, as detailed in this article on how EU Anti-Money Laundering laws can help spur innovation.

Summary

AMLA marks a significant milestone in the EU's fight against financial crime. It aims to strengthen AML/CFT efforts through unified regulations and advanced technology. But implementation challenges will require careful attention. Firms must adapt their frameworks, engage proactively with AMLA, and consider direct supervision. They should also explore how the requirements can drive innovation, helping them navigate evolving regulations and contribute to a more secure financial environment. For Frankfurt, AMLA presents an opportunity to build an ecosystem for technologies like AI and data analytics. It also offers a chance to rethink technology’s role in regulation across the EU.