The EU AML Package - where is it in the legislative process?

On 20^th July 2021, the European Commission presented an ambitious package of legislation to strengthen the EU's anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) rules ("AML Package"). Below is an overview of the status, timeline and next steps for the packet.

Background

The package consisted of four pieces of legislation.

1. The EU “single rulebook” regulation  provides guidelines for completing customer due diligence, disclosing the identities of beneficial owners, using anonymous instruments like crypto-assets, and introducing new entities such as crowdfunding platforms. It also includes clauses on "golden" passports and visas.
2. The 6th Anti-Money Laundering directive includes national provisions on oversight, Financial Intelligence Units (“FIUs”), and information sharing requirements which will provide competent authorities with access to reliable information, such as beneficial ownership registrations and assets kept in free zones.
3. The regulation establishing the European Anti-Money Laundering Authority (“AMLA”) with supervisory and investigative powers, to ensure compliance with AML/CFT requirements.
4. Amendment of the EU Transfer of Funds regulation on the information accompanying the transfers of funds and certain crypto-assets, in order to make it possible to trace respective transfers.

Status and debate

Since 2021, the proposals have been slowly moving through the legislative process and has now reached the penultimate stage and we have more insight into what the final package will look like. 

Proposals 1-3 have been discussed in the Parliament, Commission, and Council of the European Union ("EU"), where modifications have been suggested. The EU Parliament then gave the go-ahead to begin the trilogues on April 17^th, 2023 with the intention of aligning on suggested adjustments.  Trilogues are used by the Parliament, Commission and Council of the European Union (“EU”), to informally debate proposed legislation and agree on changes and conclude before a political agreement is then reached.

There are many discussion points which include:

• the customer due diligence framework as a whole;
• the beneficial ownership definitions;
• the treatment of third country jurisdictions;
• the treatment of large payments; and
• many other critical operational aspects of the proposals.

The EU Transfer of Funds Regulation (TFR)

As well as being part of the AML proposal, the EU TFR is also part of a wider crypto-asset regulatory framework including the Markets in Crypto-assets (“MiCA”) regulation. The TFR regulates the EU's ‘Travel Rule’. It aims to harmonize the rules for crypto-assets and their service providers across the EU. Amongst others, Crypto Asset Service Providers (CASPs) transacting crypto-assets on behalf of their clients are required to accompany transfers of crypto-assets with information on their originator and beneficiary. It will apply to all crypto-asset transfers, regardless of the amount. Every CASP is required to collect and transmit information on originators and beneficiaries (including intermediaries).

Timeline

The first meeting regarding the trilogue for the first three proposals was held on 11^th May 2023 with the official trilogue dates expected to take place between June and September 2023. These dates are, however, still subject to confirmation. After that, the negotiated draft will be submitted to the plenary, where a vote is expected to take place in the final quarter of the year.

The original timeline for the AMLA regulation suggested that the Authority would be established at the beginning of 2023. However, it appears the EU Parliament is already behind schedule, with further disruptions to the legislative process expected due to the change in presidency later this year and the EU Parliament elections in 2024.

The final proposal, TFR, will apply from January 2025. MiCA will generally enter into force in July 2023, however, the provisions concerning Stablecoins will enter into force in July 2024.

Next steps for firms

In relation to MiCA and TFR, as the regulations are finalised, the next step is to implement relevant changes. These regulations are aimed specifically at firms involved in the transfer of crypto-assets and will not have any impact on firms not specifically involved in crypto-assets. Some crypto asset service providers (“CASPs”) should already be well into the process of establishing and improving their AML compliance programmes in order to comply with the 5th AML Directive. Given that payment service providers (“PSPs”) have been covered by the wire transfer regulations for a while, implementing the new obligation to include payer and payee details on fund transfers should not be too difficult to apply.

As the remaining three proposals are still being debated in trilogue, we do not recommend firms to take any immediate actions as the discussion’s points are many and we have to wait and see the final versions. From a strategic point of view, dedicating resources to follow the proposals would mean; systems, controls, policies, procedures, people and technology, can all be adapted or enhanced ahead of implementation.

Please see EY’s previous article on the subject here.

EY as an organization is committed to the fight against financial crime. We welcome the Commission’s efforts to improve the AML/CTF regulatory regime across the EU. In particular, we consider that strong focus on improving enforcement of AML/ CTF regulatory regimes across Europe would considerably improve the fight against ML/TF, and support firms in their efforts to establish robust AML/CTF control environments.

For further information about our services or to discuss these changes, contact our team: