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EU's AMLA to Regulate Largest Financial Institutions Across Multiple Member States

The establishment of the EU’s Anti-Money Laundering Authority (AMLA) represents one of the most significant changes in the AML landscape in years. However, a crucial question for financial institutions has been which entities will fall under AMLA’s jurisdiction. Laws published on Wednesday by the EU in its official journal, set to take effect next month, provide much-needed clarity.

EU's AMLA to Regulate Largest Financial Institutions Across Multiple Member States

According to these new regulations, AMLA will supervise credit and financial institutions operating in “at least six” EU member states. This criterion means that only the bloc’s largest financial organizations will come under AMLA’s direct oversight.

The rationale for this approach is clearly explained: The EU stated that AMLA oversight would “bring significant added value compared to fragmented supervision between home and host Member States.” It emphasized that single oversight by AMLA would “eliminate the need for national supervisors of home and host Member States to coordinate and align the measures taken with regard to various parts of the same group.”

This unified regulatory approach also implies that risk assessments will be conducted on a ‘group’ basis. Instead of assigning separate risk scores to a bank’s operations in different countries, AMLA-regulated entities will receive a “single group-wide risk score.”

AMLA will have the capacity to “simultaneously supervise up to 40 groups and entities.” If more than 40 entities meet the criteria for AMLA oversight, the regulator will prioritize the 40 organizations operating “in the highest number of member states.”

In cases where entities ranked 39, 40, and 41 all operate in the same number of member states, AMLA will determine which institution to regulate based on the “highest ratio of volume of transactions with third countries to their total volume of transactions.” If a further tiebreak is needed, AMLA can leverage its resources to supervise more than 40 entities, depending on its capacity to hire additional staff.

Interestingly, the EU also plans for AMLA to supervise “at least one entity per Member State.” In member states where no entities are identified through the regular selection process, a risk-based approach “should be applied in order to select one entity.”

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Once the selection process begins, AMLA is expected to publish a list of the selected entities “within six months.” Entities chosen for AMLA oversight will remain under its direct supervision “for at least three years,” even if they no longer meet some of the supervisory requirements during this period.

Determining an organization’s risk profile will be based on data from national regulators for new selections, and on data held by AMLA for already selected entities.

For entities that no longer meet AMLA oversight criteria after the three-year period, the regulator will provide “sufficient time” for the financial institution’s oversight to transition back to its national regulator. The EU stated that “each subsequent selection should commence 12 months before the expiry of the three-year period of supervision of the previously selected obliged entities,” ensuring a smooth transition.

The AMLA’s regulatory framework aims to enhance the consistency and effectiveness of AML oversight across the EU’s largest financial institutions, fostering a more cohesive approach to combating money laundering throughout the region.



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