Combating money laundering and terrorist financing (AML/CFT): a European Commission proposal for a stronger European Framework

On 20 July 2021, the European Commission published a set of proposals to improve the fight against money laundering and terrorist financing in the European Union (AML/CFT). Its aim is to strengthen its provisions in this area, ensuring in particular that they are suited to market developments, particularly with regard to the development of crypto-assets. The European Commission is also proposing the creation of a European authority on AML/CFT.

On 20 July 2021, the European Commission published four reform proposals aimed at comprehensively strengthening AML/CFT in the European Union. These proposals include:

• a draft European regulation for the creation of a European AML/CFT authority, with specific tasks and powers vis-à-vis certain market players and national supervisory authorities;
• a draft directive, known as the “Sixth Directive”, to amend the existing EU directive governing AML/CFT in the European Union;
• a draft regulation, which would complement the above-mentioned Sixth Directive to provide directly applicable rules within Member States in the areas of customer due diligence and beneficial ownership for obliged entities;
• a draft amendment to EU Regulation 2015/847/EU on money transfers, to provide for specific obligations on crypto-asset service providers, in line with the recent work of the Financial Action Task Force (FATF).

The publication of these proposals was announced in May 2020 by the European Commission in its AML/CFT Action Plan and taken up in July 2020 in the Commission’s Communication on the European institutions’ Security Union Strategy.

This initiative marks a strong political will to make the European Union a reference in AML/CFT with regard to international standards, by reinforcing the obligations of the players and the effectiveness of the supervision mechanisms. To this end, the proposals pay particular attention to certain issues, particularly the crypto-assets sector and coordination with third countries.

These proposals will now be submitted to the European Parliament and the Council, with the aim of having this reform operational by 2024. Their publication by the European Commission also gives market players the opportunity to actively contribute to the definition in the European Union of a regulatory framework that is relevant to their activities.

Useful link: Beating Financial Crime (europa.eu)