New EU legislation to combat money laundering and terrorist financing

Created by Mag. Sylvia Unger |
Banking Law , Business Law

1. Background

On 20 July 2021, the European Commission presented a package aimed at expanding EU regulations to combat money laundering and terrorist financing. In addition to renewing and supplementing the 5th Anti-Money Laundering Directive, this package also includes new regulations and a cross-border authority that will be able to take action against the abuse of the financial system with more powers than before. 

To date, the EU legal framework has consisted of the Directive on combating money laundering and terrorist financing (EU2018/843) and the Regulation on information accompanying transfers of funds (EU2023/1113).

In future, it will consist of two regulations, a directive and an authority, namely: 

  • Regulation on combating money laundering and terrorist financing (AML Regulation),

  • Directive on mechanisms to combat money laundering and terrorist financing (6th AML Directive),

  • Regulation on information accompanying transfers of funds (Funds Transfer Regulation EU2023/1113) and

  • Regulation on the Establishment of the Anti-Money Laundering and Terrorist Financing Authority (AMLA Regulation), on the basis of which the AMLA (Anti-Money Laundering Authority) is established.


2. Realisation

This package is in the final implementation stage. 

The Funds Transfer Regulation has been updated and is already in force in its new version. The member states must adopt the necessary legal and administrative provisions by 30 December 2024 in order to comply with the new regulations. On 30 December 2024, the regulation will be applicable.

On the remaining proposals an agreement has been reached - but they still need to be approved by the representatives of the Member States and the European Parliament. Once they have been formally adopted by the Council of the European Union and the European Parliament, they will also be published in the Official Journal of the EU.

The implementation of the entire package, including all technical standards, is planned by the end of 2025, which would lead to applicability from 1 January 2026. The 6th AML Directive should also be transposed into national law by then.

The headquarters of the AMLA will be in Frankfurt am Main, which was resolved on 22.02.2024 by representatives of the EU member states and the European Parliament. In addition to Frankfurt, Paris, Rome, Madrid, Vienna, Dublin, Brussels, Vilnius and Riga, among others, have applied to host the authority.


3. What is new

The changes consist of additions to existing directives and new regulations. 

3.1 The scope of the Funds Transfer Regulation will be extended to include crypto transfers. As a result, providers of services for virtual assets are obliged to collect information on the sender and recipient of crypto transactions. If information is missing or incomplete, the transfer can only take place if the missing information is provided before the recipient is favoured. Specifically, this is about the traceability of transfers, which should make it easier to recognise and block suspicious transactions.

In addition, the European Banking Authority (EBA) was instructed in Article 38 of the Funds Transfer Regulation to publish guidelines that show providers of crypto services which risk factors must be taken into account for transactions in crypto assets. This is to be realised through the following four guidelines: 

  • revised risk factor guidelines

  • travel rule guidelines

  • extension of the risk-based AML/CFT guidelines

  • guidelines for internal policies, procedures and controls to ensure the implementation of Union and Member State restrictive measures

The guidelines are to be published by the EBA by 30 December 2024.

3.2 The AML Regulation and the 6th AML Directive are linked together as a "single set of rules" because the reorganisation means that provisions from the 5th AML Directive will be transferred to the AML Regulation. The provisions on the private sector previously regulated in the 5th AML Directive are now in the AML Regulation, while the organisation of the institutional system will be the subject of the 6th AML Directive. The AML Regulation will result in full harmonisation.

The AML Directive regulates, among other things:

  • Due diligence and reporting obligations of the obliged entities, in particular 

    • credit and financial institutions

    • certain companies and professions outside the financial sector (e.g. lawyers, notaries, auditors)

    • most of the crypto sector

    • dealers in luxury goods (e.g. jewellers and goldsmiths, dealers in luxury cars, aircraft and yachts)

    • professional football clubs and agents

  • Standardising regulations on beneficial ownership:

    • setting a 25% threshold for beneficial ownership

    • provisions for multi-layered ownership and control structures

    • clarification of the provisions on data protection and the retention of records  

  • Upper limit of EUR 10,000 for cash payments, which may be deviated from in favour of a lower limit

  • Enhanced due diligence measures for transactions with high-risk third countries 

3.3 The 6th AML Directive contains provisions on:

  • the register of beneficial owners

  • the national supervisory authorities 

  • the central reporting offices 

3.4 By implementing the anti-money laundering authority AMLA,

  • direct and indirect supervision of particularly high-risk credit and financial institutions, 

  • support of the non-banking sector,

  • coordination of central reporting centres and databases and 

  • the power to impose penalties for particularly serious or repeated offences, 

    is being realised. 


4. Conclusion

The structure of the regulatory framework is changing. This is particularly noticeable for the cryptocurrency sector and credit and financial institutions, which will be reviewed by the AMLA in future. 

In future, there will be a directly applicable, standardised legal framework for obliged entities, i.e. all those who have to take due diligence and reporting obligations into account and whose circle is expanded by the AML Regulation. This will lead to stronger enforcement options for the supervisory authorities, which will receive additional support from the AMLA.