EU Agreement on Anti-Money Laundering Measures: Key Updates and Innovations

In February 2024, the European Council and Parliament reached an agreement on parts of the EU package designed to strengthen measures against money laundering (AML) and terrorist financing (CFT).

Key Developments in the AML Package

• The new AML Regulation aims to establish a uniform legal framework across the EU and enhance transparency requirements in money laundering laws.
• The institutional structure for AML/CFT enforcement will be addressed separately in the 6th EU Money Laundering Directive.
• A new EU supervisory authority, the Anti-Money Laundering Authority (AMLA), will be established in Frankfurt.
• Stricter rules for identifying, verifying, and reporting beneficial owners of legal entities are introduced to ensure EU-wide harmonization.
• Due diligence requirements, previously implemented at the national level, will now be enforced directly through an EU regulation, preventing inconsistent interpretation across Member States and improving cross-border cooperation.

1. Key Innovations in the Draft AML Regulation

Expansion of AML Obligations

• Crypto Sector: AML due diligence requirements will apply to most crypto service providers, mandating customer checks for transactions above EUR 1,000 and additional risk-mitigation measures for self-managed electronic wallets.
• Luxury Goods Traders: Businesses dealing in precious metals, gemstones, jewelry, watches, luxury cars, yachts, aircraft, and cultural goods (e.g., artwork) will now be subject to AML rules.
• Professional Football Clubs & Agents: Recognized as a high-risk sector, football-related entities will face AML obligations. However, Member States may exempt them if deemed low risk. A longer implementation period (five years instead of three) is granted.

Enhanced Due Diligence Measures

• Crypto Service Providers: Required to conduct enhanced due diligence in cross-border correspondent banking relationships.
• Financial Institutions: Must apply stricter due diligence when managing large asset holdings (EUR 5 million or more) for high-net-worth individuals (EUR 50 million+). Violations will be treated as aggravated offenses under AML sanctions.

Restrictions on Cash Transactions

• A EUR 10,000 limit on cash payments is introduced across the EU, with Member States allowed to impose lower thresholds.
• AML-obliged entities must verify identities for cash transactions between EUR 3,000 and EUR 10,000.

High-Risk Third Countries

• Enhanced due diligence is required for transactions and business relationships involving high-risk third countries, as identified by the European Commission based on FATF assessments.
• Additional European or national-level countermeasures may be applied to mitigate risks.

New Rules on Beneficial Ownership (BO)

• The regulation standardizes beneficial ownership (BO) rules across the EU.
• BO identification will be based on two key factors: ownership and control.
• Applies to all companies operating in the EU, including non-EU entities acquiring real estate.
• A uniform BO threshold of 25% or more in capital, voting rights, or ownership interests is established.
• Stricter rules on multi-level ownership structures, ensuring every level of ownership (even indirect) is reported if it meets the 25% threshold.
• Economic ownership transparency requirements will be expanded to include place of birth, national identification numbers, tax identification numbers, and multi-level ownership descriptions.

Increased Transparency in Trusts & Third-Country Entities

• Trust relationships must now be disclosed to legal entities and reported to the BO register, even if they do not create economic ownership.
• Non-EU companies entering a business relationship with an EU-obliged entity or acquiring real estate must register in at least one national BO transparency register.

2. Key Innovations in the 6th EU Money Laundering Directive

• Entities & persons under international sanctions must be explicitly recorded in national BO registers.
• National authorities responsible for BO registers will have inspection rights to verify the accuracy of company-reported data.
• Public access to BO registers will be extended to those with a legitimate interest (e.g., journalists, civil society groups).
• Property ownership data will be accessible through a centralized EU system, including property value, transaction history, mortgages, and legal restrictions.
• Supervisory colleges will oversee non-banking sectors, with AMLA setting new regulatory standards for their operation.

3. Next Steps in the EU Legislative Process

The EU AML package has been submitted to the Committee of Permanent Representatives and the European Parliament for approval. Once adopted, it must be formally approved by the Council and Parliament, then published in the EU Official Journal before entering into force.

4. Expected Timeline & Impact

• The final provisions are unlikely to change significantly in the legislative process.
• The new EU AML rules are expected to enter into force no later than 2027.
• The harmonization of due diligence and reporting obligations will significantly improve AML/CFT enforcement across the EU, particularly for cross-border financial activities.