European Parliament Approves AML Reform: What You Need to Know

The European Parliament recently passed new laws aimed at combating money laundering and terrorist financing, awaiting the vote of the Council of the European Union and publication in the official journal of the EU. Stanislaw Tosza, an associate professor in compliance and law enforcement at the University of Luxembourg, discussed the AML reform during a livestream organized by Luxembourg for Finance.

The new laws focus on ensuring that legitimate entities can access beneficial ownership information while giving more power to financial intelligence units to analyze cases of money laundering and terrorist financing. Tosza explained that the new AML framework will consist of three elements: an AML regulation with compliance duties, an AML directive providing a supervision framework, and the establishment of the anti-money-laundering authority (Amla) in Frankfurt.

One significant change in the new framework is the inclusion of enforcement of international sanctions within the AML framework. Tosza highlighted that this change will create a substantial burden and risk for financial institutions, as they will now have to monitor assets and verify clients from the perspective of the risk of laundering assets that circumvent restrictive measures.

Tosza also pointed out a lack of proper debate on the impact of extending the AML framework into the enforcement of international sanctions. He raised concerns about the potential compliance burdens and costs for obliged entities and clients, questioning whether the real impact would be felt in the economies of sanctioned countries or in the EU economy.

Overall, the new AML system introduces significant changes and challenges for financial institutions, with potential implications for both the EU economy and countries subject to sanctions. The consequences and limits of this new framework are yet to be fully understood.