€750 billion lost annually to money-laundering in EU

The EU’s new Anti-Money Laundering Authority (AMLA) will begin directly supervising relevant financial groups in 2028.

Firms will be expected to demonstrate that their compliance systems are effective in detecting and disrupting financial crime, the 8th Annual A&L Goodbody Corporate Crime & Regulation Summit (14 October) has been told.

Human trafficking

Conservative estimates suggest that over €750 billion is lost annually in the EU to money-laundering, driven primarily by drug trafficking, human trafficking, and exponentially rising fraud.

Modernisation and innovation have fuelled this growth, with cryptocurrency and transnationality major factors.

The EU Anti-Money Laundering Regulation (AMLR), creates a single rulebook and takes effect on 10 July 2027.

AMLA is part of the architecture.

The creation of a new EU authority was a significant step at a time when the bloc was pursuing simplification and reduced bureaucracy, AMLA executive board member Derville Rowland said.

“AMLA’s mission and approach is complicated, but it is a structural response to the established and obvious fragmentation failures that we’re seeing across Europe,” she said.

AMLA has three main functions: direct supervision of selected financial groups, promoting convergence between national supervisors, and co-ordinating financial intelligence units (FIUs) across the EU.

It also has a policy-making role and advises the European Commission on money-laundering and terrorist-financing risks.

The objective is to establish a more consistent system, with information gathered by supervisors informing financial intelligence work, and intelligence about criminal activity helping to shape supervisory priorities.

“What we want to be is to be on the front foot, where we can anticipate, where we can reflect, where we can detect and disrupt better, earlier, more”, Rowland said, adding, “and we expect it to be a step change in Europe”.

AMLA has finalised its regulatory technical standards for the risk methodology and sent them to the European Commission. It is now gathering data and working with national regulators to develop the methodology for selecting eligible groups.

The EU Single Rulebook for anti-money laundering takes direct effect on July 10 2027 and AMLA’s targeted financial-sanctions guidelines should be issued in 2027.

The selection process will focus on systemic relevance and risk, rather than banks alone. Payment institutions, crypto-related financial institutions, and other financial-services businesses may also be selected.

Rowland emphasised that the target was up to 40 groups, rather than 40 individual entities, meaning a single group could contain hundreds of entities.

Interface

The authority will also interface with third countries, Rowland explained.

“When we supervise firms, we will not stay inside the EU border. We will go wherever that group is”.

Selection will be repeated every three years. Most firms will continue to be supervised nationally.

However, national supervisors’ approaches will increasingly be shaped by AMLA’s methodology and guidance.

AMLA’s remit also includes monitoring certain financial institutions’ compliance with sanctions-related requirements, including financial sanctions and asset freezing. The authority will not change the underlying legal framework; it will assess whether systems and controls deliver the required outcomes.

Although lawyers and accountants will not be directly supervised by AMLA, Rowland said that the authority had an oversight role in the non-financial sector.

In the panel discussion that followed, Tony Cahalan, head of the Financial Integrity Division in the Central Bank of Ireland, flagged that, from a national supervisor's perspective, “it's really important to say that we see ourselves as part of AMLA. It's not a separate thing over there”.

This means, he said, “that the Central Bank's own autonomy and discretion is fettered by that”.

Cahalan expressed the view that success would depend on how convergence was implemented, and “that firms in the system have measures that are really going after the key risks”.

Record-keeping and training are important, but “what I want to see is that in high-risk entities, transaction monitoring is occurring. It's detecting patterns and it's sending reports into the FIU”, and that when failures occur, action is taken.

Rowland confirmed that AMLA’s objectives would involve ensuring that systems were working.

She also stressed the importance of data quality. Poor-quality data could undermine even sophisticated systems, she said and, while AI could help reduce noise and identify relevant risks, it could do so only with good data and subject-matter expertise.

Significant discrepancies

Brian McKenzie, head of AML CEP at Citibank, which operates across 23 European countries, said firms currently faced significant discrepancies in the way national regulators applied the rules.

It would be “a huge win” to have an easily operationalised single rulebook with a harmonised set of expectations, he said. “And it's not necessarily about having less regulation; it's about having more effective regulation.

“The challenge for all institutions will be to make sure that the NCAs live up to that mandate, and we have to make sure that those interpretations are consistent”.

In conclusion, Derville Rowland described a Europe “where there will be no safe place to hide for money launderers” as a shared win-win outcome for those working in advisory firms, industry, and on the regulatory side.