Financial Crime World

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EU Introduces Ambitious Anti-Money Laundering Package to Strengthen Financial System

In a bid to combat financial crime and strengthen the EU’s anti-money laundering (AML) and countering the financing of terrorism rules, the European Commission has presented an ambitious package of legislation. The proposed changes aim to improve processes for detecting suspicious transactions and activities, while closing loopholes that criminals exploit to launder illicit proceeds or finance terrorist activities.

A Paradigm Shift in Regulatory Approach

The EU AML Package, as it’s known, represents a significant shift in the regulatory approach to combat financial crime. It introduces a range of measures aimed at enhancing transparency and cooperation between financial institutions, law enforcement agencies, and other stakeholders.

Key Components of the EU AML Package

The package consists of four key components:

1. Proposal for a Regulation Establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism

  • This regulation will establish a new authority responsible for supervising financial institutions and enforcing AML/CFT regulations.

2. Proposal for a Regulation on Prevention of Use of Financial System for Money Laundering and Terrorist Financing

  • This regulation will introduce stricter requirements for financial institutions to detect and prevent money laundering and terrorist financing activities.

3. VI Directive on Anti-Money Laundering/Countering the Financing of Terrorism (6th AMLD)

  • This directive will replace the existing IV Directive 2015/849/EU and introduce new requirements for financial institutions, including enhanced customer due diligence and reporting obligations.

4. Amendment of Regulation 2015/847 on Information Accompanying Transfers of Funds

  • This amendment will introduce new requirements for financial institutions to provide information about transfers of funds.

Most Important Changes Introduced by EU AML Package

The package introduces several key changes, including:

1. Establishment of a New Supervisory Authority

  • The authority will be responsible for supervising financial institutions and enforcing AML/CFT regulations.

2. Unification of Regulatory Framework

  • The package aims to unify the regulatory framework for AML/CFT across the EU, reducing complexity and inconsistencies.

3. Enhanced Supervision

  • Financial institutions will be subject to enhanced supervision, including regular audits and inspections.

4. Changes to High-Risk Countries List

  • The package introduces new criteria for determining high-risk countries, which will be connected to the FATF list.

Likely Practical Consequences of Implementing EU AML Package

The implementation of the package is expected to have several practical consequences, including:

1. Impact on Polish AML Act

  • The package may require changes to the Polish AML Act in force.

2. Changes to Internal Documentation

  • Financial institutions will need to update their internal documentation and procedures to comply with the new requirements.

3. Costs for Financial Institutions

  • The implementation of the package is expected to incur significant costs for financial institutions, including investments in technology and staff training.

4. Impact on Financial Institutions

  • The package may require financial institutions to adapt to new regulations and procedures, which may be challenging.

Timeline for EU AML Package

The Authority will be established at the beginning of 2023, with most of its activity starting from 2024. Direct supervision is expected to begin in 2026 when the Authority reaches its target number of employees. The entire EU AML package, including the AML Regulation, is expected to be in force three years after its adoption.