Brussels, 14 November 2024
In 2021, the European Commission presented a package of legislative proposals in the area of anti money-laundering efforts and countering the financing of terrorism (AML/CFT).
One of them, a proposal on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, became Regulation (EU) 2024/1624, adopted on 31 May 2024. Its detailed, directly applicable provisions will replace the minimum rules of the existing EU AML directives.
Most provisions will apply from 10 July 2029. The package was adopted in response to repeated calls by the European Parliament and the Council of the EU to enhance the EU’s AML/CFT regulatory framework. The aim is for the framework to become more coherent, keeping in step with technological innovations and related new forms of crime, as well as remaining in line with international standards in the area.
In Parliament, the Committees on Economic and Monetary Affairs and on Civil Liberties, Justice and Home Affairs were jointly responsible for the file. Second edition. The ‘EU Legislation in Progress’ briefings are updated at key stages throughout the legislative procedure.
Introduction
Money laundering is a global phenomenon. Its exact scope can only be assessed roughly, with some estimates putting it in the range of 2-5 % of global GDP annually.1 According to Europol, almost 99 % of criminal profits in the European Union (EU) escape confiscation, remaining in the hands of offenders. In the aftermath of the Covid-19 pandemic, the effectiveness and resilience of anti-money laundering and countering the financing of terrorism (AML/CFT) tools have been genuinely tested. Economic hardship has lowered the barriers for some individuals to engage in off-the-book transactions, while organised crime groups have proven highly adaptable to the new circumstances.2
Since the early 1990s, the EU has been building up a comprehensive legal framework to address money laundering and terrorist financing. The framework has been aligned with international standards in the field, which include recommendations adopted by the Financial Action Task Force (FATF), an intergovernmental body established in 1989 by the Group of Seven (G7). In some areas, EU legislation has gone beyond the requirements set by these standards, to address specific threats faced by its Member States.
The EU AML/CFT framework is, however, not set in stone, as it needs to keep abreast of technological advancement and emerging patterns in crime. One such development is the growing use of crypto-assets for money laundering, as they are becoming increasingly common as a form of payment. Moreover, a number of high-profile money-laundering scandals across the EU may be indicative of structural deficiencies of the system in its current form. Against this backdrop, a variety of interested parties, including the European Commission, the Council and the European Parliament, have called for the reform of the EU AML/CFT system. On 20 July 2021, the Commission presented a legislative package composed of the following initiatives:
- a proposal for a regulation establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA),
- a proposal for a sixth anti-money-laundering directive,
- a proposal for a revised regulation on transfers of funds,
- a proposal for a regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.