AMLA: The New EU Authority for Anti-Money Laundry is being established in Frankfurt

The European Union (EU) has recently announced the creation of a new agency, the Anti-Money Laundering and Countering the Financing of Terrorism Authority (AMLA). The main goals of the AMLA are:

Develop AML/CFT Framework for Web3: Create a framework addressing the unique challenges of decentralized technologies. [1]

Coordinate National Authorities: Ensure consistent application of AML/CFT rules across the EU. [2]

Supervise High-Risk Entities: Directly oversee entities with the highest money laundering and terrorism financing risks.

Support Financial Intelligence Units: Enhance FIUs’ analytical capabilities and facilitate information exchange.

Balance Security with Innovation: Prevent financial crimes while fostering innovation in the Web3 space.

International and Interagency Cooperation: Work with EU and international partners for a unified AML/CFT approach.

Enhance EU Financial System: Improve the financial system’s security, integrity, and adaptability to new technologies.

As part of its ambitious package of legislative proposals to strengthen the EU’s anti-money laundering and countering the financing of terrorism (AML/CFT) rules [1]. AMLA will be the central authority coordinating national authorities to ensure the correct and consistent application of EU rules, as well as directly supervising those financial sector entities exposed to the highest risk of money laundering and terrorism financing [2]. AMLA will also support financial intelligence units (FIUs) to improve their analytical capacity and information exchange, and host the central online system, FIU.net [2]. AMLA will be a decentralized EU regulatory agency and its seat will be based in Frankfurt, Germany [3].

The establishment of AMLA comes at a time when the internet is undergoing a major transformation from web 2 to web 3 space, a new decentralized web that utilizes blockchain technologies. Web3 encompasses various technologies and applications, such as cryptocurrencies, non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs), decentralized finance (DeFi), and more. Web3 promises to enable new forms of value creation, collaboration, and innovation, but also poses significant challenges and risks for AML/CFT, such as anonymity, decentralization, cross-border transactions, and lack of regulation [4].

AMLA will have to address these challenges and risks by developing a comprehensive and coherent framework for AML/CFT in the Web3 era, considering the specific features and needs of the different Web3 actors and activities. AMLA aims to strike a balance between preventing and combating money laundering and terrorism financing, while simultaneously nurturing innovation and competitiveness within the Web3 space. AMLA will have to cooperate closely with other EU institutions, bodies, and agencies, as well as with international partners and stakeholders, to ensure a harmonized and effective approach to AML/CFT in the Web3 context.

AMLA is expected to become fully operational by 20262. Until then, the EU will continue to work on the legislative proposals that will form the basis of AMLA’s mandate and powers, as well as on the selection of AMLA’s seat and staff. The introduction of AMLA could contribute to enhancing the security, integrity, and resilience of the EU’s financial system, as well as synchronizing it more with the development and adoption of innovations such as Web3 in a responsible and sustainable manner.