Not so long ago, i.e. last year, certain solutions were introduced in Poland via the implementation of the fifth AML Directive, and we are still adjusting to these changes. Nevertheless, another EU package of regulations is in the pipeline, introducing fundamental changes to the regulatory framework of the European AML/CFT system.
At the time of implementation of the fourth and fifth AML Directives, work on an entirely new EU AML/CFT package was already underway due the weaknesses of the existing system being highlighted by a number of international money laundering scandals involving European financial institutions.
These identified weaknesses include:
- ineffective and insufficient implementation of the existing AML/CFT rules in individual Member States, resulting primarily from numerous ambiguities in the current regulations, leading to significant discrepancies in their transposition into national legal systems and their application;
- rapidly evolving technological innovations in the financial services market (e.g. development of crypto-assets), which the AML regulations have not kept up with;
- insufficient intensity and effectiveness of supervision of obliged entities’ compliance with the AML regulations by national authorities in individual Member States; and
- low detectability of suspicious transactions reported to Financial Intelligence Units (FIUs).
The response to these challenges is a package of draft new European AML/CFT regulations proposed by the European Commission last summer, consisting of:
- a Regulation establishing an EU AML/CFT Authority in the form of a decentralised EU regulatory agency (the Anti-Money Laundering Authority – AMLA);
- a new AML/CFT Regulation containing directly applicable AML/CFT rules, including a revised EU list of entities subject to AML/CFT rules (i.e. obliged entities);
- an AML/CFT Directive replacing the existing EU AML/CFT Directive and containing provisions not appropriate for a Regulation and requiring national transposition, such as rules concerning national supervisors and FIUs in Member States; and
- a recast of the 2015 Regulation on information accompanying transfers of funds (Regulation 2015/847) to include crypto-asset service providers.
The new AML/CFT Regulation will be of key importance to the day-to-day functioning of obliged entities. It will contain a number of provisions analogous to those we know from the existing AML Directive, but with two aspects where fundamental changes will be introduced.
Firstly, where the provisions of the AML Directive were most vague, the provisions of the new Regulation will be more precise. Secondly, the new provisions will be applied directly in EU Member States, without the need for implementation as in the case of the Directive.
Clarity and consistency in their interpretation will also be promoted by the AMLA, including through the issuance of technical standards in certain regulatory areas, and in the performance of AML analytical and coordination tasks at European level. In particular, the new Regulation will provide greater clarity, detail and uniformity in its application across the European Union with respect to issues such as the catalogue of financial safeguards or the rules for identifying beneficial owners.
Although we will have to wait a little longer for the new regulations to come into force, it is worth familiarising yourself with their drafts today to be better prepared when the upcoming changes finally appear.
Source: “Resistant Bank: anti-money laundering & anti-fraud” Report, published by the Polish Bank Association
Date: 30 March, 2022