The ECB has put forth a question that the EU established an AMLA agency is that efficient. The European Union (EU) recently put forward its plans to establish the Anti Money Laundering Authority (AMLA). The AMLA is to serve as a central EU authority and have extensive reaching powers. AMLA’s goal is to be able to carry out immediate actions on any money laundering issues it detects in the EU countries.
Difference between FATF and AMLA
The FATF, which is an existing intergovernmental group, has the function of making policies regarding money laundering. However, the AMLA will have the power to actually implement them. AMLA will cooperate with member states to ensure that the regulations put forth by the EU are followed by all financial institutions. It will also have investigative powers, unlike the FATF.
Why was AMLA formed?
The AMLA was developed after the European Court of Auditors, which serves as the EU’s external auditor reported that EU countries are lacking in the tool and technology to ensure that AML/CFT rules and regulations are being observed in the country’s financial institutes. In many cases, the government themselves are unable to properly administer the stricter rules. This in turn is leading to the discrete spread of money laundering.
The AMLA will be a direct supervisor for large financial institutions under its domain of control. It will have the right to monitor any banks and other institutions dealing with risky transactions. If they observe any serious matters, they will have the right to take immediate action, as well as impose sanctions if necessary.
The AMLA will also have a hand in coordinating all future supervisory activities in financial activities over Europe. It will also work together with already established Financial Intelligence Units (FIUs) in its member states to investigate potential and ongoing money-laundering operations.
The EU is currently laying the foundation for the AMLA in place. It is set to be established in 2023. The headquarters are likely to be in Vienna. There will be about 250 members of staff on site. Once the AMLA begins its operations in 2024, it will take over the administration of the European Central Bank’s (ECB) AML/CFT database. It will also oversee the management of Europol’s FIU.net.
ECB’s concerns regarding AMLA
However, the European Central Bank is not taking this news well. The move to synchronize all AML/CFT operations is being seen as a generally positive move by authorities. However, the ECB has some concerns about its effectiveness. The organization will initially have 250 members. However, according to the European Central bank, this number is too low to satisfy its promise of ‘direct supervision’ of financial bodies.
With its current proposed staff and budget, the AMLA will be able to 15-20 of the larger financial institutions at most. In this case, the smaller financial institutions will remain under the jurisdiction of the existing state regulators. The limited approach may also lead to illicit activities in smaller firms going undetected. Since assessment of the current regulations proved that they were ineffective, this will render the point of the AMLA moot. The fact that many countries have country-specific laws may cause problems during adjustment.
Shortcomings of AMLA
In this case, the AMLA will need to amend its policies and goals from the start, or it may fail. Its goal of unifying all financial regulatory authorities may remain unachievable with its current capacity. To reach the level of command the AMLA desires, it will have to employ more staff and increase its budget than originally envisioned. If not, then it will fail to detect terror financing and money laundering in smaller institutions. This will be a contradiction to its stated purpose.
The ECB has noted that country-specific banks may have to go through extra hurdles to conduct investigations. Since the AMLA aims to directly supervise the entities, the banks will no longer have internal teams working to solve these issues. This may take away the independence of the financial institutions and lengthen the period of the inquiry.
The AMLA’s policies may also clash with those of the FATF (Financial Action Task Force) and other anti-money laundering intergovernmental entities. The AMLA will have to coordinate with these organizations as well as the financial authorities of the nations involved and match their methods and policies.
Conclusion
The successful implementation of the AMLA will require the support and cooperation of the ECB. The ECB’s opinion regarding AMLA is quite important, as it will be handing over some of its duties to them.
As of now, the ECB stands on the opinion that the AMLA’s ambitions are too high. With the current planned budget and implementations of the AMLA, it may find it difficult to conduct operations as assured.
