The European Commission carries out risk assessments in order to identify and respond to risks affecting the EU internal market. It promotes the adoption of global solutions to respond to these threats at international level. The European Union adopted robust legislation to fight against money laundering and terrorist financing which contributes to those international efforts. The Commission ensures effective application of this legislation by reviewing transposition of EU acquis and working with networks of competent authorities.
On 24 July 2019, the European Commission adopted a Communication entitled "Towards better implementation of the EU's anti-money laundering and countering the financing of terrorism framework" accompanied by four reports.
On 7 May 2020, the European Commission adopted an action plan for a comprehensive Union policy on preventing money laundering and terrorism financing built on six pillars. To gather the views of citizens and stakeholder on these measures, the Commission launched a public consultation in parallel to the adoption of this action plan. Feedback is welcome until 26 August 2020.
On 16 September 2020, the European Commission adopted a report assessing whether Member States have duly identified and made subject to the obligations of Directive (EU) 2015/849 all trusts and similar legal arrangements governed under their laws. Directive (EU) 2015/849 (the 5th anti-money laundering Directive) indeed extended to trusts and similar legal arrangements the transparency rules and obligations applicable to legal entities, requiring Member States to identify and notify trusts or trust-like arrangements governed under their legal framework.
EU legal framework on anti-money laundering and counter terrorist financing
It is essential that gatekeepers (banks and other obliged entities) apply measures to prevent money laundering and terrorist financing. Traceability of financial information has an important deterrent effect. The European Union adopted the first anti-money laundering Directive in 1990 in order to prevent the misuse of the financial system for the purpose of money laundering. It provides that obliged entities shall apply customer due diligence requirements when entering into a business relationship (i.e. identify and verify the identity of clients, monitor transactions and report suspicious transactions). This legislation has been constantly revised in order to mitigate risks relating to money laundering and terrorist financing.
2015 modernised regulatory framework
In 2015, the EU adopted a modernised regulatory framework encompassing
- Directive (EU) 2015/849 on preventing the use of the financial system for money laundering or terrorist financing (4th anti-money laundering Directive);
- Regulation (EU) 2015/847 on information on the payer accompanying transfers of funds – makes fund transfers more transparent, thereby helping law enforcement authorities to track down terrorists and criminals.
Both instruments take into account the 2012 recommendations of the Financial Action Task Force (FATF), and go further on a number of issues to promote the highest standards for anti-money laundering and to counter terrorism financing.
5th anti-money laundering Directive
On 19 June 2018 the 5th anti-money laundering Directive (Directive (EU) 2018/843), which amended the 4th anti-money laundering Directive, was published in the Official Journal of the European Union. The Member States had to transpose this Directive by 10 January 2020.
These amendments introduced substantial improvement to better equip the Union to prevent the financial system from being used for money laundering and for funding terrorist activities.
These amendments were introduced to
- enhance transparency by setting up publicly available registers for companies, trusts and other legal arrangements;
- enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks;
- limit the anonymity related to virtual currencies and wallet providers, but also for pre-paid cards;
- broaden the criteria for the assessment of high-risk third countries and improve the safeguards for financial transactions to and from such countries;
- set up central bank account registries or retrieval systems in all Member States;
- improve the cooperation and enhance of information between anti-money laundering supervisors between them and between them and prudential supervisors and the European Central Bank.
On 26 June 2017 the Commission published its first Supranational Risk Assessment Report as required by the 4th anti-money laundering Directive. The Commission assessed the vulnerability of financial products and services to risks of money laundering and terrorist financing. This risk analysis is conceived as a key tool to identify, analyse and address money laundering and terrorist financing risks in the EU. It aims at providing a comprehensive mapping of risks on all relevant areas, as well as recommendations to Member States, European Supervisory Authorities and obliged entities to mitigate these risks. This risk analysis support Member States and obliged entities when carrying out their respective risk assessments. On 24 July 2019, the Commission published its second supranational risk assessment report
EU list on high risk third countries
Based on Directive (EU) 2015/849, Article 9, the Commission is mandated to identify high-risk third countries having strategic deficiencies in their regime on anti-money laundering and counter terrorist financing. The aim is to protect the integrity of the EU financial system.
One of the pillars of the European Union's legislation to combat money laundering and terrorist financing is Directive (EU) 2015/849. According to this Directive, banks and other gatekeepers are required to apply enhanced vigilance in business relationships and transactions involving high-risk third countries. The types of enhanced vigilance requirements are basically extra checks and control measures which are defined in article 18a of the Directive.
Enhancing access to financial information by law enforcement
Terrorists and criminals have demonstrated their ability to transfer funds quickly between different banks, often in different countries, but lack of timely access to financial information means that many investigations come to a dead end. There is therefore a clear need to enhance cooperation between authorities responsible for combating terrorism and serious crime when financial information is a key part of an investigation.
Directive (EU) 2019/1153 enhances the use of financial information by giving law-enforcement authorities direct access to information about the identity of bank-account holders contained in national centralised registries. In addition, it gives law enforcement the possibility to access certain information from national Financial Intelligence Units (FIUs) – including data on financial transactions – and also improves the information exchange between FIUs as well as their access to law enforcement information necessary for the performance of their tasks. These measures will speed up criminal investigations and enable authorities to combat cross-border crime more effectively.
Proposal - laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences and repealing Council Decision 2000/642/JHA
Impact assessment - laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences and repealing Council Decision 2000/642/JHA
Executive summary of the impact assessment - laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences and repealing Council Decision 2000/642/JHA
- A Staff Working Document on improving cooperation between EU Financial Intelligence Units was published on 26 June 2017. It summarises the results of a 2016 mapping exercise that was carried out by the Financial Intelligence Units under the FIU Platform that identifies obstacles to the access, exchange and use of information as well as obstacles to the operational cooperation between FIUs.
- Staff Working Document on Compliance by cross border banking groups at group level
Supervision and regulatory technical standards
The Commission’s services work closely with the European Supervisory Authorities in the implementation of the AML/CFT rules. The joint committee of the European Supervisory Authorities on AML/CFT issues guidelines and opinions to help national competent authorities to understand the regulatory expectations.
As part of its legal obligation stemming from the 4th anti-money laundering Directive the Commission adopted Delegated Regulations in relation to the following regulatory technical standards that have been developed by the European Supervisory Authorities (ESAs)
- Regulatory technical standards for the minimum action and the type of additional measures credit and financial institutions must take to mitigate money laundering and terrorist financing risk in certain third countries
- Regulatory technical standards on the criteria for the appointment of central contact points for electronic money issuers and payment service providers and with rules on their functions
The European Commission adopted on 8 November 2018 an opinion, in exercise of its powers under the EBA Regulation, requiring the Maltese anti-money laundering supervisor (Financial Intelligence Analysis Unit) to continue taking additional measures to fully comply with its obligations under the fourth anti-money laundering Directive.
The European Commission adopted on 24 July 2019 a report which assesses recent alleged money laundering cases involving EU credit institutions.
An Expert Group on Money Laundering and Terrorist Financing meets regularly to share views and help the Commission define policy and draft new legislation.
- A Committee on the Prevention of Money Laundering and Terrorist Financing may also be convened to give its opinion on implementing measures put forward by the Commission.
- The European Commission also organises meetings of an Expert group (the EU FIU's Platform) that brings Financial Intelligence Units together in order to facilitate cooperation among national FIUs and to provide advice and expertise to the Commission.
- The European Commission organises meetings of an Expert Group on eID and remote Know-Your-Customer (KYC) processes that brings public and private experts together to explore issues relating to electronic identification and remote KYC processes to provide advice and expertise to the Commission.
The Commission is a member of the Financial Action Task Force (FATF), the main international body concerned with combating money laundering, the financing of terrorism and other threats to the integrity of the international financial system.
The Commission is an observer in Moneyval – the Council of Europe body assessing compliance with AML/CFT standards.
The Commission is an observer at the Egmont Group of Financial Intelligence Units, that provides an international platform for the secure exchange of expertise and financial intelligence between FIUs to combat money laundering and terrorist financing.