EU context of anti-money laundering and countering the financing of terrorism

EU legal framework on anti-money laundering and countering the financing of terrorism

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

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 the financing of terrorism.

​5^th anti-money laundering Directive

On 19 June 2018 the 5^th anti-money laundering Directive (Directive (EU) 2018/843), which amended the 4^th 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.

See also the Factsheet on the main changes of the 5^th anti-money laundering Directive

Risk assessment

On 26 June 2017 the Commission published its first Supranational Risk Assessment Report as required by the 4^th 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 countering the financing of terrorism. 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.

Further information:

EU Policy on High-Risk Third Countries

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.

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.

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.

Anti-Money Laundering – Objectives and Tasks

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)

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.

Communication on strengthening the Union framework for prudential and anti-money laundering supervision

Adoption of targeted changes to the three Regulations establishing the Supervisory Authorities

The European Commission adopted on 24 July 2019 a report which assesses recent alleged money laundering cases involving EU credit institutions.

EU-wide cooperation

An Expert Group on Money Laundering and Terrorist Financing meets regularly to share views and help the Commission define policy and draft new legislation.

Relevant legislation