The European Union has introduced a significant reform to strengthen the fight against money laundering and terrorist financing with its new Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) package. This reform replaces the previous directive-led framework with a more harmonised, regulation-led approach, ensuring consistent application of AML/CFT rules across all EU member states.
This reform establishes a new regulatory and supervisory watchdog—the Anti-money Laundering Authority (AMLA)—and introduces a new "Single Rulebook," formally known as Regulation (EU) 2024/1624.
What is the AML/CFT Single Rulebook legislation?
For decades, the EU has relied on directives to combat money laundering and terrorist financing. While well intentioned, the use of multiple AML/CFT directives often led to varying interpretations and implementations across member states, resulting in gaps and loopholes.
The Single Rulebook creates a unified framework that streamlines AML/CFT rules across Europe, addressing the inconsistencies that arose under the previous system of directives. It aims to resolve existing AML/CFT issues by introducing a consistent set of rules that all EU member states must follow, ensuring uniform standards across the board. The European Council formally adopted the new package of AML rules on 30 May 2024.
What effect does the EU’s new AML/CFT package have on businesses?
One of the most significant changes under the new regulation is the expansion of businesses required to comply with AML/CFT rules. The scope now extends beyond traditional banks and financial institutions to include crypto-asset service providers; crowdfunding platforms; non-bank mortgage and consumer credit providers; businesses assisting with EU residency; traders of high-value goods such as luxury cars, yachts, jewellery, and art and professional football clubs and agents.
The Single Rulebook obliges these entities to put in place internal policies, procedures and controls to effectively manage money laundering and terrorist financing risks. Additionally, they must report suspicious activities identified to financial intelligence units (FIUs). The new package significantly strengthens the authority of FIUs, empowering them to more effectively identify and investigate cases of money laundering and terrorist financing and also granting them the ability to halt suspicious transactions.
The legislation also introduces more stringent due diligence requirements for businesses, particularly in high-risk scenarios. It strengthens the security requirements for crypto-asset service providers involved in cross-border relationships, and, in cases where financial institutions conduct business involving large sums money with high-net worth individuals, they must perform enhanced due diligence as part of the client relationship. To mitigate money laundering risks, the regulation also imposes an EU-wide limit of €10,000 on cash transactions.
When does the Single Rulebook come into effect?
The Single Rulebook will take effect on 10 July 2027, with some provisions, such as those concerning football clubs and agents, beginning in 2029. While this timeline gives businesses time to adapt, the significant changes required to comply with the legislation necessitate early preparation and action.
What should you do next?
- Understand the regulation: Establish a good understanding of the new regulatory landscape.
- Complete a risk assessment: Examine your AML technology to ensure it meets the increased regulatory scope. Align your processes with harmonised standards to ensure compliance across jurisdictions, thereby reducing the risk of penalties. This adjustment may require substantial updates to systems and workflows.
- Implement your remediation plan: Strengthen your due diligence frameworks to identify and mitigate AML/CFT risks effectively. Enhancing due diligence includes updating your AML/KYC programme, standards and policies to improve customer verification and continuous transaction monitoring.
- Assign resources: While the Single Rulebook aims to simplify compliance processes and reduce administrative burdens, the initial implementation phase may temporarily increase workloads. Proper resource allocation is essential to manage this transition smoothly.
How Grant Thornton can help
The world’s leading organisations trust Grant Thornton’s global Financial Crime Compliance (FCC) practice to help them reduce risks related to money laundering, terrorist financing and economic sanctions. We help clients balance the competing demands of operational efficiency, effective financial-crime risk mitigation and regulatory compliance.
Our FCC experts are committed to helping you navigate the EU’s new AML/CFT regulation. As the implementation date approaches, we’ll continue to provide insights and guidance to ensure your business remains compliant and ahead of the curve in this changing regulatory environment.
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