As the EU enters an era of harmonised Anti-Money Laundering (AML) regimes and is laying the groundwork for the new Anti-Money Laundering Authority (AMLA), businesses are faced with substantial operational and financial challenges to meet the heightened standards.
The new framework envisions an EU that is free from corruption, fraud and illicit finance and the path to achieve this includes a vast array of reforms. The Anti-Money Laundering Regulation (AMLR) introduces stricter requirements, demanding for enhanced due diligence, robust transaction monitoring, comprehensive reporting protocols, stronger internal governance and controls, and more transparent beneficial ownership, to name a few.
Additionally, thresholds are being lowered; customer due diligence (CDD) will apply to occasional transactions from €10,000 (down from €15,000), cash transactions over €10,000 will be prohibited, and identification will become mandatory for transactions between €3,000 and €10,000.
Importantly, the scope of the new centralised framework expands beyond financial institutions. From large banks to FinTech firms, to designated non-financial businesses and professions (DNFBPs) such as high-value goods traders (cars, luxury goods, fine art, jewellery, etc.); all must prepare to adapt and comply.
Businesses and entire sectors are being driven towards enhanced transparency, accountability and risk management standards. Non-regulated businesses, in particular, are expected to face an immense shift in compliance responsibilities. Traders of cars, luxury goods, fine art, jewellery and other high-value goods will now be held to much higher due diligence and reporting standards, than before, akin to those imposed on financial institutions. More specifically, they will have to:
- develop and maintain internal policies and procedures,
- establish strong internal controls,
- intensify the scrutiny of high-value transactions and clients,
- train their staff on all things AML, and so on.
Undeniably, the stakes are high. The new rules come accompanied with tougher sanctions, in the form of fines and penalties. For credit and financial institutions, the maximum thresholds for fines have risen to the higher of €10 million or 10% of total annual turnover (previously €5 million or 5% of total annual turnover). For all other businesses, the maximum sanctions that can be imposed are at least double the amount of the benefit gained from the breach, or €1 million, whichever is greater.
Compliance is no longer optional – businesses need to prepare for real change, and they need to do it promptly – to safeguard their reputation, to meet their regulatory obligations, to avoid fines and penalties, and to demonstrate their commitment to supporting the EU’s fight against financial crime.
* By Clea Evagorou, Partner, Risk, Regulatory & Forensic Leader and Annabel Iacovidou, Senior Manager at Risk, Regulatory & Forensic at Deloitte
