COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the Anti-money laundering package: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the mechanisms to be put in place by the Member States for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and repealing Directive (EU)2015/849 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the European Authority for Countering Money Laundering and Financing of Terrorism, amending Regulations (EU) No 1093/2010, (EU) 1094/2010 and (EU) 1095/2010 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on information accompanying transfers of funds and certain crypto-assets
Date: 2021-07-20
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: banking supervision, economic offence, exchange of information, fight against crime, financial institution, financial supervision, financial transaction, money laundering, terrorism financing

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  EN 

   EUROPEAN COMMISSION  Brussels, 20.7.2021  SWD(2021) 191 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the Anti-money laundering package:  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing      Proposal for a DIRECTIVE OF THE  EUROPEAN PARLIAMENT AND OF THE COUNCIL on the mechanisms to be put in place by the Member States for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and repealing Directive  (EU)2015/849      Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the European Authority for Countering Money Laundering and Financing of Terrorism, amending Regulations (EU) No 1093/2010, (EU) 1094/2010 and (EU) 1095/2010      Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on information accompanying transfers of funds and certain crypto-assets             {COM(2021) 420 final} - {SEC(2021) 391 final} - {SWD(2021) 190 final}  
 
 
Executive Summary Sheet 

Impact  assessment  on  a  package  of  Commission  legislative  proposals  regarding  Anti-Money  Laundering  and 
Countering  Financing  of  Terrorism  (AML/CFT),  including:  Draft  Regulation  on  AML/CFT;  Draft  amendment  of 
Directive 2015/849 on AML/CFT; Draft Regulation creating an EU Authority for AML/CFT. 

A. Need for action 

Why? What is the problem being addressed?  
Three problems are identified, despite recent revisions of the AML Directive: lack of clear and consistent rules, 
inconsistent  supervision  across  the  internal  market,  and  insufficient  coordination  and  exchange  of  information 
among Financial Intelligence Units (FIUs). Reference is made to the 2019 “post-mortem” report on recent money 
laundering (ML) cases in the EU (COM(1019)373final). Regarding rules, note is taken of the absence of limits on 
cash  operations  and  the  impacts  this  has  on  the  mitigation  of  the  high  risk  of  ML  deriving  from  large  cash 
payments;  the  scope  of  entities  covered  by  AML  legislation  and  customer  due  diligence  are  among  other 
highlighted areas where greater harmonisation could be beneficial. The current approach to third countries has 
limited effectiveness. Concerning supervision, enforcement varies in effectiveness across Member States, due to 
differences in resources and practices. FIUs currently lack common methods and harmonised templates which 
hinder  joint  analysis,  resulting  in  suboptimal  detection  of  transactions  and  activities  potentially  connected  to 
ML/TF. The current approach to identify holders of bank account across borders is not effective. 

What is this initiative expected to achieve?  
The objective is to strengthen the preventive AML/CFT framework in the EU by removing the current loopholes 
that  allow  criminals  to  misuse  the  EU  financial  system  to  launder  their  illicit  proceeds  or  permit  terrorism 
financing of terrorist activities. This is expected as a result of action at both legislative and structural level: 
-  A clearer set of rules, including directly applicable provisions, will ensure more consistent application of the 
framework.  This  will  provide  for  a  more  consistent  approach  to  those  entities  that  are  required  to  apply 
AML/CFT  rules  across  the  EU,  as  well  as  to  the  measures  that  they  must  put  in  place,  in  addition  to 
introducing a ceiling on cash payments in the EU. 

-  The creation of an EU AML Authority will improve supervision and support cooperation between FIUs.  

What is the value added of action at the EU level?  
The  2019  AML  Package  adopted  by  the  Commission  highlighted  how  criminals  have  been  able  to  exploit  the 
differences among Member State’s AML/CFT regimes. The cross-border nature of much money laundering and 
terrorism financing (ML/TF) makes good cooperation between national supervisors and FIUs essential to prevent 
these crimes.  Many entities subject to AML obligations have cross-border activities, and different approaches by 
national supervisors and FIUs hinder them in achieving optimal AML/CFT practices at group level. Greater EU-
level coordination, including a component of direct EU supervision of the riskiest entities, is needed to deal with 
these cross-border issues and maximise the EU’s financial system capacity to both prevent and detect ML/TF. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
Regarding AML/CFT rules, apart from the baseline scenario (minimal changes in the current AML Directive), the 
options are directly applicable and more harmonised rules concerning only the entities covered by the legislation 
or  also  covering  supervisors  and  FIUs.  In  the  area  of  supervision,  the  baseline  scenario  consists  of  limited 
AML/CFT  coordination  being  carried  out  by  the  European  Banking  Authority,  as  at  present.  An  intermediate 
option  is  to  create  at  EU  level  indirect  supervision  powers  (an  EU  body  to  exercise  oversight  over  national 
supervisors),  and  another  option  is  to  also  create  EU-level  direct  supervision  over  a  number  of  the  riskiest 
entities;  a  final  option  is  EU  direct  supervision  over  all  Obliged  Entities.  For  FIUs,  apart  from  the  baseline  of 
informal  coordination  among  national  FIUs,  one  option  is  to  create  an  EU-level  coordination  and  support 
mechanism for FIUs. A further option is to create a single EU FIU, replacing national FIUs. 
       The  selected  options  are:  a  set  of  more  harmonised  AML/CFT  rules,  including  a  more  harmonised  set  of 
entities subject to AML/CFT requirements, more harmonised requirements that they have to apply and a ceiling 
of €10 000 for cash payments in the EU; an EU AML/CFT supervisor, with indirect supervisory powers regarding 
all entities subject to AML/CFT requirements, and  direct supervisory competence for a selection of the riskiest 
entities in the financial sector; an EU-level coordination and support mechanism for FIUs, integrated in the same 
EU Agency as the supervisor; interconnection of the national bank account registers and data retrieval systems. 

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Who supports which option?  
The public consultation received 202 replies, 99% of which considered that further action is needed to combat 
ML/TF.  Action  at  EU  level  was  deemed  the  most  effective  option.  All  categories  of  stakeholders  support  more 
harmonised  rules,  including  a  more  harmonised  set  of  obliged  entities  (76%),  more  harmonised  requirements 
they must apply (67%) and limits to cash payments (55%). As regards the EU supervisor, 55% of respondents 
prefer it to cover all entities, whether immediately or incrementally (with stakeholders outside the financial sector 
more  reticent).  Most  stakeholders  support  broad  competences  for  the  FIU  mechanism  –  from  developing 
templates (57%) to assessing trends and risks (62%) to supporting joint analyses (57%). 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?  
Increased effectiveness and efficiency of the EU AML/CFT framework through more consistent application and 
enforcement is the principal benefit of the preferred options, with EU level structures to underpin, coordinate and 
support this. This will reduce criminals’ options to exploit regulatory divergences across Member States and will 
ensure  better  protection  of  our  financial  system  and  economy.  A  more  effective  approach  to  third  countries 
should  reduce  the  burden  on  operators  as  rules  to  be  applied  become  smarter  and  enhanced  checks  are 
reserved for risky situations only. An EU-wide interconnection of bank account registers would speed up access 
to  bank  account  information  and  facilitate  cross-border  cooperation  between  FIUs  and  other  competent 
authorities.  The  limitation  of  cash  operations  to  payments  under  €10  000  will  significantly  deter  money 
laundering while not affecting financial inclusion. 

What are the costs of the preferred option (if any, otherwise main ones)?  
The principal costs are the creation and running costs of a new EU AML/CFT Authority (a regulatory Agency). 
Supposing  a staff level of 250 FTE  at full operation, the annual cost  would be of the order of €40 million. It is 
envisaged that over half of this cost can be met by levies on financial sector entities covered by the framework. 
       Private sector entities newly covered by the AML framework will also incur costs. These are mainly certain 
types  of  Virtual  Asset  Service  Providers  and  crowdfunding  platforms.  These  costs  will  mainly  involve  the 
recruitment and training of AML/CFT staff and obtaining appropriate IT applications. Certain entities covered by 
the AML/CFT framework will incur the cost of contributions to the AML Authority. The exact cost per entity  will 
depend on the number of entities which must contribute (this will be determined in a subsequent delegated act). 
       The  interconnection  of  centralised  bank  account  registries  and  data  retrieval  systems  will  generate  costs 
both in terms of establishing the system and its maintenance. Based on the costs incurred in relation to other EU 
systems, the costs of the future interconnection platform are tentatively estimated at approximately €2 000 000.   

How will businesses, SMEs and micro-enterprises be affected?  

Financial  institutions  which  are  active  cross-border  will  experience  benefits  from  clearer  and  more  consistent 
rules across the EU, resulting in reduction of compliance costs. In addition, they will encounter more harmonised 
practices and better communication between national supervisors and FIUs, with some will only having to deal 
with a single EU supervisor. Other Obliged Entities should experience improved quality of supervision and better 
feedback from FIUs. SMEs covered by the AML framework are essentially non-financial, including notaries, real 
estate agents, accountants and others. Currently they play a limited role in ML/TF detection. Their awareness of 
ML/TF will be improved, alongside the level of surveillance to ensure that they apply AML/CFT measures. As a 
result of this initiative, the number of suspicious transaction that they report should increase. 

Will there be significant impacts on national budgets and administrations?  
No  such  negative  impacts  are  envisaged.  There  may  be  some  savings  for  some  national  supervisors  which 
currently supervise entities which will be transferred to supervision by an EU supervisor. 

Will there be other significant impacts?  
The main expected significant impact is a reduction in money laundering and terrorism financing in the EU. The 
total  amount  of  undetected  ML/TF  has  been  estimated  by  Europol  at  well  over  €100  billion  per  year.  An 
improved preventive framework can help to reduce this figure by reducing the options available to criminals. This 
has the potential to bring major social welfare benefits. Moreover, improved detection will positively impact the 
cases that are investigated and prosecuted, with higher chances to recover assets for the benefit of all.  

D. Follow up 

When will the policy be reviewed?   
A  review  clause  in  the  future  AML  Regulation  will  require  evaluation  within  5  years  of  application.  The  AML 
Authority will be reviewed at the same time, if it has been in operation at least two years by that time. 

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