The Anti-Money Laundering Authority (AMLA) : a new approach to European banking supervision

Abstract

Money laundering (ML) and terrorist financing (TF) pose a threat to the financial stability of the European Union (EU). Although the EU prioritises combatting ML and TF, its antimoney laundering and countering financing of terrorism (AML/CFT) framework did not adequately address evolving threats. Allowing member states (MS) flexibility in implementing AML/CFT directives led to regulatory arbitrage and inconsistent enforcement. In response, the European Commission (EC) introduced the Anti-Money Laundering Authority (AMLA) in 2021 to strengthen supervision and harmonisation. This study analysed AMLA’s establishment, role, objectives, structure, and anticipated overall impact. It assessed the shortcomings of the current EU anti-money laundering (AML) framework, which led to the need for centralised supervision. A comparative analysis of the United States’ (US) AML framework was conducted, evaluating its approach to AML regulation and supervision. This study also examined the impact of AMLA on EU banking supervision, particularly following the 2007–2009 global financial crisis, which exposed weaknesses in EU banking oversight. It analysed the roles of the Single Supervisory Mechanism (SSM), the European Central Bank (ECB), and the European Banking Authority (EBA), in harmonising regulatory standards. A comparative assessment of the US banking supervision framework highlighted its fragmented structure, strengths, and limitations. Although certain shortcomings remain, which are also addressed in this study, the findings revealed that AMLA’s centralised approach would foster a more coherent framework, enhancing cross-border coordination and ensuring consistent AML/CFT enforcement across MSs. In contrast, the US’s decentralised system offers flexibility but risks inefficiencies due to overlapping responsibilities. As AMLA’s direct supervisory functions will not take effect until 2028, its effectiveness remains uncertain. This study recommended measures to enhance AMLA’s role, including clarifying governance structures, expanding direct supervision, increasing EU budget contributions, and strengthening international cooperation.