Nine cities are competing to be the new home of the newly formed financial crime watchdog
Surprisingly, until now the European Union has had no central body for fighting money laundering, but that is set to change this month. In December 2023, the Council of the EU and European Parliament agreed to create the new authority, aiming to address weaknesses in their current Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) framework.
Establishing the Anti-Money Laundering Authority
The primary weakness within the current EU AML/CFT framework allows cross-border opportunities for criminals using the EU financial system. As such, an action plan was put forward in 2020 for a unified EU policy, and in 2021, the European Commission put together a proposal for the new authority. Two and a half years later, agreement on the authority was established but it is only on 22nd February 2024 that the city housing AMLA will be announced.
In terms of deciding on the location, the 27 MEPs – one from each member state – will represent the Parliament. They may settle the vote in advance of the Council, which has already agreed to ‘vote as one’. As such, several prior rounds of internal voting may be needed for one city to be chosen by the majority.
What will AMLA do?
AMLA is being set up for a number of reasons. In their own words:
“The creation of this new Authority is crucial to ensure efficient and adequate supervision of obliged entities having high inherent Money Laundering/Terrorist Financing (ML/TF) risk, strengthening common supervisory approaches for non-selected obliged entities and facilitating joint analyses and cooperation between Financial Investigation Units (FIUs).” – Proposal for establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism and amending Regulations (EU) No 1093/2010, (EU) 1094/2010, (EU) 1095/2010
AMLA’s main priorities will be:
- Establishing the EU rulebook on AML/CFT
- Implementing the rulebook as well as the existing EU AML/CFT framework
- Enhancing and strengthening the international aspects of the framework
- Supervising member states regarding AML/CFT
- Helping to enable cooperation, analysis, and support for FIUs by developing common reporting templates and standards
- Enforcing criminal law provisions/improving exchange of information between member states
Alongside these processes, AMLA is also expected to assist the Financial Action Task Force (FATF), take on the AML/CFT database from the European Central Bank, and manage FIU.net, the secure communications network currently operated by Europol.
It is hoped that by taking action, the EU can stay ahead of future financial crime trends before they occur.
What will a city gain by becoming the new home of AMLA?
The successful city – and its country – will gain a lot from becoming the new home of AMLA. Not only will the financial sector of the country receive a significant boost in term of global prestige and industry recognition, it will also lead to an enhanced status for the country within the EU.
Alongside this, establishing the headquarters effectively will require a lot of personnel; up to 400 jobs are expected to be created from the initiative, which in turn brings money into the local economy.
Which cities are wanting to host the EU Anti-Money Laundering Authority?
There are nine candidates looking to house the headquarters of AMLA. As might be expected, bidding for the authority has been hugely competitive with nine countries seeking to establish themselves as the leading nomination.
The nine cities are:
- Rome, Italy
- Paris, France
- Frankfurt, Germany
- Madrid, Spain
- Vienna, Austria
- Dublin, Ireland
- Brussels, Belgium
- Vilnius, Lithuania
- Riga, Latvia
It is perceived among many that the frontrunners to house the EU Anti-Money Laundering Authority are Paris and Frankfurt followed by Rome and Madrid. In the chasing pack are Dublin, Brussels and Vienna, with Vilnius and Riga as the so-called dark horses of the bid.
Pros and Cons of each city
As with any bidding process, there are a number of pros and cons to each city in the running to become the new home of AMLA. As succinctly as possible, we have outlined them below.
Pros: Italy has been strong on organized crime in recent years boasting some large asset seizures. Alongside this, the country has a strong FATF presence. Italy’s clear commitment to anti-money laundering provides a compelling argument for Rome to be chosen as the new AMLA HQ.
Cons: Although Italy is being particularly robust in fighting financial crime currently, this isn’t the case when one looks at historic efforts. This might count against them in the final stages of selection.
Pros: Post Brexit, Paris is home to the EU’s largest banking sector (in terms of assets). The city also houses the European Banking Authority and the European Securities and Markets Authority. Alongside this, the FATF is also based in Paris and has been since its formation in 1989. The 35 years’ of experience in fighting financial crime makes the city an excellent choice from an efficiency point of view; not only could the two offices share information in a straightforward manner but a lot of AML/CFT expertise is already contained within the city.
Cons: The European Union might not wish to concentrate its anti-money laundering efforts within one city. Moreover, the country doesn’t appear to be fully behind its bid with limited financial support in place (€15 million). Furthermore, questions continue to be asked of the country’s heavy-handed supervision of non-profit organizations.
Pros: Similar to Paris, Frankfurt already houses some key financial headquarters including the European Central Bank (ECB) and a new Federal Financial Crimes Agency (BBF). These could work well with AMLA, boosting efficiency and effectiveness in fighting money laundering and combatting the financing of terrorism.
Cons: Germany is still licking its wounds after the Wirecard scandal, which led to the creation of the BBF. The financial contribution that the country has put forward to support its bid is also not as generous as others (€10 million), while such concentration of so many financial centres in a larger EU country, that is already a financial bastion of Europe, may not be in the Union’s best interest.
Pros: Spain has hugely positive FATF ratings while Madrid is seen as an important financial hub within the EU. It has a mature, impressive AML sector while the city is also big on cybersecurity, helping to boost its candidacy. The country has also offered the Torre de Cristal, the city’s largest skyscraper, to be used rent-free as the establishment’s headquarters.
Cons: The primary argument against Spain relates to their recent Ultimate Beneficial Ownership regulation, which launched in September 2023 to comply with the EU’s AML/CFT directive. This register is open access, which might infringe on its possibility of housing the AMLA headquarters. Even so, it is a strong candidate in the race.
Pros: Austria is seen as a strong contender for housing AMLA with a lack of previous financial crime/AML scandals certainly helping its cause. Vienna is helped in its candidacy by its central location and its apparent ability to coordinate fighting financial crime with other international organizations that already exist within the city, such as the United Nations Office on Drugs and Crime (UNODC).
Cons: Austria was seen as a compelling choice and ‘dark horse’ in the race. However, the country has elections this year and the government has been noticeably quiet on its candidacy, which may see interest turn elsewhere. Alongside this, the country still has strong financial contacts with a few Russian institutions which may cause alarm.
Pros: Unlike other candidates, the Dublin bid has seen significant financial support from Ireland’s government (€80 million), which included covering the premises’ rent and costs for nine years. With positive FATF rating and strong leadership in regards to AML/CFT, the city is a compelling choice.
Cons: Though the country has a positive overall FATF rating, it is seen poorly by the FATF when it comes to asset seizures, while it has also chosen not to be part of the European Public Prosecutor’s Office, which investigates organized crime and money laundering across borders. When coupled with the country’s tax haven status (it has come under criticism for its relationship with Apple, for example), expensive housing, and poor geographic location relative to other EU countries, such difficulties may prove to be Dublin’s downfall.
Pros: If location is seen as most important to the creation of the AMLA headquarters, then Brussels is an obvious choice with key EU offices dotted throughout the city. This would allow for close cooperation.
Cons: Like Germany, the EU may not wish for more power to be concentrated within the city. As well as this, there have been recent political issues surrounding Belgium’s identity, and elections are due in June 2024. Such instability may be best avoided when looking seeking out the new headquarters for AMLA.
Pros: Like Tallinn in Estonia, Vilnius is quickly establishing itself as a fintech hub within the EU. Its growing status in this regard, as well as its impressive AML/CFT track record help it stand out from other candidates, especially considering it ranks best in the Basel AML Index (9th lowest risk overall), three places higher than France. Alongside this, the country also has experience in regulating cutting-edge fintech firms, including those that deal in cryptocurrencies.
Cons: Lithuania’s geographic location doesn’t help its candidacy with its border with Russia proving a point of concern in light of the Russia/Ukraine war. Alongside this, the country is currently reporting to Moneyval regarding its strengthening of AML/CFT regulations. Even so, it is making good progress in this record with a further follow-up expected later this year. Alas, the decision on AMLA may come just a bit too early for the country as it seeks to outgun more established cities.
Pros: Riga is seen as an outsider in the candidacy bid for becoming the home of AMLA. Even so, the Latvian government have thrown their full weight behind the bid, pointing to Riga’s historic status as largest city in the Baltics and being an important trade and commercial crossroad to Europe by the Baltic Sea. Alongside this, the country highlights its belief that the AMLA HQ should point to a vision for growth and cooperation, and notes its improvements and reform in AML/CFT. A finally point in its favor is in seeking to address the balance of power within the EU away from the likes of Brussels and Frankfurt.
Cons: Although the country is keen to highlight its reform in regard to combatting money laundering, the fact it needs to showcase this shines a light on its past financial scandals that it is seeking to forget. Its recent progress in this regard may not be enough to help it win the bid, while like Lithuania, it also suffers from its border with Russia and current geopolitics in the region.
When will AMLA be operational?
We will know who has won the bid to host the Anti-Money Laundering Authority on February 22nd 2024. The headquarters is expected to become operational by the end of the year with an initial 100 staff if all goes to plan, but rising to up to 400 by its third year. Estimated budgets for AMLA vary between €12.8 million – €30million. Once the location of the Anti-Money Laundering Authority is agreed, the EU’s new AML legislation will be finalized.
In conclusion, all cities at this stage of the process have an excellent opportunity to become home to AMLA. Alongside winning the bid, the chosen country will also improve its prominence within the EU. As such, the selected city will need to be equipped to handle the responsibilities of hosting the AMLA but also committed to fostering trust and collaboration among its fellow member states, helping in the fight against money laundering not just for today but for the future as well.