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Frankfurt chosen to host AMLA

03.19.2024 | Henry Fosdike
 

Last month, the EU chose Frankfurt to host AMLA – the newly created Anti-Money Laundering Authority- to address weaknesses in the current Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) framework. Emerging victorious from a shortlist that included eight other prospective cities. So why was Frankfurt chosen? What does its win mean for the city itself and Germany? What can countries within the EU expect from this new authority? Let’s find out.

What was the EU looking for in a host city?

To host AMLA, each city was required to fill in an extensive application with optional supporting documents. This application was extensive – Frankfurt’s winning submission was 82 pages long – and outlined exactly why the city should be chosen and why it was already well placed to get AMLA up and running immediately. In the EU’s own words:

‘When selecting the location, the co-legislators have agreed that they will ensure that, given the nature of AMLA, the location enables the Authority to fully execute its tasks and powers, to recruit highly qualified and specialized staff, to offer adequate training opportunities for AML/CFT activities, where relevant, to allow for close cooperation with Union institutions bodies and agencies, and to avoid reputation risks, to consider how ML/FT risks are adequately addressed in the Member State based on publicly available, relevant and comparable information such as FATF reports.’

Alongside this mission statement, there were four other pieces of criteria that an application had to meet:

  • The date on which AMLA could be operational
  • Accessibility of the location
  • Adequate education facilities for AMLA staff’s children
  • Appropriate access to the labor market, medical care, and social security
  • Geographical balance
How was Frankfurt chosen?

Nine cities were competing to host AMLA, each offering its blend of strengths and challenges. Some cities were already financial hubs or were relying on great geography or transport networks, while others were hoping to woo the European Union with financial incentives (Ireland was promising €80m in contrast to Germany’s €10m).

The pros and cons for Frankfurt, as written in our recent blog on the candidate cities for AMLA, were:

Pros: Frankfurt already has 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 centers in a larger EU country that is already a financial bastion of Europe may not be in the Union’s best interest.

Evidently, the EU decided that Frankfurt’s many benefits outweighed the few concerns, choosing the city to host AMLA after a joint public hearing between all candidates on January 30th, 2024, and then a final vote on February 22nd, 2024.

As noted on the European Commission’s website, ‘to find agreement on the location of AMLA’s seat, co-legislators voted together in an informal inter-institutional meeting with the same number of votes attributed to each co-legislator. As a result of this joint vote, Frankfurt was selected.’

Why was Frankfurt chosen to host AMLA?

With Frankfurt chosen to host AMLA, the EU publishes each application, its supporting documents, and the EU’s assessment of its bid. In Frankfurt’s application, there were many positives:

Frankfurt is already a financial hub – as noted previously, Frankfurt is home to some key financial centers such as the Deutsche Bundesbank (central bank of Germany) and Frankfurt Stock Exchange, and it is the largest financial hub in continental Europe. It is a city already filled with the skilled workers required to set AMLA on its way.

Excellent location with superior travel links – many representatives from the EU will need to travel to AMLA when it is fully set up in 2025. As such, good travel links are a bonus. Frankfurt benefited from its superb location – just 2.5 hours from all EU capitals (except Nicosia) by rail or air.

Large number of nurseries and schools available – as a new endeavor for the EU, it is highly likely that people will move to Frankfurt to work at AMLA. Frankfurt offers many nurseries and schools. Additionally, two European schools in the Frankfurt metropolitan area offer education in all EU languages and 39 more offer ten major EU languages.

Cultural diversity, social security, and medical care – the application noted Frankfurt was already culturally diverse, so assimilation for new employees would be straightforward. Alongside this, all AMLA employees and their direct family members would be exempt from making social security contributions. They can be insured for healthcare at no extra cost beyond the employee (if not in work), and all will have an unrestricted right to work regardless of nationality.

High-quality premises rent-free – Frankfurt offered Tower 185, located in the heart of the city’s business district, as the new headquarters for AMLA. Completed in 2011, it would be available immediately and come fitted with everything the EU will need. To further sweeten the deal, the German federal government, the state of Hesse, and the city of Frankfurt would provide a lump-sum grant of €10 million over five years, with further grants possible for upgrading and extending the premises.

With all these key benefits, it isn’t difficult to see why Frankfurt was chosen to be the home of the new Anti-Money Laundering Authority.

What will AMLA do?

AMLA is being set up for many reasons with the primary concern to combat the ever-evolving world of financial crime. In the EU’s 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

Helping to enable cooperation, analysis, and support for FIUs by developing common reporting templates and standards

Enforcing criminal law provisions/improving the exchange of information between member states

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

AMLA will also be 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.

The EU hopes that by setting up a new Anti-Money Laundering Authority, it can stay ahead of future financial crime trends before they occur.

When will AMLA be operational?

Although the set-up of AMLA has been provisionally agreed between the EU Parliament and Council, the package has to be formally adopted before it enters into law. The vote will receive final approval at the plenary session on 22nd-25th April. Once finalized, the AMLA regulation will apply from July 2025.

Until that point, the European Commission will be responsible for establishing AMLA and its initial operations, starting with hiring up to 400 people.

What will AMLA provide?

After the vote, the EU came together to highlight its critical role in fighting financial crime.

“AMLA will be a game-changer in cracking down on dirty money in the EU,” co-rapporteurs Emil Radev, a Bulgarian MEP, and Eva Maria Poptcheva, a Spanish MEP, said in a statement from the European Parliament. “It will supervise the riskiest financial entities, oversee the non-financial sector, and play a crucial role in stopping evaders from circumventing targeted financial sanctions.”

Mairead McGuinness, Financial Services European Commissioner, said, “We’re mitigating risks linked to large sums of money within the EU-wide limit of 10,000 euros for cash payments. At the same time, we’re addressing risks posed by crypto and the anonymity it enables.” She explained that football clubs will be subject to reform under new rules that create new categories of companies.

Conclusion

Creating AMLA is another vital step in fighting money laundering and terrorist financing across Europe. SymphonyAI is dedicated to helping financial institutions with an end-to-end, adaptable financial compliance platform that uses advanced analytics to detect and prevent fraud across banking, financial markets, and insurance.

Through advanced AI/ML and complete, scalable software, SymphonyAI accelerates investigator workflows, detects more potential criminal activity, and brings transparency and explainability to compliance operations.

Interesting in learning more? Feel free to contact us or book a demo today.

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