An analytical review of the proposed anti-money laundering authority (AMLA) and its impact on the Maltese financial services sector

Abstract

Money laundering and terrorist financing (ML/TF) pose significant threats to the European Union's (EU) economy, financial system, and the safety of its citizens. The current framework for anti-money laundering and countering the financing of terrorism (AML/CFT) relies on national implementation, making it ineffective in addressing the cross-border nature of recent ML incidents. To address these shortcomings, the European Commission proposed a new AML package in 2021, which includes regulations for establishing the EU AML Authority, a regulation on AML/CFT, the 6th AML Directive, and revising the 2015 Regulation on Transfers of Funds. This study aimed to analyse the proposed Anti-Money Laundering Authority Regulation (AMLAR) and its key aspects. It reviewed the tasks and powers of the Anti-Money Laundering Authority (AMLA), the supervisory system for AML/CFT, direct and indirect supervision of obliged entities, oversight of the non-financial sector, coordination among Financial Intelligence Units (FIUs), and the composition of the AMLA. The study also assessed the potential impact of the AMLA on the Maltese regulator and the financial services sector in Malta. Findings revealed that the AMLA is expected to positively impact the operations of the Financial Intelligence Analysis Unit (FIAU) by promoting collaboration and convergence in supervision. The AMLA will facilitate evaluations, peer reviews, and provide support and coordination for the FIAU's function as an FIU. As the AMLAR provisions are still being finalised, it is challenging to determine if Maltese obliged entities will be directly supervised by the AMLA. Indeed, it is crucial to note that the precise nature and extent of this impact will only become apparent once the AMLAR has been finalised and put into effect. Throughout the research, counterproposals were put forward based on feedback from EU bodies, self-regulatory bodies, organisations, and study participants. These suggestions include broadening the eligibility criteria for crypto-asset service providers adopting a risk-based approach for selecting entities under direct supervision, expanding the definition of 'group,' removing the reference to 'material breaches' in selecting credit institutions, using residual risk ratings, establishing a new database for sanctioned individuals and companies related to AML/CFT, and granting permanent membership to European Supervisory Authorities within the AMLA.