Frankfurt was selected as the optimal site for the headquarters of the anti-money laundering and counterterrorism financing (AML/CFT) authority in Europe.
The decision was made through a voting process on February 22, with Frankfurt prevailing over other prominent cities such as Paris, Madrid, and Rome. This choice is a part of a larger reform initiative in response to several notable money laundering scandals.
In a competitive vote that took place on Thursday, February 22nd, Frankfurt emerged as the winner over other major contenders like Paris, Madrid, and Rome. The result of this vote could set a precedent for future decisions on where EU agencies will be located.
During a press conference, Mairead McGuinness from the European Commission emphasized the importance of addressing the issue of illicit money entering the financial system.
She highlighted the numerous warnings in recent years about the laundering of illegal funds and mentioned that those warnings were taken seriously that evening.
The selection of the site marks the final stage of an EU AMK/CFT reform, which includes restrictions on large cash transactions and stricter identity verifications for football agents and sponsors.
Past scandals
The establishment of AMLA follows a string of controversies, including Danske Bank’s acknowledgment of laundering billions in illicit Russian funds through its Tallinn branch.
Additionally, the financial collapses of institutions like Pilatus in Malta and ABLV in Latvia have further highlighted the need for such an agency.
Among the nine contenders competing to host the AMLA headquarters, uncertainty loomed over the final decision until the very end.
In the last round of the confidential vote, Frankfurt secured 28 votes, Madrid received 16, Paris six, and Rome four, as reported by lead lawmaker Eva Maria Poptcheva (Spain/Renew Europe) during a press briefing.
On January 18, the Parliament and the Council came to a political agreement on the initial AML/CFT regulation and the sixth AML/CFT directive.
In December 2023, the co-legislators reached a consensus on the AMLA Regulation. Furthermore, in June 2022, they came to an understanding regarding a modified regulation pertaining to the traceability of funds and crypto-asset transfers.
These legislative documents establish a standardized rule book for combating money laundering and form the basis for harmonizing the efforts between the newly established AMLA and national competent authorities.
Combating money laundering
Money laundering within the realm of cryptocurrency has emerged as a significant focal point. Criminals are increasingly gravitating towards digital assets to conceal illicit gains.
Recent data and trends highlight the advantages and obstacles that cryptocurrencies present to anti-money laundering (AML) endeavors.
A 2021 study by Chainalysis emphasized the global extent of cryptocurrency laundering, totaling $8.7 billion for the year. Although this represented a decline from previous years, it contributed to an overall sum surpassing $33 billion since 2017.
Key strategies utilized in cryptocurrency money laundering involve the utilization of privacy coins for heightened anonymity, mixing services to mask the origins of funds, and the use of intermediary services like personal wallets and decentralized finance platforms.
Nevertheless, Governments and regulatory bodies worldwide are intensifying their efforts to combat cryptocurrency-linked money laundering through reinforced AML frameworks, legislative actions, and enhanced international collaboration among law enforcement agencies.
Furthermore, recent revelations from Chainalysis’ 2022 report underscore the scale of illicit activities within the cryptocurrency sphere. Notably, four exchange deposit addresses received more than $1 billion in illicit funds throughout the year, underscoring the persistent challenges in addressing cryptocurrency-related money laundering.
On February 20, a series of posts on X by blockchain analysts at Cyvers Alerts disclosed findings from an inquiry that exposed abnormal transactions originating from wallets allegedly owned by AAX. The cryptocurrency exchange came under scrutiny after suspending all withdrawals just two days following FTX’s insolvency.
According to the investigation, over $55.5 million worth of Ethereum (ETH) was transferred from AAX wallets in early February.
These transactions, orchestrated by an unidentified entity, were aimed at laundering funds through decentralized exchange (DEX) platforms such as UmbraCash and 1inch.
FAQ’s
What will the new EU anti-money laundering authority do?
The authority will be responsible for directly supervising cross-border financial firms and enforcing anti-money laundering and counter-terrorist financing rules across the EU. It aims to close gaps and inconsistencies in AML supervision.
Why was Frankfurt chosen as the headquarters?
Frankfurt is a major financial center in the EU and home to the European Central Bank. This will allow the authority to leverage existing financial expertise and infrastructure. Its central location in the EU was also a factor.
When will the authority become operational?
Key powers will include the ability to conduct on-site inspections of firms, demand documents and information, and impose penalties for non-compliance with AML rules. It aims to have more muscle than current coordination-focused EU bodies.
How will this impact banks and financial firms?
Companies with cross-border operations will now be directly supervised at the EU level, facing a single supervisor rather than multiple national watchdogs. Firms will need to ensure their AML programs meet the authority’s standards.
