Seat of the new AML Authority – EU Public Hearings

Today, a joint hearing organised by the EU Parliament and the Council was held, with each of the remaining 9 bidding countries, each having 1 hour each to present, with 10 minutes for opening remarks, followed by a Q&A and 3 minutes to conclude.

This is the first time a public hearing has been used to determine the seat of an EU Agency, courtesy of a decision by the European Court of Justice. Nine Agencies submitted formal applications. The final decision will be taken on the 22nd February 2024

JF Lopez Aguilar Co Chair of the session and Spanish MEP and Former Spanish Minister of Justice opened the session reminding the context for the hearing stating that, “ML/TF are threats not only to the stability of our financial systems but also for public security. and for the cohesion of society…Behind dirty money there is always pain, tears, blood. The creation of the AML Authority is aimed at setting a major milestone in the EU response to fight ML/TF”. Also that the, “AML package: AML Regulation, AML Directive and AML Authority are fundamental to reshaping, the EU response to fight this form of crime and proceeds of crime… The AMLA is to meant to play a crucial role”, as the centrepiece of the AML package, “supporting policy making and risk assessment”, “direct supervisory powers over the riskiest FIs in the internal market [EU]”, “ensuring supervisory convergence in the financial and non financial sectors alike, assisting and providing operational support to FIUs through joint analysis”

Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and Capital Markets Union also echoed these words in her remarks, stating that, “Behind money laundering are societal harm, terrible damage to communities to families, to our countries. This is not just a technical financial issue, this is an issue for our European society and if we tackle money laundering effectively we can tackle many of the social ills we all face. The AMLA will sit at the very heart of our new framework. A decision “is vital to show the EU is committed to supervising and enforcing our AML system”.  Still she conceded that whilst the AMLA will be able to start hopefully on some technical work in the second half of 2024, direct supervision of the 40 riskiest FI’s is likely only in 2028

For a summary of FATF ratings related to supervision for EU countries see below:

The Assessment Process

Cities and Countries were being assessed against a number of factors including the usual factors for hosting an EU Agency, where location, connectivity, living standards, attractiveness etc are relevant but also on the AML/CTF record of the country as well as its readiness to support the AMLA in terms of available high quality space for about 400-500 people and in terms of financial subsidy. Formal written proposals had been received for all 9 countries- See HERE. For access to the video of the hearings see HERE.

Here also is a summary by FCN of some of the most important AML/CTF related points raised in the sessions, in order as they presented.:

1. Italy and Rome presented its strong credentials in being one of the architects of the fight against organised crime globally and which included its role as a founder member of FATF. Italy has taken a uniquely strong stance against financial crimes, not least following the murders of magistrates Falcone and Borsellino. which elevated this fight in Italy, to one involving national security, and a response which leads in Europe including from the dedicated financial police force the Guardia di Finanza, a model which Germany is leveraging decades later and made much of in its own presentation see later. Assets seizure and confiscations were reported with €1.8 billion for 2022 and Russian related seizures of €2.3 billion including related to 30 different persons and entities. Italy also made a point that it has been one of the strongest supporters of the AML package including AMLA, and has long pushed for public registers for Beneficial Ownership transparency.

2. Austria and Vienna presented its vision for AMLA promoting its central location and its synergies and co operation opportunities with international organisations also based in the City including in particular the UNODC. Austria/Vienna believes it’s risk based approach to supervision it’s lack of previous scandals on AML and Sanctions is important and that it’s understanding of crypto being home to the second largest crypto exchange in the EU another important positive factor. Whilst it’s biggest selling point appeared to be the quality of life in Vienna which could attract high caliber professionals the Austrian bid made it clear they believed they provided the strongest financial support package of all bidders. Challenges included remaining contacts in Russia by Austrian FIs but this was responded to by stating that these relations were hard to exit but the governments opinion is for everyone to exit Russia. Austria reported it had been a strong supporter of the AML package and the AML Authority

3. Lithuania and Vilnius presented with a focus on the need for the EU to balance EU agencies with also representation in smaller states, which would also provide a clear signal to those that are close and involved in conflict (Russia) that the Baltics and Lithuania are also important to the EU. Lithuania is a growing fintech hub and has a solid AML/CFT track record, has avoided scandals that others have faced in the region, operates an AML centre of excellence, including PPP, has more than 10,000 AML/CFT specialists, and ranks best out of all 9 nominated countries in the Basel AML Index. It also has a dynamic and diverse financial system and deep compliance, is the greenest capital in the EU and very IT and digital savvy. Questions raised related to Moneyval /FATF – TF and DNFBP regulation, how Lithuania connects with other EU countries and AML education and training opportunities.

4. Latvia and Riga presented its bid for the AMLA, describing it as at the heart of Baltic Nordic region. It recognised that it had learned major lessons from earlier scandals, with significant improvements and investments including at the FIU in the private sector and in supervision. Riga stated it is the “key gatekeeper to the EU” and 1 in 3 financial services employees were AML trained and certified. Latvia was claimed to be the first EU country to have positive ratings for all 40 Recommendations and has undertaken transformative steps and now has a zero tolerance to ML/TF. The AMLA was in many ways the phoenix that came out of the lessons the EU learned from ML via Latvia and the Nordics and Latvia are now pleased that the theoretical discussion about the AML Package including AMLA can be converted into reality and AMLA creation a centrepiece. Questions about BO registers & Digital Wallets were raised but both have been effectively transposed in domestic laws. Latvia believes it will receive strong FATF/Moneyval ratings in their next review.

5. Germany and Frankfurt presented its case for the seat of the AMLA, reminding all of its historical importance as one of the original architects of the EU, and one of the main EU supporters of the AML package, where Germany even pushed for stronger powers for the AMLA and was instrumental in targeting 40 riskiest FIs to be covered by AMLA and not the original 15. Germany explained how it has established a new Federal Financial Crimes Agency and was investing domestically significant new financial resources to back a renewed effort on combatting ML/TF and that this agency and the AMLA could be important allies, though curiously this is to be based in Dresden and Cologne. More importantly the location of the ECB in Frankfurt was stressed with the need for prudential supervisors and the AMLA suggested as being very important for the future as AMLA will need to cooperate closely with all supervisors and rely on the ECB in particular. Whilst this makes sense, the question of AML independence and conflict of interest then came up. Wire card was also mentioned. Questions on the financial contribution were also raised, as it appeared the German proposal was less generous on this and indeed initial figures for subsidy were relatively low. It was good to see former FATF President Marcus Pleyer attending next to the German Finance Minister but disappointing he wasn’t given the chance to speak with the politicians presenting and responding to all the questions. His insight from his former and current positions, knowledge of the EU approach and German experience would have been invaluable.

6. Ireland and Dublin presented its case confidently suggesting it’s the “logical” location for the AMLA, mainly because of the importance of technology, fintech and financial services in Dublin, which is suggested as being the areas for intersection which will play a crucial role in fighting ML/TF. Ireland’s long understanding of ML and in particular domestic TF over many decades was stressed. Ireland confirmed AMLA could be operational from Day 1 and would be provided with a very significant €80 million financial contribution. They expanded on the nature of the finance sector and staffing in Dublin, which was truly international and with a significant EU footprint, explaining that the industry does not sit “in the shadow of a national industry”. The fact that FATF rated Ireland as one of only 2 EU Member States as positive in effectiveness ratings for IO3 Supervision was raised, though the name of the other country, Spain was not mentioned. Ireland also talked up its “world class”  criminal assets bureau, though no evidence was presented and FATF had rated confiscations in Ireland poorly. Ireland suggests that it already has many AML/CTF leaders (which is correct) who can help design and implement EU wide regulation and supervisory action, and so has the skill base and capacity to support AMLA. Ireland made a virtue out of its relationships with the USA and the UK but didn’t explain what these would bring, though it seemed to be well understood nevertheless, without further explanation, though it would have been interesting to hear. Ireland was challenged about its status to some as a tax haven, and the supervisory expertise over the non financial sectors. In summing up, Ireland reminded that its membership was longer than most other smaller states at 51 years and that a powerful signal could be sent to place the AMLA in a so called smaller state. At the conclusion of this presentation, the first round of applause of the day rang out, which suggested it had been a successful presentation. 

7. Spain and Madrid presented their conviction that Spain and Madrid is the best candidate. as they believe they are the benchmark for AML/CFT as found by the FATF, and the model taken by the EU for the AMLA itself. Spain has been rated as just one of only 4 with positive ratings in Financial Intelligence globally (FATF IO6) and has 10/11 positive FATF IO Effectiveness ratings, including IO3 Supervision & IO4 private sector compliance. Spain is a reference point for the model taken by AMLA as based on SEPBLAC which itself combines the FIU and Supervision as well as the lead for financial sanctions. Spain is also a benchmark for co operation and coordination in AML CTF, according to the presentation, with many sucessfull investigations and provides more information to Europol for TF investigations, than any other EU member state. Spain and Madrid also provides digital and cybersecurity leadership to ensure connectivity and security with Spain top 2 in cyber security in the EU and 4th worldwide in the UN index on cybersecurity. Madrid is the 4th largest financial centre in the EU and has more than 100,000 employees in financial services, and so has a very mature AML sector with deep AML resources. With AMLA in Madrid, Spain will help promote this approach to places elsewhere like LATAM, where Spain has unique relationships. According to Spain it  makes sense to separate AMLA from other agencies. (see alternative views from Belgium, France and Germany). One challenges was for Spains potential infringement relating to open access to BO registers, which was adressed.

8. Belgium and Brussels presented and focussed on the fact that the AMLA would be “within walking distance of the Commission and the Parliament”, and decision makers should “think how closely the EU Parliament scrutinises AML/CTF issues “and how important access to the Parliament and the legislative support that will be needed by the AMLA in relation to its future regulations. Brussels is also close to FATF and the EBA in Paris, Europol and Eurojust in the Hague, the European Court of Justice and Prosecutory Agency in Luxembourg and the ECB in Frankfurt. Brussels is also home to a number of very large FIs such as SWIFT, BNY Mellon & Euroclear. Belgium has been an early adopter in risk based supervision and has been a supporter of a stronger EU AML/CFT supervision, and has implemented stronger measures against for example, football clubs and cash transactions now taken up in the EU AML package. Extradition co operation in the EU was raised as an issue related to the co operation of Belgium on criminal matters. whilst this isn’t directly relevant for the AMLA as responded by the Belgian contingent, this doesn’t help its bid suggesting  as it does that its the most european of bids. When asked about the USP for Belgium/Brussels the response was 3 items; Democratic accountability, transparency and carbon footprint. With the AMLA It gets the best head start in Belgium/Brussels, the talent pool, as “in the end the strength of the AMLA will be because of its people“, say the presenters. Lastly the fact that the recent political agreement for the AML Package was secured under the Belgian Presidency was highlighted. The conclusion mentioned they hadn’t produced glossy brochures or videos because they didn’t need to. everyone knew what Brussels and Belgium is and what it can do, especially those in Brussels, Belgium.

9. France and Paris presented that they deserved the seat of the AMLA for efficiency and effectiveness reasons. Coordination and bringing together complementary skills should not be dispersed, rather consolidated. The FATF is in Paris. According to the French presentation, “it would be absurd to separate AMLA from FATF. OECD and EBA” which all play important roles with EBA providing very precious technical assistance. Separating these resources is a mistake if you want to achieve efficiency and effectiveness, say the French. Bringing AMLA to Paris would make the City the “world capital in fighting ML/TF”. According to the presentation, Paris is stated as “exemplary in the fight against Ml/TF” also stating, “we rank the best worldwide” and have held an important International conference on terrorism in 2018 and hosting Egmont in 2024 on financial intelligence. There is an argument for this based on FATF ratings though you could also argue as with all countries that effectiveness even here is not where it needs to be. Questions regarding NPOs and technical specialists for supervisors as well as the limited financial support of approximately €15 million grant over 9 years. On the financial support the French response was that the FI’s supervised should pay for the budget for the AMLA not the public hosting authorities.

Final Remarks

That this is the first public hearing providing countries and cities the chance to publicly communicate their offerings and bid for hosting an important EU agency is a very positive step and the European Court of Justice should be commended for this.

Additional observations include:

  • It is also commendable that so much interest is shown and as a result countries and cities are willing to put their records to the test on combatting ML/TF. It is also a major coup for the combatting ML/TF agenda that so many senior government figures attended and presented and supported their nominations, which gets AML/CTF increased attention domestically and across the EU. That many overstated their achievements, when all countries have improved but all still have significantly more to do is unfortunately par for the course. Humility isn’t a bidding strategy.
  • That PPPs information sharing, risk appetite, risk based supervision, risk based methodologies, risk based intensity, supervisory resources, supervisory sanctions, optimising financial intelligence, didn’t really come up, which shows more needs to be done to truly understand the important elements that will make the difference at the AMLA..
  • All 9 presentations had though credibility and were professionally delivered, though all promoted so called country/city strengths and of course completely avoided rather than identified and accepting weaknesses and presenting how to proactively address them. 
  • Of course it is easy and or probably lazy to say that Lithuania and Latvia had the biggest challenge of the 9 but even so they otherwise rose to that challenge and provided solid reasons why those that doubt their ability to house the AMLA probably don’t know Vilnius nor Riga well enough, nor really appreciate the transformation they have been on over the last 5 years.
  • Clearly “capitals” dominate the nominations with 8/9 countries (Frankfurt being the exception) nominating their capital cities, even though these include some of the most expensive places to house the AMLA in the EU, but also reflect the realities of where agencies are concentrated and talent is often based. These nominations ignore many other great cities with plenty of additional benefits, including Lyon, Barcelona, Milan, Dresden/Cologne, 
  • A related point comes with the argument made about concentration versus independence and dispersing agencies. France, Germany and Belgium argued for concentration allowing better collaboration of key agencies. (FATF/OECD/EBA in Paris- ECB in Frankfurt – EU Institutions in Brussels), whereas the rest argue that doesn’t matter, and can be compensated for and that more importantly, independence and other factors should be considered and that fairness and geographic spread is needed  otherwise the decision will always go in favour of those with already a big presence and a historical head start.
  • Whilst excellent and confident presentations the Belgian and Austrian arguments, stuck me as somewhat half hearted, knowing they could do it and successfully house the AMLA but are unlikely to get the chance. Conversely the Lithuania and Latvia presentations were the most eager to be given the chance, probably alongside Ireland. The Spanish appeared to genuinely believe they deserved to be given the AMLA as the so called benchmark country for AML/CFT related supervision in the EU and perhaps globally, including showing the EU the prototype for the AMLA in SEPBLAC in Spain, whereas France, German and Italy have strong cases based on unique factors, which had compelling elements.

Whilst a lot of the focus was on the record of the country in combating AML/CTF the reality is these issues probably won’t really impinge on the future actual workings of the to be established new AMLA as it will be an EU agency and authorised and controlled as such, with most likely non local leadership, which may make more of an impact and effect success than the actual location. Still rewarding a city with the AMLA should come with recognition that it has done better than other contenders in combatting ML/TF and it has relevant success in what the AMLA is expected to do.

Questions came from mainly the parliamentary representatives and some from the Council Members. I really would have liked to hear the answers to 2 questions posed to each of the delegations which could have helped with making the final decision:

Question 1) if not you, then which of the other 8 countries and cities is most qualified in your opinion and why; and

2) What 3 measures of success would you have for the AML Authority and in what timeline?

Good luck to all Cities and Countries ahead of the decision expected on the 22nd February 2024.

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