Experts Split On Who Will Win AMLAvision As The Grand Finale Nears

February 20, 2024
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Will Frankfurt or Paris seize the day? Will politicians settle for a compromise to win, such as Vienna? Deliberations over the EU’s new financial crime watchdog, which will oversee anti-money laundering rules for payments, e-money, and crypto institutions, have split experts.

Will Frankfurt or Paris seize the day? Will politicians settle for a compromise to win, such as Vienna? Deliberations over the EU’s new financial crime watchdog, which will oversee anti-money laundering (AML) rules for payments, e-money, and crypto institutions, have split experts. 

The pressure is undoubtedly on for the EU to solve its financial crime problems through the Anti-Money Laundering Authority (AMLA). 

Once established, the agency will be responsible for overseeing AML regulation and sanctions enforcement in the trading bloc, with direct supervision over high-risk entities.

According to the text agreed, this could include payment institutions, e-money institutions and crypto-asset service providers. 

However, before it can become operational, it needs a home. On Thursday (February 22), all will be revealed, when the final vote is cast. 

After the European Parliament’s public hearing on January 30, stakeholders are split on where will eventually be chosen. 

"At the public hearing, nine very different candidacies emerged, and there were some strong performances on the day that were better than submissions on paper,” said Michael Huertas, financial regulation partner at PwC. 

Huertas said that Paris, Brussels and Frankfurt are serious contenders. 

“I think that Frankfurt fell short, and that is due to the fact they maybe didn't read the room as well as they could have,” the Frankfurt-based lawyer said. “The presentation style was perhaps less suited to those needing to understand the key messages."

"Paris was very comfortable but I don't think that it will get it, and Brussels was beaten a little bit by criticism of financial crime in the country,” he told Vixio. 

Huertas continued that he felt that Vienna also came out and did quite well. “Representatives answered questions in English, did a good Q&A, and had a senior female executive sit front and centre. Representatives played on the strengths of this being a meeting point between north and south, as well as east and west.”

According to Huertas, this was well received. “Even if previously poor on paper.” 

During the public hearing, Vienna’s representatives also had to deal with awkward questions about sanctions enforcement, with MEP Isabel Benjumea asking whether representatives thought the country had a “strong regulatory framework" to deal with money laundering and terrorist financing. 

This was echoed by fellow MEP Pedro Marques, who asked representatives of Vienna to “convince us” that Austria has not been “blocking or stalling" sanctions on Russia due to its financial sector. 

This was rebuffed by representatives of Austria as “completely untrue”, however. “If anything, we have been arguing for tougher sanctions, and it may not have escaped you that Russia is considering Austria as an unfriendly country.”

“Madrid was typically Spanish in charm and confidence, and with the Baltics, some policymakers with a vote may have the view ‘it's not gonna happen’,” said Huertas. 

Meanwhile, Huertas said that that Dublin “kind of kicked itself out”. The whole connectivity point on 1,400 flights to elsewhere in the EU, and 800 to the UK. Who cares?"

Politics first

Jesper Kristensen, senior management consultant at VILUAN Consulting, added that during the public hearing, “perhaps you could feel the political, behind-the-scenes factor is more important here”. 

“It seems to be more about who is owed a seat than the criteria of the best location,” he said. 

Indeed, a source familiar with the negotiations in the European Parliament, told Vixio that “France and Germany are strong but neither wants the other one to get it”.

"So, Spain could be a good compromise," the source suggested. 

The source added that Ireland has also been winning support from smaller member states. 

"Council is going to end up agreeing on one country and giving all 27 votes," the source said. "So they will then buy off one MEP to get to 28."

Kristensen, however, pointed out that this should not be the all-determining factor as to who lands the seat. “What is more important is the ability to attract the right talent. This is the number one issue."

"Overall, I think that the top four are Frankfurt, Vienna, Madrid and Paris, and it is Vienna and Madrid that are the ones to watch,” said Huertas. 

He summarised that the question now is who can team up with whom. “There will be tactical voting, similar to Eurovision, and this makes the 22nd very exciting."

Location, location, location

Nine countries await to hear their fate on Thursday. These are Belgium (Brussels), Germany (Frankfurt), Ireland (Dublin), Spain (Madrid), France (Paris), Italy (Rome), Latvia (Riga), Lithuania (Vilnius) and Austria (Vienna).

Hosting an agency is a badge of honour for member states. Previously, competition over hosting agencies such as the European Banking Authority and the European Medicines Agency were so hotly contested that the winning city had to be drawn via a lucky dip.

In and around Brussels, host country candidates have been keen to make sure they are visible. Vilnius took out advertising space near the European Parliament at Place de Luxembourg. Dublin, meanwhile, has advertised at the airport. 

The city ultimately chosen could have an impact on where AMLA proves most comfortable supervising. For example, should Vilnius be picked, the fintech and/or crypto industry could stand to benefit, while destinations such as Frankfurt and Paris have so far been hubs for traditional and incumbent credit institutions. 

"Proximity to supervised firms, and the talent working there, is just as important as closeness to regulators and policymakers,” said Huertas. “Frankfurt, Paris, and Brussels have the pull to lead on that." 

However, Kristensen was certain. "I don't think that the particulars of financial services will be a determining factor. The capabilities that we're looking at are the same across the board.”

“An interesting question here is the huge difference in recruitment strategies,” he suggested. “On one end, you will have countries that only recruit those with public service experience as will be moving in a political organisation. On the other side is what people you have with what industry background.”

Kristensen speculated how the AMLA staff could balance between these. “I am very much in favour of broad capabilities and backgrounds. It won't be set up for success if it focuses solely on recruiting people in public services."

The pressure is on for AMLA

The last few years have dealt the trading bloc a plethora of scandals, whether that be the Danske Bank case in the Baltics, the Wirecard scandal or the Panama Papers, and then there are member states such as Malta, Croatia and Bulgaria, which have all ended up on the Financial Action Task Force’s (FATF) list of countries subject to increased monitoring. 

"I'm happy that the EU is moving to create a more central organisation and is also considering that more often now, crimes may involve different countries so having a connection is needed,” said Marco D’Oro, business development manager at SGR Compliance. 

“Without something like AMLA, the EU is missing an opportunity to spot risks."

However, he continued that he is afraid that AMLA “will be another elephant in the room, and bring more bureaucracy than action to local regulators”. 

“I'm also concerned that they will make everything last longer than it does right now. The compliance process is already really long, and there are a lot of checks based on each rule,” he said. “Each country will have specific situations to deal with, and, ultimately, will it really be helpful for each of these countries?"

For AMLA to prove ineffective would be a hard pill to swallow for Brussels policymakers. 

However, there is optimism about the work that AMLA could do. 

"I think that AMLA will have a big impact, especially in regards to administrative enforcement,” said Pierre Simon, managing director of Simon Consulting. 

Amsterdam-based Simon referenced the European Public Prosecutors Office (EPPO) as an example of how effective AMLA could end up being.

"While EPPO has demonstrably impacted criminal enforcement, AMLA holds similar potential for administrative enforcement of EU AML rules,” he said.

Launched in June 2021 and applicable to 22 member states, Simon pointed out that the EPPO has already initiated numerous criminal investigations, prosecutions and has secured convictions. 

“AMLA, with its focus on administrative enforcement, could be equally effective in tackling money laundering through robust supervisory measures and sanctions."

Kristensen agreed that AMLA will be effective, and suggested that it will also be a global player in tackling financial crime.

“Will it solve all problems? No,” he added. 

“We are looking at the tip of the iceberg. It is in the infancy of this work, and AMLA is definitely going to be a very important factor, but we're very far from it overall solving the problem.”

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