New Cooperation Framework Aims to Strengthen Anti-Money Laundering Supervision in European Banking

The introduction of the European Anti-Money Laundering Authority (AMLA) marks a significant shift in how money laundering risks are managed and supervised across the EU’s banking sector.

AMLA’s recent establishment responds to an increasingly challenging environment for banks, as digitalisation and geopolitical risks elevate threats related to money laundering and terrorist financing. Such risks not only harm the financial system’s integrity but can also jeopardize the stability and viability of individual banks. While the European Central Bank (ECB) does not oversee anti-money laundering (AML) compliance directly, it relies heavily on information from AML/CFT authorities, given that lapses in these areas often expose deeper governance and risk control failings within banks. The integration of AML/Countering the Financing of Terrorism (CFT) risks into prudential supervision is thus crucial, especially as the lines between traditional banking and digital financial services continue to blur.

AMLA is set to take on direct supervisory responsibilities for higher-risk credit and financial institutions by 2028, fostering a more consistent approach and addressing the fragmentation previously caused by varied national rules. This new EU-level coordination is expected to close gaps that have allowed criminals to exploit differences between national supervisory frameworks. The ECB and AMLA, both headquartered in Frankfurt, have taken proactive steps to boost their cooperation through a formal Memorandum of Understanding, streamlining information exchange, harmonizing standards, and ensuring a unified supervisory approach. Enhanced exchange of information, mutual participation in AML/CFT colleges, and alignment with recent EU regulations underscore a collective commitment to more effective oversight.

Digitalisation further complicates the supervisory landscape, introducing new vulnerabilities through faster and broader cross-border payments, surging cyberattacks, and the rapid rise of crypto-assets. AMLA plans to focus on these high-risk areas, working to bridge supervisory gaps and strengthen controls over the burgeoning crypto-asset sector, where lapses can easily impact the wider banking ecosystem. The ECB has also embraced digital tools and AI to proactively detect emerging threats, striving for efficiency and improved risk-based oversight.

This deeper cooperation between AMLA and the ECB is a pivotal development, promising to make European banking supervision not only more coordinated and efficient but also more resilient to evolving financial crime risks.