On 22 February 2024, the European Parliament and the Council voted together to choose Frankfurt as the home for the EU’s new Anti-Money Laundering Authority, or AMLA for short. AMLA’s key objective will be to protect EU citizens and the EU’s financial system against illicit money flows and terrorist financing. Nine capitals in total applied to host AMLA, including Dublin. In this Just the Facts, we will chart the journey to choosing AMLA’s location and explain its future functions.
How does AMLA fit into the EU’s institutional setup?
AMLA will be set up as a decentralised EU regulatory agency. There are currently seven European institutions, seven EU bodies and over thirty decentralised agencies spread across the EU.
In addition to the main EU institutions such as the Commission, the Council and the Parliament, there are a number of bodies which play specialised roles in helping the EU to perform its functions. Some bodies advise the institutions (e.g. the European Committee of the Regions) while others ensure that the institutions comply with EU rules and procedures (e.g. the European Ombudsman).
Distinct from the main EU institutions, decentralised agencies have their own legal frameworks and are set up for an indefinite period. They contribute to the implementation of EU policies and pool technical expertise from both the EU institutions and national authorities.
A notable example of an EU agency would be the European Medicines Agency (EMA) which is responsible for the scientific evaluation, supervision, and safety monitoring of medicines. The EMA was directly involved in the development of effective medicines and vaccines against COVID-19. There is only one EU agency based in Ireland – Eurofound, located in Dublin which provides knowledge and research to inform the design of better social, employment and work-related policies in EU Member States.
Why was AMLA created?
Suspicious financial activities account for about 1% of the EU’s GDP, or €130 billion, according to Europol. In 2020, Vice President of the European Commission for Values and Transparency Commission, Věra Jourová, estimated that around 1% of EU wealth is involved in “suspect activity”, equating to about €160 billion. Up until now, there has been no pan-European authority to control money laundering. The ECB’s supervisory arm, the Single Supervisory Mechanism, is responsible for scrutinising the business models and governance of banks. However, the competence to police money laundering previously resided in Member States, with the Commission relying on national authorities to enforce EU regulation and national governments to transpose it. This means that the quality and effectiveness of EU anti-money laundering legislation and policies to combat the financing of terrorism policies are uneven, due to significant variations in resources and practices across Member States.
Since 2018, a series of separate scandals in Denmark andEstonia,Germany,Latvia,Malta,the Netherlands,andSweden brought the EU’s shortcomings in enforcement regarding illicit money flows into focus. In July 2021, the European Commission proposed the creation of an agency in direct response to this problem. This was part of a legislative package consisting of four legislative proposals aimed at preventing money laundering and the financing of terrorism. This area of EU regulation comes under the remit of Mairead McGuinness, the Commissioner for Financial Services, Financial Stability and Capital Markets Union.
What is AMLA’s role?
AMLA will have two main areas of activity:
- Direct and indirect supervision of financial sector entities exposed to the highest risk of money laundering and terrorism financing (e.g. crypto asset service providers).
- Hosting the central online financial intelligence system and facilitate information exchange and cooperation between Financial Intelligence Units (FIUs). The FIU in Ireland is a division of an Garda Síochána which is currently maintained by Interpol.
Importantly, AMLA will also monitor that selected entities, known as obliged entities, subject to the new rules have internal policies and procedures in place to ensure the implementation of targeted financial sanctions, asset freezes and confiscations. AMLA will have the authority to impose administrative pecuniary sanctions of €500,000 – €2 million, or 0.5-1% percent of annual turnover for material breaches and up to 10% of the total annual turnover of the obliged entity in the preceding business year.
For the non-financial sector, AMLA will have a supporting role, carrying out reviews and investigating possible breaches in the application of the AMLA Regulation. AMLA will also have the power to issue non-binding recommendations.
Home of AMLA: Runners & Riders
Nine countries prepared candidacies to host AMLA. The runners and riders included Germany, Italy, France, Spain, Belgium, as well as smaller Member States such as Ireland, Latvia, Lithuania and Austria. The agency would provide prestige, as well as a welcome boost to the economy of any city, providing hundreds of jobs and a high salaried workforce of anti-money laundering officials. On 30 January, the nine countries formally presented their cases before the Parliament and the Council in a joint public hearing in Brussels.
Frankfurt’s winning campaign, headed up by the German Finance Minister Christian Lindner, presented the city as a “one-stop shop” for financial supervision. Frankfurt is already home to the European Central Bank (ECB).
French Minister for Finance, Bruno le Maire, made the case for Paris as the ideal location, citing its financial expertise as the home for the international money laundering watchdog, the Financial Action Taskforce (FATF), as well as the European Banking Authority (EBA), and the European Securities and Markets Authority (ESMA).
The Italian case presented by the Minister of Economy and Finance, Giancarlo Giorgetti, put forward the country’s wealth of experience in cracking down on years of organised financial crime. Meanwhile, Austria’s Minister of Finance, Magnus Brunner, highlighted Vienna’s reputation as the “world’s most liveable city”.
Spain presented a strong campaign, having already identified a “ready-to-use” building in Madrid to house AMLA. Belgian officials, insisted that an AMLA in Brussels would be the “most accountable”, being within walking distance of the Commission.
The Lithuanian Minister of Finance Gintarė Skaistė presented the country’s key strengths in tracking anti-money laundering risks which included monitoring, not only conventional financial sectors, but also the thriving Fintech sector. Latvian representatives argued that their experience in dealing with the 2018 money laundering scandal has prepared the country for the job.
Some of the smaller countries, as well as eastern European countries’, bids gained some traction as “resentment” had been expressed about concentrating even more EU agencies in the larger western European Member States.
The Irish campaign
The Irish Minister for Finance, Micheal McGrath TD, and the Minister of State for Financial Services, Jennifer Carroll MacNeill TD, presented a formal case for Dublin before the Joint Committee hearing in Brussels on 30 January.
Ireland’s campaign began in March 2023 when the government committed €80 million to help set up the agency. The Irish Ministers highlighted that Dublin is currently home to 22 of the top 25 global financial services firms and is a diverse city, with 18.5% of its workforce coming from abroad. The fact that Ireland has the transactional language of English was also cited during the campaign as being a major strength. However, some MEPs questioned whether Ireland was indeed a good choice, given commentary on Ireland being perceived as an “investment hub” or a so-called “tax-haven”.
How is the location of an EU Agency decided?
Despite the issue of AMLA’s location being a point of contention between the Parliament and the Council in recent years, on 22 February the co-legislators agreed the details of the new AMLA’s location.
In the past, the seats of decentralised agencies have been determined in most cases by Member States. However, in July 2022, the European Court of Justice (ECJ) clarified that the competence to determine the location of the seat of an EU agency, as set out in the EU Treaties, does not lie with the Member States, but rather with the EU legislature. In this case, that means that the European Parliament and the Council should decide together.
The decision of AMLA’s location is the first instance where this case law has been applied and so the first time that the Parliament will also vote. In another first, this is also the first time that public hearings were part of the process to select the seat of a new EU agency.
The Parliament and the Council each had the same number of votes (27) and the votes were then aggregated. EU Member States in the Council have one vote each, while the European Parliament has 27 votes distributed between its political groups according to their size.
Realpolitik
MEP, and Parliament rapporteur for the AMLA Regulation, Eva-Maria Poptcheva (Renew, Spain), said at the press conference that the new voting procedure was a “major win for democracy”. However, in the end, it was the Council’s top choice which won out, showing that the institution still retains significant power in this decision-making procedure.
In the Council voting procedure, ambassadors for all 27 Member States give their top three preferences in the first round of a secret ballot, and if there is no clear winner, the voting goes into a second and then third decisive round. This is a system which has been likened by some journalists to the Eurovision song contest’s system of voting where countries team up to influence the result of the vote. In the same way, the Council could, in essence, agree on their top choice internally, meaning that they would only need one MEP to back their choice to win a simple majority of 28 out of 54 votes.
After multiple rounds of voting, Frankfurt emerged as the top choice in the Council. Dublin only placed fifth, after polling as favourites in October 2023. Madrid and Paris placed second and third.
In the Parliament, it was reported that MEPs of the largest political group, the European People’s Party (EPP), of which Fine Gael is a member, chose not to include Dublin on their preferred shortlist of candidate cities, opting for Madrid, Paris and Vilnius instead. The second-largest political group, the centre-left Socialists and Democrats (S&D), are also said to have not included Dublin in their preferred shortlist, setting their sights on Madrid, Paris and Rome. The third-largest group, Renew, of which Fianna Fáil is a member, included Dublin on their shortlist, placing it third ahead of Frankfurt and behind Madrid and Paris. The Left (GUE/NGL) which includes Irish Independents and Sinn Féin as members had only Dublin on their shortlist.
Dublin’s loss is Frankfurt’s gain
As always there will be some political horse-trading coming up to the 2024 European elections in June as the top EU jobs get a reshuffle. Some sources have pointed to potential backroom deals in Germany’s triumph and raise the question as to how the top jobs (Commission President, Council President, Parliament President, ECB President etc.) will pan out in the months ahead.
However, regarding immediate next steps, it is now up to the Parliament and the Council to formally adopt the legislative texts. The Parliament is expected to vote on its final approval during the April plenary session, the final session before the EU elections. The much-anticipated EU agency, AMLA is scheduled to open its doors in Frankfurt in mid-2025 with an allocation of 400 staff.
