Follow the Money, AMLA! – How to unleash the EU’s new AML watchdog

Established to address serious flaws in the EU’s fragmented anti-money laundering framework, the Anti-Money Laundering Authority (AMLA) now directly supervises high-risk entities, coordinates national authorities and promotes regulatory convergence. Its success, however, will hinge on overcoming institutional fragmentation, ensuring accountability and fostering a genuinely integrated supervisory culture across Europe.

Markus Tiemann is Banking Supervisor at the European Central Bank. The views expressed in this Policy Brief are those of the author and do not necessarily reflect the official position of the European Central Bank (ECB).

I. Introduction

In recent years, several money laundering scandals have unmasked significant flaws in the effectiveness of the anti-money laundering (AML) framework, both at member state and EU level. The scandals involving ABLV Bank in Latvia and Danske Bank in Denmark, for instance, are striking examples of how cross-border financial crime has flourished and how gaps in the European AML regulatory and supervisory approach have undermined the integrity of the EU’s financial sector. Although the exact financial impact of money laundering is hard to measure, the United Nations Office on Drugs and Crime estimates that each year between 2 and 5% of the world’s entire GDP is laundered.

On the one hand, the problems of the pre-reformed AML regulatory framework were the result of member states’ failure to apply and enforce effective regulation and supervision. This was largely due to a lack of political momentum and the absence of effective regulatory and supervisory instruments. On the other hand, the highly fragmented and decentralised nature of authoritative power within and across member states persisted, with a variety of national authorities at different levels of government being involved. Insufficient information-sharing or coordination led to regulatory loopholes and rigidities. All this benefited criminal organisations which were able to abuse EU integration and the achievements of the EU Single Market, particularly relating to the freedom of movement of capital, goods, services and persons.

To counter these deficiencies and to foster regulatory integration, harmonisation and centralisation, the European Commission took the initiative in summer 2021, proposing a bundle of legislative acts to overhaul the EU’s AML regulatory regime. At the heart of this reform, it was decided to establish a new EU AML authority (AMLA), which is responsible, among other tasks, for the direct supervision of a restricted number of regulatory entities across Europe, as well as for coordinating, on the national level, relevant AML authorities and Financial Intelligence Units (FIUs).

The establishment of AMLA can be regarded as a major step in the fight against money laundering in Europe and as a reasonable policy response to a long-standing problem. Going forward, however, the actual success of the new watchdog, which started its work in July 2025, will also be determined at the level of the member states and their willingness to act. To make a meaningful and sustainable impact, AMLA will need to overcome a number of hurdles: (i) the creation of a novel AML supervisory culture in Europe, (ii) challenges relating to the precise administrative set-up and design of internal processes, methodologies and accountability obligations, and (iii) limitations in its scope and powers. In addition, the effectiveness of the fight against illicit financial flows within the single market will remain challenged by the prevailing fragmentation in related areas, such as cross-border judicial and police cooperation.

II. What’s the problem? – The need for an EU AML watchdog with teeth

Given the baleful impacts of money laundering (see Box 1), which not only comprise economic dimensions but also corrupt core democratic principles like equality and the rule of law, strong regulation and supervision is warranted.

Europe’s regulatory fight against illicit financial flows started with the first AML Directive in 1991. Over the years, the Directive was amended several times. However, each revision only saw incremental progress in enhancing regulatory effectiveness. Because the EU AML Directive is not directly applicable but must be transposed by each member state into its respective national law, loopholes and inconsistencies across national jurisdictions in Europe are still rife. These deficiencies have been increasingly exploited by criminals who continue to profit from EU integration and the evolution of the bloc’s single market with all its associated freedoms.

Moreover, a series of AML cases in European banks, including scandals that rocked Denmark’s Danske Bank or Latvia’s ABLV Bank, are testament to the current inefficacy of the EU’s supervisory and regulatory landscape for tackling money laundering. Both scandals involved vast amounts of money laundered through EU financial institutions, often linked to non-resident clients from high-risk countries. They exposed how major banks failed to enforce AML regulations and left themselves open to exploitation by criminal networks. Whereas Danske Bank survived the scandal (albeit with its reputation greatly damaged), ABLV foundered and entered liquidation. The fact that the US government intervened in the latter case by cutting off ABLV’s access to US dollar funding only strengthens the case for a sovereign EU regulatory authority with bite.

In light of these deficiencies, a political consensus emerged, which recognised that the decentralised nature of regulation and supervision in conjunction with the abuse of the EU single market was one of the main reasons for the ineffectiveness of the European AML system. In particular, the pre-reformed AML regulatory and supervisory landscape was populated by a broad range of national authorities that oversaw AML matters according to their own national legislation. This created silo mentalities, fragmentation and an uneven playing field across the bloc. This situation was made worse by only limited cooperation and coordination among national authorities beyond state borders, which could only be partially remedied by the European Banking Authority (EBA), which took over the responsibilities in the area of AML coordination across Europe. Even though the EBA was mandated to ease fragmentation in the aftermath of scandals like the ones previously mentioned, there is still ample policymaking scope for the institution to enhance cross-border cooperation.

Moreover, money laundering techniques have evolved to ever higher levels of sophistication, and the digitalisation of the financial industry offers myriad new possibilities for criminals to launder their proceeds, for instance through crypto currencies. Regulation to deal with this new reality, however, was still lagging, especially as the anonymity afforded by the digital world helped to mask the flow of illicit financial gains.

III. AMLA opens a new chapter in Europe’s fight against money laundering

With the goal of enhancing the effectiveness of EU AML/CFT regulation and supervision through cooperation, harmonisation and centralisation, in July 2021 the European Commission presented a bundle of legislative proposals. These not only laid down the regulatory foundation for AMLA but also comprised (i) a sixth Directive on AML/CFT (AMLD6), (ii) a Regulation on AML/CFT, and (iii) a revision of the 2015 Regulation on Transfers of Funds to also include transfers of crypto-assets. The European Parliament endorsed the package in April 2024, with the EU Council adopting it the following month.

In line with the measures established in the ramp-up plan, AMLA formally took on its assignments and powers in July 2025, opening its HQ in Frankfurt am Main. The authority plans to be fully operational by 2028, with around 400 staff members working to fulfil the authority’s main responsibilities: the direct supervision of a restricted number of regulatory entities across Europe and the coordination of national competent AML authorities and Financial Intelligence Units (FIUs). In addition, AMLA will be responsible for setting up a central database to record and monitor its anti- money laundering activities. In its operations, it will combine both supervisory and regulatory powers within the same authority.

In January 2025, the EU Council appointed the Italian lawyer and former Banca d’Italia official Ms Bruna Szego as the first Chair of AMLA, in which capacity she represents the authority and oversees its two governing bodies, the General Board and the Executive Board. The General Board meets in two alternative compositions, a supervisory composition with the heads of supervisory authorities responsible for AML/CFT supervision from all EU member states, and an FIU composition with the heads of the FIUs from all EU member states.

Whereas the General Board in its former guise takes all decisions relating to AML/CFT supervision, including issuing and implementing regulatory and technical standards, guidelines and similar measures for relevant entities, the General Board in its latter composition primarily offers a coordination platform for FIUs and adopts acts relevant for them, while still drafting and setting regulatory and technical standards, guidelines and similar measures for FIUs. The Executive Board, instead, is composed of the Chair and five full-time members and will take all decisions regarding specific obliged entities or individual supervisory authorities. It will also decide on the draft budget and other operational matters relating to the functioning of AMLA.

Other key players in AMLA’s governance set-up include (i) the Executive Director, responsible for day-to-day management and administration, and (ii) the Administrative Board of Review, which handles appeals against binding AMLA decisions and acts as a quasi-arbitration board outside the judicial court system.

IV. Will the watchdog’s leash be long enough?

AMLA has a great potential to break down the previous silo mentality in EU AML regulation and supervision, to close regulatory gaps and to enhance regulatory effectiveness while promoting supervisory convergence. In particular, the move from EU Directives to applicable EU Regulation is a significant improvement.

a) AMLA as a watchdog that actually has bite

With the agencies powers and its design, the EU co-legislators laid down foundations for an authority with the powers to counter today’s evolving forms of money laundering, especially in the digital realm.

First, the investigative measures, including the possibility for supervisors to perform on-site activities on the supervised entities’ premises, will give the AMLA a clearer picture of weaknesses and best practices with regard to AML control. This enhanced supervisory transparency can be used to perform benchmarking across the EU and to accumulate best practice examples to inform the agency’s future work.

Second, the power to impose administrative measures on individual supervised entities will enhance compliance. In this area, the EU’s AMLA regulation provides the agency with a range of measures which include, for instance, the issuing of remedial recommendations or the authority to order obliged entities to implement specific corrective measures for weaknesses identified in relation to AML control. Again in line with the regulation, AMLA is also entitled to change the governance structures of the entities it supervises or even to restrict their business operations altogether.

Third, the power to issue public statements that identify natural or legal persons in breach can be particularly impactful. If used judiciously, such a “blame list” aligns supervised entities’ interests to AMLA’s interests because reputational damage can have negative business consequences for the respective entity.

Fourth, the envisaged central database of information collected from supervisory authorities or stemming from AMLA’s activities addresses the previous lack of effective information-sharing. AMLA also has an obligation to distribute relevant information with other bodies, including both AML and non-AML authorities.

b) AMLA as a watchdog that might need a longer leash

Despite this array of measures, time will tell whether the powers granted in the AMLA regulation are appropriate for the agency to fulfil its mandate. There is a risk that they may in fact be insufficiently far-reaching, given the following:

First, the restricted number of obliged entities that are under direct AMLA oversight might hamper the rigorous eradication of illicit financial flows. AMLA’s responsibilities will comprise the direct supervision of 40 cross-border entities deemed high-risk when it comes to money laundering. In terms of the range of entities obliged to address money laundering, there is a wide variety of categories among which AMLA will determine its ultimate 40 obliged entities. However, entities active in the non-financial sector, like property firms or gambling companies, will not be covered by AMLA itself but will remain under the aegis of supervisory authorities at the national level. In the same vein, obliged entities operating in fewer than six member states do not fall under the direct scope of AMLA and will thus also remain under national supervision. AMLA does, however have the possibility to take over supervision of entities from the relevant national oversight authorities. Conversely, the latter can, in turn, request AMLA to take over direct supervision in exceptional cases.

Second, in terms of AMLA’s powers, AMLA might for instance temporarily ban any person held responsible for a breach, from exercising managerial functions within the obliged entity it selects. While the power to remove managers for wrongdoing can have a strong impact, the power only to do so temporarily might dilute the measure as a deterrent. In addition, although AMLA can propose to an authority-granting body that the latter withdraws or suspends its authorisation, the agency cannot itself withdraw or suspend authorisation.

Third, AMLA’s powers of financial sanctioning are limited. AMLA has the power to apply Periodic Penalty Payments (PPPs) for identified breaches of administrative measures, which it can impose on a breaching entity until such time as that entity complies with the respective measure. These PPPs are, however, limited in time (up to one year) and amount (2-3% of an obliged entity’s annual turnover or income), so that breaching entities might trade off financial costs for remediation against PPPs and so pay the penalties but continue as before. Nevertheless, PPPs could be seen as a powerful tool, especially if AMLA is able to impose them on entities or natural persons retroactively and with subsequent public disclosure. Their limitations, however, might make them appear less fearsome in practice. AMLA is also empowered to impose financial sanctions. But, as with PPPs, sanctions are also limited in the amounts they can impose and only apply to a pre-defined set of breaches. In consequence, breaches relating to national transpositions of AMLD6, for example, cannot be directly sanctioned by AMLA but rather by competent authorities at the national level. AMLA can, however, recommend to national competent authorities (NCAs) that they launch such sanctioning procedures.

In addition, there are several challenges that AMLA may face during its establishment and early days. The authority will be added to an already highly dense ecosystem of European financial regulatory, supervisory and resolution authorities, including micro- and macro-prudential banking supervisors, insurance supervisors or capital markets supervisors. Some of its powers and tasks will therefore also impact the work of other regulatory authorities.

Finally, integration in the European judicial and police system is not sufficiently advanced. These two sectors are crucial to the effective prosecution and eradication of money laundering. Although there is cooperation, harmonisation and mutual recognition in some areas, many judicial and police matters remain at the national level. A single European judiciary in particular is a long way off. Despite EU-wide rules and standards, the actual investigation and prosecution of criminal offences is carried out by member states. Thus, the effective use of instruments of judicial cooperation beyond national borders – such as EU arrest warrants or investigation orders – as well as agencies operating across the bloc, like Eurojust and Europol, will play a vital role if the AML reforms are truly to be a success.

V. How to turn the creation of AMLA into a success

In light of these challenges, these recommendations could enable AMLA to successfully perform its tasks:

• With regard to its limited scope, it is recommended for AMLA to constantly re-assess any changes to the risk profiles of entities; this will enable it to identify those entities with the highest AML risks. If need be, it should also be proactive in taking over exceptional cases, whereby non-directly supervised entities might be taken temporarily under AMLA’s direct remit;
• With regard to PPPs and financial sanctions, it is recommended to revise and tighten the AMLA regulation in that regard, should they turn out to be too lax and therefore unfit for purpose;
• In terms of AMLA’s co-existence with fellow European authorities, it is recommended to establish effective information-sharing and coordination practices, especially prior to the application of more stringent measures, as the decision of one authority might also affect the mandates of other bodies. Meticulous information-sharing with the European Central Bank’s prudential banking supervisory arm (the Single Supervisory Mechanism or SSM) is particularly recommended because AMLA’s supervisory scope also includes credit institutions. In this way, regular, ad hoc and informal exchanges.

A critical element of success for AMLA’s effectiveness and its reputation as a watchdog fit for the future will be the creation of a truly integrated AML regulatory and supervisory mindset for AML matters at the EU level – with AMLA at its heart. A cultural shift encouraged by centralisation will especially impact AML supervisors working in national competent authorities, which will transfer most of their powers and competences to AMLA. Although NCAs will remain highly engaged in AML supervision, for example with Joint Supervisory Teams (JSTs) engaging in direct supervision, the final say when it comes to measures relating to obliged entities will be taken by decision-makers at ALMA.

To achieve these aims, it will be important to create an atmosphere of trust, consensus and goal alignment within operational and management teams, through joint team events, informationsharing and staff exchanges between AMLA and national competent authorities. This is also vital for retaining national-level supervisors with their local know-how, as well as for fostering a motivated workforce, especially in the early years of AMLA’s existence when the bulk of supervisory convergence is expected to occur. Achieving this is even more important in light of the relatively complex design of the AMLA governance structure, with its mix of governing bodies and its broadly centralised approach, albeit with more de-centralised elements, like the JSTs and those overseeing national transpositions of AMLD6.

Given these challenges in the AMLA regulation and in the establishment of the authority itself, it is also recommended that the agency’s internal processes be monitored and reviewed right from the start of its operations. Evaluating the functioning of AMLA in its early years to draw conclusions about the efficacy of its supervisory and regulatory operations can also be invaluable for refining policies, regulations and procedures. Such reviews should be undertaken at different levels – at AMLA internally but also externally by other EU institutions like the European Court of Auditors, or even by independent assessors.

As an agency of the European Commission, AMLA is not as independent as, say, the ECB’s Single Supervisory Mechanism. Nevertheless, the quality and efficacy of its supervisory work should be constantly upheld by robust accountability mechanisms. As laid down in its founding regulation, AMLA will be accountable to both the European Parliament and the Council. One accountability measure, for instance, is for an annual report to be made available to both institutions and the possibility for policymakers to challenge its work in relevant forums. It is therefore up to the latter to make sufficient use of the means to scrutinise and question the agency’s authority and tasks. From an internal perspective, in turn, it will be important for AMLA to be transparent and clear in explaining its decisions towards a supervised entity, thereby justifying the mandate and powers accorded to it.

VI. Conclusion

Breaking down silos in financial regulation and supervision across Europe has never been easy but has always been necessary. This is especially true for regulating and supervising the scourge of money laundering, which has proven largely ineffective over the last 30 years. The creation of AMLA at the heart of a general overhaul of Europe’s AML supervisory and regulatory regime constitutes a significant milestone in Europe’s efforts to combat money laundering and a vital policy response to a persistent economic and social issue.

Once fully operational, AMLA will have the chance to significantly contribute to stemming the flood of illicit finance across the continent through tighter, more harmonised and, ultimately, more effective AML regulation and supervision.

But to make a genuine impact and to meet the expectations justly demanded of it, AMLA needs to successfully navigate challenges related to its scope, its powers and its organisational set-up. To support this task, putting in place a clear accountability framework will be a keystone for underpinning AMLA as a legal authority with bite and a leading protagonist in the fight against money laundering.

Its remit can be further supported by enhanced integration, especially with increased cooperation between cross-border judicial, policing and security authorities. Not only would this greatly facilitate the work of AMLA, it would reinforce efforts on the part of member states to detect and cut off the sources of illicit funds.

With these challenges and opportunities ahead, the prospects look promising for AMLA to help create a new AML regulatory and supervisory culture in Europe – as a bulwark against criminality and for the benefit of the EU’s social, economic and democratic principles themselves.

Image: CC Mathias Reding, Source: Unsplash