EU Commission propose new AML/CFT Regulations featuring the LEI System

The European Commission have announced a long-awaited AML Package and new regulatory body to govern its implementation and compliance. The Legal Entity Identifier is chosen as a trusted means to identify counterparties to transactions. 

The European Commission have announced the long-awaited AML Package and new regulatory body to govern its implementation and compliance.

The package put forth aims to put in place a new watchdog called the EU AML Authority (AMLA) and draft a new single EU Rulebook for AML/CFT obligations.

A new EU regulatory watchdog has been proposed in order to ensure the private sector correctly and consistently applies EU AML rules.

In a bid to fight money-laundering, so called "dirty money" and counter terrorism financing, the ambitious package of legislative proposals is set to strengthen the existing EU’s AML and countering the financing of terrorism (CFT) rules. The overall aim of this package is to improve detection of suspicious activities and transactions, and tighten up and loose spots in the system.

For example, there is set to be an EU wide limit of €10,000 of large cash payments as this is the single most common way for criminals to launder money. 

In addition, the use of crypto-anonymous wallets will be prohibited, similarly to anonymous bank accounts. The Legal Entity Identifier will greatly help reconcile payments between counterparties in transactions and help flag any suspicious trends or activity.

The LEI is quickly becoming the mark of trust in the global financial system.

The proposal put forward on 20th July 2021 is set to include a revision of the 2015 Regulation on Transfers of Funds. Within which is a proposal for a new law which allows authorities combat AML/CFT by tracing sources of funds, or "crypto-assets". In order to achieve this the EU will mandate the use of the Legal Entity Identifier (LEI) for both payer and payees.

The proposal states "(the LEI)could easily be included in existing payment message formats". This could indicate the LEI is set to overtake, or bolster the IBAN as a primary means of identifying the entities behind bank transactions on a corporate, rather than individual level. 

To find out more about the new package put forward by the European Commission, check out the link provided to the page on the EC website: Anti-money laundering and countering the financing of terrorism legislative package.