The European Union’s latest anti-money laundering (AML) reforms, released last year, and aimed at harmonizing compliance across member states, are raising concerns among regional businesses. While the intent is to tighten financial crime controls, the new measures may inadvertently impose disproportionate burdens on smaller firms and come in the way of innovation for startups.
Central to the reforms is the establishment of the Anti-Money Laundering Authority (AMLA), set to begin operations in the second half of 2025 in Frankfurt. AMLA will oversee high-risk financial entities and has the authority to impose fines. The agency’s creation is part of a broader AML package that extends regulations to new sectors, including cryptocurrency firms, art dealers, and football clubs, and aims to centralize banking records.
However, the complexity and cost of compliance are significant concerns. Among the most contested rules are the mandatory establishment of internal AML compliance functions even for low-risk organizations, stricter customer due diligence requirements —including enhanced background checks for politically exposed persons (PEPs)— and the obligation for real-time transaction monitoring across sectors not previously covered, such as crypto firms, art dealers, and even soccer clubs.
These rules require substantial investment in compliance infrastructure, legal expertise, and IT systems, which many regional or niche market players can eventually not be able to afford. The requirement for detailed, standardized risk assessments and central bank account registries has also raised concerns about data privacy and administrative overload for national authorities and SMEs alike.
High standards
The European Banking Authority (EBA) is also consulting on new Regulatory Technical Standards (RTS) that will shape how institutions and supervisors comply with AML obligations. These standards focus on harmonizing risk assessments and customer due diligence processes across the EU. While the aim is consistency, there’s concern that the “one-size-fits-all: approach may not account for the varied capacities of regional firms.
Moreover, the inclusion of non-financial sectors, such as art dealers and sports institutions, under the AML umbrella introduces new compliance challenges. These entities may lack the infrastructure and expertise to meet the stringent requirements, potentially leading to operational strain and losses on innovation and competitivity for the economic bloc.
Fair play
While the reforms aim to prevent financial crimes, they may inadvertently stifle legitimate business activities, especially for smaller firms and startups with limited resources. The balance between effective regulation and operational feasibility remains a contentious issue. As the EU moves forward with implementing these reforms, ongoing dialogue with stakeholders will be crucial to ensure that the measures effectively combat financial crimes without unduly burdening regional businesses.
