EU’s New Crypto Oriented Anti-Money Laundering Watchdog to Set up Headquarters in Frankfurt

The European Union (EU) is establishing a new Anti-Money Laundering Authority (AMLA) to oversee crypto firms and other high-risk financial entities operating across borders. 

The oversight body will be headquartered in Frankfurt, Germany, and is expected to begin operations by mid-2025.

AMLA’s Mandate and Structure

The AMLA will coordinate anti-money laundering activities with financial intelligence units and regulators across the EU. It will have the power to supervise any economic entity, including crypto firms, that engages in cross-border activities or is deemed high-risk. 

This could include oversight of cryptocurrency exchanges, decentralized finance protocols, NFT marketplaces, and other crypto sectors.

The agency will be governed by two boards – a general board comprised of representatives from all 27 EU member states and an executive board led by a chairperson and five independent full-time members. 

Locating the headquarters in Frankfurt will allow close coordination with the European Central Bank, also based there. The establishment of AMLA is part of broader EU efforts to regulate emerging technologies like cryptocurrencies and artificial intelligence (AI). 

Other European Union Regulatory Efforts Across Sectors

Apart from the regulations to guide cross-border crypto practices, the European Union has been pioneering regulations focused specifically on governing artificial intelligence (AI). 

On February 13, 2023, legislators in the European Parliament endorsed a preliminary agreement on the EU’s new AI Act. 

This groundbreaking legislation will establish the world’s first comprehensive framework for regulating AI systems. It aims to set guidelines for ethically and safely developing AI across sectors, including banking, transportation, healthcare, and law enforcement.

A total parliamentary vote is expected in April 2024 to finalize the Act before it becomes law across the 27 EU member states. The AI Act will oversee foundational machine learning models and generative AI-like chatbots built using large datasets.

To protect citizens, it prohibits high-risk applications involving biometric profiling or social scoring that could violate rights. 

The Act also enshrines safeguards requiring transparency and human oversight in AI systems. The union’s Markets in Crypto-Assets (MiCA) framework came into effect in mid-2023, with rules on stablecoins and requirements for crypto exchanges being phased in over the next two years.

With AMLA expected to begin operations by mid-2025, the EU now faces the tasks of recruiting personnel, establishing procedures, and preparing the organization to fulfill its ambitious mandate. 

The oversight body will coordinate closely with national financial regulators across the bloc’s 27 member states. 

To develop appropriate regulations, AMLA’s staff will need expertise across various types of crypto assets, blockchain technology, data privacy, and financial crimes. 

Its success will also depend on instituting robust internal controls and compliance systems to maintain high standards and prevent issues like data breaches or conflicts of interest. 

Strict security protocols will be necessary, given the sensitive information the agency will handle.