Frankfurt to host the EU Anti-Money Laundering Authority

The vote was not without drama with the European Parliament requesting a change in the voting process so as not to hand the result to Frankfurt. After one round of voting, Frankfurt came out as the winner with 28 votes. Madrid came in second with 16, Paris in third with 6 and Rome in fourth with 4.

What does this mean?

The impact of this is quite significant Frankfurt will now be home to the European Central Bank, the European Insurance and Occupational Pensions Authority and now the EU’s Anti-Money Laundering Authority. On top of having the most seats in the Parliament, a commanding voice in the Council and the announcement that Ursula von der Leyen will be running again as Commission president, Germany is in a strong position.

There will be some that are quite aggrieved by this. Paris performed particularly well in the hearing and came second in the Council vote. Madrid had positioned itself as not currently housing an EU agency and was a clear favourite amongst MEPS, although, Spain did just have Nadia Calvino become the President of the European Investment Bank. Dublin narrowly missed out on EBA after tying with Paris and have now missed out on AMLA. The Riga and Vilnius will also consider themselves unlucky having put in a strong bid and arguing that there is already a high concentration of agencies in Western Europe.

However, this comes at a very important time with those missing out likely to gain an advantage on what portfolio they are given in the next Commission. Jobs have not been promised yet but as trading continues it would not be surprising to see some of those who missed out in this process get their preferred portfolios.

Whilst it remains to be seen what the impact of AMLA being in Frankfurt means in practice, it will certainly further Frankfurt’s credentials in being a financial hub. AMLA will be tasked with the supervising up to 40 groups and entities which represent a high risk in several member states, which will no doubt see a greater business presence in the city. It will certainly factor into the thinking of firms looking to establish a presence in the EU and those who may want to be at close proximity to their regulator.

In addition, AMLA also has the power to directly supervise certain types of credit and financial institutions, including crypto asset service providers, if they are considered high-risk or operate across borders. This in the context of the incoming Markets in Crypto Assets Regulation is significant. Where cryptoasset service providers are currently undertaking their analysis of where they should locate their business in Europe in order to obtain their MiCA license, the fact that AMLA, a regulator which may directly supervise them, is in Frankfurt, could end up tipping the scales. It is also important to note that AMLA will also have a role in the non-financial space which will attract a broader range of firms to Frankfurt, expanding it to more than just a banking hub.

Whilst AMLA will be hosted in Frankfurt, we should not jump to conclusions on how it will be run and draw too many comparisons to BaFin. After all, they will be very different entities. For reference we can consider the difference in how ESMA and the EBA operate in relation to the AMF in France. AMLA will be a brand new EU entity which will attract regulatory professionals from across the Union and ultimately be accountable to the European Parliament and the Council. The mandate has been made clear and its identity will no doubt reflect the principles under which it is created. What is for certain is that AMLA will have an incredibly high work load and it remains to be seen whether 400 staff will be sufficient for what seems like a vast challenge.

Sarah Wrage and Richard Reimer react from our Frankfurt Office:

“Frankfurt is well equipped to create a strong foundation for AMLA and its integrated AML supervision. By hosting AMLA, Frankfurt will further strengthen its status as the continent's most important financial hub and its key role in financial supervision in the future. The proximity of AMLA to ECB in Frankfurt offers significant advantages for enhancing interaction between the authorities and strengthening the European financial system. In addition, it is expected that a large proportion of the institutions directly supervised by AMLA will be based in Frankfurt, which constitutes a significant organizational advantage and will simplify supervision“

What was the Criteria for Selection?

The institutions had set out a clear metric that they intended the pitched to measure themselves against. These were:

• The location – does the proposed site offer the ability for the Authority to fully execute its tasks and powers
• Recruitment – will this location be able to recruit highly qualified and specialised staff to be able to carry out the function of AMLA effectively?
• Training Opportunity – does the pitch offer adequate training opportunity for AML / CFT activities
• Cooperation – to what extent will this site allow for close cooperation with Union institutions, bodies and agencies
• Commitment to AML / CFT – does this jurisdiction have a strong track record for fulfilling its AML / CFT obligations. In particular in its FATF evaluation.
• Speed – how quickly will the site can become operational

There were also additional agreed upon criteria such as:

• Accessibility – how accessible is this location and how well connected is this location to the rest of Europe?
• Quality of education – what provisions are in place for the schooling of AMLA staff
• Jobs, Benefits and Healthcare – what rights and access do the children and spouses of AMLA have in relation to the labour market, social security and medical care
• Geographical Balance – what other EU Institutions does this jurisdiction have

What was the Process?

The process for determining who will host AMLA is a new one. After the European Parliament deemed it was unjustly kept out of the process for determining the European Medicines Agency, the European Courts of Justice ruled that the competency for determining the seat of an EU agency should be shared between the European Council and the European Parliament. As such, both Institutions are given 27 votes – one for each Member State in the Council and the 27 votes distributed between the political groups based on their size. The vote took place in the form of a secret ballot and the results was via simple majority – ie. One bid needs to gain at least 28 votes.

Member States were invited to submit their applications to host AMLA on 28 September 2023 and a deadline was set for 10 November 2023. Nine Member States put in submissions:

•           Belgium, Brussels

•           Germany, Frankfurt

•           Ireland, Dublin

•           Spain, Madrid

•           France, Paris

•           Italy, Rome

•           Latvia, Riga

•           Lithuania, Vilnius

•           Austria, Vienna

A joint hearing was subsequently held on 20 January 2024 with the European Parliament and the Council for Member States to present their case and be questioned. The Council announced that it would hold its own preliminary voting and block vote, announcing that Frankfurt was its chosen destination. Early indications from Political Groups seems to suggest that Paris, Frankfurt, Madrid and Dublin were in contention. However, with 27 votes already in hand, it was always going to be Frankfurt’s to win, which is why the European Parliament had tried to alter the voting process at the last moment – to no avail. 

What are the next steps?

The decision is now made subject to formal adoption by Council and Parliament which in the Parliament is expected at the end of April. According to the German application the premises for AMLA is available immediately with fit out taking 7 months, keeping AMLA on track for being operational in 2024. The intention is that it will begin direct supervision of the high risk financial institutions from 2026/2027.

Authored by Eimear O’Brien, Sarah Wrage, and Lavan Thasarathakumar.