AMLA Proportionality To Boost Europe’s Competitiveness
2072 Mins Read
By Christoper Buttigieg
The EU’s new Anti-Money Laundering Authority (AMLA) is still taking shape, with governance structures and operational capacity being built from scratch. Yet from its inception, the agency faces a crucial challenge: how to enforce rigorous anti-money laundering and counter-terrorist financing (AML/CFT) rules while respecting the principle of proportionality.
If AMLA fails to strike this balance, it risks creating a system that burdens smaller firms and weakens Europe’s competitiveness.
The EU’s AML package was designed to close loopholes exploited by criminals and to prevent national supervisors from erecting barriers to cross-border business. But the history of European financial regulation shows that rigid, rules-heavy approaches can stifle innovation and disadvantage new entrants.
AMLA should instead adopt a principles-based regulatory model, underpinned by supervisory convergence across member states.
A principles-based framework would allow AMLA to adjust requirements according to the risk profile of individual firms and sectors and reduce unnecessary burdens on smaller enterprises which often struggle with costly compliance.
Yet this approach carries its own dangers: too much flexibility could create inconsistent application across the bloc. Divergence risks regulatory arbitrage, with firms gravitating towards jurisdictions where supervision is lighter.
To counteract this, AMLA must draw on proven supervisory tools such as peer reviews, joint inspections and supervisory colleges.
These mechanisms are already well established within the European Supervisory Authorities. By building on their experience, AMLA can promote both mutual trust, confidence in each national authority’s supervisory actions and collective trust, a shared commitment to common objectives.
This trust is essential for ensuring that flexibility does not erode the integrity of the single market.
Alongside supervisory convergence, AMLA should embed a regulatory “maturation process”. Rules must evolve through a clear cycle: identification of risks, development of standards, dissemination of guidance, active oversight, and, critically, ex-post evaluation.
Regulatory measures that prove ineffective or disproportionate should be revised or repealed. This iterative process would prevent ossification and allow AMLA’s rulebook to adapt as risks change.
Finally, every regulatory proposal should be subject to a rigorous cost-benefit analysis. This must include an explicit assessment of proportionality and competitiveness, as recommended in Mario Draghi’s review of EU competitiveness.
Benchmarking EU rules against those in third-country jurisdictions would ensure that AMLA does not place European firms at a structural disadvantage.
AMLA has the rare opportunity to build a supervisory culture from the ground up.
If it embraces proportionality from the start, through principles-based regulation, supervisory cooperation, regulatory maturation and robust cost-benefit analysis, it will not only strengthen Europe’s defences against money laundering and terrorism financing but will also support the EU’s broader economic ambitions.
Professor Christopher P Buttigieg Ph.D. is a Chief Officer Supervision Malta Financial Services Authority and an Associate Professor in the Banking and Finance Department at the University of Malta
