Frankfurt Will Host New AML Authority: What Does That Mean for Luxembourg?

The European Council and Parliament have finally decided that the newly created Anti-Money Laundering Authority (AMLA) will have its seat in Frankfurt, Germany. With direct and indirect supervisory powers over obliged entities and the power to impose sanctions and measures, the agency is expected to begin operations in mid-2025, with a workforce of over 400 staff members. But what is the AMLA? Why is it important? And what does all of this mean for Luxembourg?

Although formally proposed by the Commission in July 2021, the idea to create an EU-level agency for AML supervision dates back to 2020 as one of the six pillars proposed to strengthen the EU's rules on combating money laundering and terrorist financing, with the goal of avoiding gaps between member state-level agencies that could be exploited by criminals.

Bidding for the seat of the AMLA began in September 2023 and received applications from nine member states for the cities of Brussels, Frankfurt, Dublin, Madrid, Paris, Rome, Riga, Vilnius and Vienna. Applicants were required to demonstrate that the location would allow the AMLA to recruit highly qualified staff, to offer adequate training opportunities and to allow for close cooperation with other EU institutions and agencies.

In response to a parliamentary enquiry on the matter, former Finance Minister Yuriko Backes underscored the favorable environment in Luxembourg to host the AMLA, emphasizing its hosting of various European institutions such as the Court of Justice of the European Union and the European Public Prosecutor's Office. She highlighted the latter's role in investigating, prosecuting, and referring for trial individuals involved in criminal offenses impacting the financial interests of the Union, such as fraud, corruption, or money laundering.

Luxembourg ultimately failed to meet the deadline for submitting a formal application to host the AMLA and Frankfurt was finally voted as the host city in an informal inter-institutional meeting held on February 22, 2024. In response to a subsequent parliamentary enquiry, the new Finance Minister Gilles Roth briefly stated that the previous government finally decided not to respond to the call for applications made by the European Commission, without providing any further explanation.

It would be of great interest to have more information on the reasons why the Luxembourgish government finally decided not to bid for the seat of the AMLA, as this signifies a missed opportunity, especially for the country's highly qualified professionals. With its esteemed financial ecosystem and a wealth of skilled talent, Luxembourg was poised to reinforce its reputation as a premier hub for financial services. However, the loss means that these professionals could potentially lose out on valuable career growth opportunities within their home turf.

The defeat not only impacts Luxembourg's standing in regulatory affairs but also casts a shadow on the aspirations of its workforce. The country's skilled professionals, known for their expertise in finance and compliance, now face uncertainty regarding their career trajectories. As Luxembourg navigates this setback, it must redouble efforts to support and retain its talented workforce, ensuring that they continue to find avenues for growth and development within the country's dynamic financial landscape.

Nicolas Orrico is a lawyer and Senior AML Analyst based in Luxembourg.