Interview: Bridging Regulatory Gaps In AML/CFT Between The EU And US
As global financial systems become more interconnected, effective AML and CFT frameworks are more critical than ever. The EU pursues centralization through initiatives like the AMLA, while the US maintains a decentralized, agency-driven approach. These differing models pose challenges and opportunities for institutions managing cross-border compliance amid the rise of digital assets and complex crimes.
To gain deeper insight into how these regulatory frameworks compare and what the future holds for AML/CFT compliance, we interviewed Heamanth Kumar, a Financial Crime Consultant with extensive experience in both EU and US regulations. His expertise sheds light on the evolving landscape and offers a unique perspective on the strategies companies must adopt to stay compliant.
Could you start by sharing some of your career background and your key areas of expertise in AML/CFT, especially regarding your work with EU and US regulations?
I have 14 years of experience in AML and Financial Crime, focusing on regulatory compliance and operational excellence. My expertise includes customer due diligence (CDD), enhanced due diligence (EDD), transaction monitoring, and regulatory reporting, with significant exposure to both EU and US regulations. I’ve worked on projects ensuring adherence to the EU’s AML directives and the US PATRIOT Act, providing insights into compliance frameworks and cross-border investigations.
Heamanth K.
Give us an overview of the main differences in the regulatory approach to AML/CFT in the EU compared to the US.
The EU focuses on harmonized directives, like AMLDs, which member states must implement, promoting consistency across the region. In contrast, the US follows a centralized approach through agencies like FinCEN and applies uniform regulations nationwide. The EU’s framework is evolving toward centralization with AMLA, while the US has longstanding centralized enforcement.
Heamanth K.
With the EU moving towards a 'Single Rulebook' for AML/CFT, what benefits or challenges does this bring to compliance professionals, especially compared to the US’s state-led approach?
The Single Rulebook simplifies compliance by providing consistency across EU countries, reducing discrepancies in national interpretations. However, it challenges professionals to adapt quickly to centralized supervision and coordinate efforts across multiple jurisdictions. Unlike the US, where uniformity exists, the EU transition may initially require significant alignment efforts.
Heamanth K.
The establishment of the EU Anti-Money Laundering Authority (AMLA) marks a significant shift. How does this centralized body compare to US regulatory authorities like FinCEN in terms of its expected impact on AML enforcement?
AMLA centralizes oversight of high-risk entities, providing a unified enforcement approach. While FinCEN also operates centrally, AMLA’s cross-border mandate aims to address discrepancies between EU countries. This can enhance consistency but requires strong coordination between national regulators and AMLA.
Heamanth K.
The latest EU AML/CFT framework places a strong focus on beneficial ownership transparency. How does this align with or differ from the US’s own requirements under the Corporate Transparency Act, and what might this mean for global companies?
Both frameworks emphasize beneficial ownership to combat shell companies and illicit activities. The EU mandates public access to beneficial ownership registers, whereas the US Corporate Transparency Act focuses on private reporting to FinCEN. For global companies, aligning processes to meet both standards ensures compliance but adds complexity.
Heamanth K.
Crypto assets are increasingly regulated under both EU and US frameworks. Could you discuss recent developments, including how the EU’s inclusion of crypto-asset providers compares with the US’s approach under FinCEN’s guidance?
The EU has incorporated crypto assets into its AML framework, requiring providers to register and comply with AML directives. Similarly, the US requires crypto exchanges to follow FinCEN’s guidance, including AML and KYC protocols. The EU’s approach appears broader in scope, potentially influencing global crypto regulations.
Heamanth K.
The EU now requires central bank account registers to be accessible through a single point of access for law enforcement. How does this measure contrast with the US approach, and what are the implications for cross-border investigations?
The EU’s central access enhances efficiency for cross-border investigations. The US lacks a centralized bank account registry, relying on subpoenas and collaboration between financial institutions and regulators. The EU measure sets a benchmark for streamlined law enforcement access globally.
Heamanth K.
How are tighter due diligence requirements, particularly around KYC and KYB, evolving in the EU, and how might these influence or be influenced by US practices?
The EU is enhancing due diligence standards through stricter KYC/KYB protocols, particularly for high-risk sectors. These developments often align with US practices, such as beneficial ownership verification under FinCEN. Cross-influence ensures consistency for firms operating in both regions.
Heamanth K.
The EU’s Sixth Anti-Money Laundering Directive (AMLD6) introduces expanded obligations for certain sectors, including crowdfunding and football. How does this sector-specific focus differ from regulatory focuses in the US?
The EU’s sector-specific approach reflects its response to unique risks within certain industries. The US also addresses industry-specific risks, such as real estate and crypto, but typically enforces broader standards. EU’s approach may influence global trends for targeted sector regulations.
Heamanth K.
The EU’s recent reforms emphasize enhanced cooperation among national Financial Intelligence Units (FIUs). Could you explain how this structured approach to FIU collaboration compares with the practices in the US?
The EU prioritizes seamless FIU collaboration through a centralized system, which promotes timely and effective information sharing. In the US, FIU functions are centralized under FinCEN, ensuring efficiency, but the EU’s reforms aim to address fragmentation within member states.
Heamanth K.
As AMLA gains direct supervisory authority over high-risk entities in Europe, what kind of compliance shifts should companies with both EU and US operations anticipate in terms of regulatory oversight?
Companies will need to manage dual oversight, aligning centralized EU directives with US regulations. This requires robust compliance frameworks to address varied supervisory expectations and proactive communication with both AMLA and US regulators.
Heamanth K.
How do you see the impact of harmonized due diligence standards within the EU on global financial crime risk management practices, especially for firms operating under US regulations?
Harmonized EU standards promote uniformity and reduce discrepancies in cross-border compliance. For global firms, this ensures predictability but requires adjustments to meet the specific requirements of both regions, fostering better financial crime risk management.
Heamanth K.
Looking to the future, what do you believe are the primary regulatory challenges for cross-border AML/CFT compliance, given the EU’s centralized model and the US’s jurisdictional diversity?
The main challenge lies in reconciling centralized and jurisdictional-specific frameworks. Firms must adapt to different oversight mechanisms, manage evolving crypto and fintech regulations, and address operational complexities in meeting both EU and US standards.
Heamanth K.
We thank Heamanth Kumar for taking the time to answer our questions.
Was this helpful?
Good job! Please give your positive feedback
How could we improve this post? Please Help us.
Astrid Johansson
[Trainee] Astrid is one of Cellbunq’s latest add-ons to the team, she is currently undergoing a bachelor's degree in Artificial Intelligence at the Stockholm University of Technology (SIT). Connect With Her LinkedIn