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Europe Plans Authority to Fight Money Laundering and Terror Financing

flags at European Parliament

Officials in Europe are launching an authority to combat money laundering and terrorism financing.

Known as ALMA, the group will have “direct and indirect supervisory powers over high-risk obliged entities in the financial sector,” the European Council said Wednesday (Dec. 13).

“Given the cross-border nature of financial crime, the new authority will boost the efficiency of the anti-money laundering and countering the financing of terrorism (AML/CFT) framework,” the council said in a news release.

The group, a joint effort of the council and European Parliament, aims to do this by developing an “integrated mechanism with national supervisors” to ensure financial sector players comply with AML/CFT-related obligations.

“In addition to supervisory powers and in order to ensure compliance, in cases of serious, systematic or repeated breaches of directly applicable requirements, the Authority will impose pecuniary sanctions on the selected obliged entities,” per the release.

The council says ALMA will also play a supporting role in dealing with non-financial sectors, and will collaborate with financial intelligence units in EU countries.

Still undecided is where the agency will be based, a matter that is still being discussed, the release said.

The launch of ALMA comes at a time when financial institutions (FIs) are facing an increasing threat of fraud and financial crime, as PYMNTS wrote last week.

“And as the volume and sophistication of fraudulent transactions continue to rise, FIs are turning to cutting-edge tools and technologies to enhance their security measures,” that report said.

The PYMNTS Intelligence and Hawk AI study “Financial Institutions Revamping Technologies to Fight Financial Crimes” found that last year, consumers reported losing about $8.8 billion to fraud, with bank fraud cases increasing by 25% compared to the previous year.

These findings match up with separate PYMNTS Intelligence research which found that fraud has increased for 43% of FIs compared to 2022, with the average cost of fraud jumping by 65% for FIs with assets of $5 billion or more.

To deal with these increasing cases of fraud and sophisticated financial crime, FIs have had to upgrade their systems and turn to advanced technologies, with 71% of FIs employing both artificial intelligence (AI) and machine learning (ML) to enhance their fraud-fighting capabilities.

“But while FIs mostly develop their own fraud prevention tools in-house, the next wave of technologies has led many to consider external providers,” PYMNTS wrote. “In fact, half of the FIs surveyed use a mix of in-house and third-party solutions, while only 14% of FIs use exclusively in-house AI and ML tools for fighting fraud.”