A commentary on the EU money laundering reform in light of the subsidiarity principle

Abstract

Purpose

In July 2021, the European Commission has proposed a set of conjunct initiatives to reform the antimoney laundering/countering the financing of terrorism (AML/CFT) regulatory regime in Europe with the main aims to (i) harmonize the AML/CFT regulation and (ii) centralize the authority to a higher degree at European Union (EU) level. This paper aims to assess the reform in light of the EU subsidiarity principle.

Design/methodology/approach

The paper uses a benchmark approach to compare the proposed EU money laundering reform against Article 5(3) of the Treaty on the Functioning of the European Union.

Findings

The paper confirms that more centralized decision-making at EU level in this policy area is justified, mainly because (i) the policy area is not an area where the EU has exclusive competence, (ii) EU centralized action is necessary and (iii) it also adds value, for instance, for level playing field and efficiency considerations as long as local information advantage will not be lost. As such, the subsidiarity principle can be applied and is an adequate tool to legitimize EU centralized action in the field of money laundering combat.

Originality/value

As the EU AML regulatory reform has not yet been sufficiently discussed in light of the subsidiarity principle, the article is of innovative nature.

Citation

Tiemann, M. (2024), "A commentary on the EU money laundering reform in light of the subsidiarity principle", Journal of Financial Regulation and Compliance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRC-10-2023-0172