Tackling the dark side of financial market integration: Building the European Union Anti-Money Laundering Authority

In 2024, the European Union (EU) adopted new legislation that considerably tightened existing EU rules to combat money laundering and terrorist financing. Of particular importance is the establishment of a new agency — the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) — which was assigned direct supervision of approximately forty financial sector entities that operated cross-border and posed high risks of money laundering and terrorist financing. AMLA was also assigned the role of coordinating with the relevant national authorities to ensure the consistent application of EU rules across member states. We set out to explain why AMLA was established in the way that it was, despite the longstanding reluctance and / or disinterest of a range of member states — which we label ‘foot-draggers’ and ‘fence-sitters’. The traditional account is that the creation of AMLA was a ‘functional’ response to a series of policy failures. Without denying the importance of these scandals, we argue that the creation of AMLA resulted from longstanding efforts to reinforce EU AML legislation by specific EU member state governments — which we label ‘pace-setters’, led by France, Italy, the Netherlands, and Spain — and an unexpected shift in the preferences of the German government — which we label a ‘recent convert’ from its longstanding position as an ‘fence-sitter’ — on the need for a European level authority.