A new agency to supervise high-risk financial institutions across the European Union regarding their anti-money laundering and countering the financing of terrorism (AML/CFT) activities gained provisional approval from the Council of the European Union and European Parliament.

The Anti-Money Laundering Authority (AMLA) is soon expected to receive final adoption following the agreement between the two sides announced Wednesday. The creation of AMLA was proposed as part of a July 2021 package of rules presented by the European Commission to strengthen the efficiency of AML/CFT efforts in the region.

In addition to supervisory powers, AMLA will be granted the ability to impose monetary penalties on the entities it will oversee.

Once adopted, AMLA will initially select up to 40 credit and financial institutions it deems represent high AML/CFT risks across multiple member states for supervision. Crypto asset service providers may also be selected.

Those institutions will be monitored and inspected by the agency to ensure they have internal policies and procedures in place regarding the implementation of targeted financial sanctions, asset freezes, and confiscations.

Institutions not selected by AMLA would remain supervised at the national level, though the new agency is expected to play a supporting role in those efforts, along with carrying out reviews and investigating possible breaches of AML/CFT requirements at nonfinancial firms.

AMLA will have a general board comprised of financial intelligence unit supervisors from each member state and an executive board. The location of the agency’s seat has yet to be determined.

Also pending are negotiations between the Council of the European Union and European Parliament on AML regulation for the private sector and an AML mechanisms directive, as required under the July 2021 rule package.