By CARLO BOFFA, EU Correspondent<\/p>\n
EU officials are grappling with whether new group-wide anti-money laundering requirements should apply to companies such as Volkswagen, BMW and Red Bull.<\/p>\n
The key question is whether parent companies that own financial institutions subject to AML rules, or operate franchise networks that include regulated entities, will be responsible for overseeing the group\u2019s anti-money laundering compliance framework.<\/p>\n
The regulation the EU\u2019s Anti-Money Laundering Authority (AMLA) is drafting, due to take effect in 2027, could draw manufacturing and retail conglomerates that have no formal AML compliance obligation under the new regulatory umbrella.\u00a0<\/p>\n
A draft regulatory technical standard (RTS) released in April said each business group needs to identify one of its entities as responsible for drawing up an AML framework for the whole group.<\/p>\n
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AML OVERSIGHT?: Our photo shows numerous car transporters, carrying new vehicles from Skoda and Audi, parked on the tracks of a marshalling yard in Munich, Bavaria, Germany on July 21, 2026. The cars are manufactured by Volkswagen Aktiengesellschaft (VW AG, Volkswagen Group), the German automaker and one of the world\u2019s leading automotive groups.<\/p>\n
But officials in Frankfurt and Brussels are still uncertain how far the rules reach outside the current perimeter of regulated entities, AML Intelligence has learned.<\/p>\n
The nub of the issue is locating the parent undertaking, the entity responsible for drawing up the framework for the whole group. For formal groups, the matter seems more straightforward, as EU legislation states that the selected company needs to be an \u201cobliged entity\u201d \u2014 a regulated company required to prevent money laundering.<\/p>\n
But for different structures such as franchises, networks or partnerships, the parent undertaking could also be a company that has no formal prevention obligation. This could theoretically draw companies such as Swarovski, BMW and Mercedes, which operate franchises alongside their group activities, into the framework.<\/p>\n
The RTS underwent public consultation, but many observers in the private sector complained that the consultation stayed open for only two months, shorter than for other regulatory standards.<\/p>\n
Consultations between AMLA, the Commission and national authorities are still ongoing. The RTS\u2019s final report is due by the end of this quarter, according to AMLA\u2019s work plan.<\/p>\n
Real estate and auditing<\/p>\n
The problem is particularly acute in the auditing, real estate and online gambling sectors, where groups are often structured as franchises or partnerships.<\/p>\n
Tommas Kaplan, chief executive of Turn Advisory and an expert in money laundering in real estate, said the new rules could give responsibility for compliance to entities that are only responsible for licensing and do not themselves operate in the market.<\/p>\n
\u201cA franchisor that never advises on a single property transaction could suddenly become the compliance hub for an entire network,\u201d he said.<\/p>\n
AMLA\u2019s draft states that it is enough for two entities to share the same audits, reviews, risk assessments or control functions related to branding, marketing or franchising arrangements to be treated as a group.<\/p>\n
\u201cThe branding criterion then almost automatically points to the franchisor,\u201d Kaplan said.<\/p>\n
\u201cIn practice, this would entail coordinating a group-wide risk assessment across dozens or even hundreds of legally independent agencies, establishing a compliance function at group level and reporting to your own management body on obligations that were never intended for you to fulfil \u2014 all without any legal authority to direct how those independent brokers handle their cases,\u201d he said.<\/p>\n
Outside the real estate sector, Accountancy Europe said it had \u201cpractical and legal concerns regarding the application of the proposed requirements to accountants, auditors and other non-financial professions operating through networks of legally separate and independent firms\u201d.<\/p>\n
Who supervises who?<\/p>\n
The new regulation\u2019s application also raises the question of who is responsible for supervising franchises.<\/p>\n
\u201cAs the text stands, the honest answer is: no one. A franchisor that is not an obliged entity has no anti-money laundering supervisor,\u201d Kaplan said.<\/p>\n
For groups, the problem arises when parent companies and some of their biggest subsidiaries come from different sectors.\u00a0<\/p>\n
The new EU regulation created a new category of regulated entities: non-financial mixed activity holding companies. These are companies that do not own any financial subsidiaries but have at least one subsidiary that is a regulated entity. The law does not provide guidance on who should supervise those holdings, which could come from very different sectors.<\/p>\n
One example is Red Bull, the Austrian energy drink group, which owns two football clubs \u2014 RB Leipzig in Germany and FC Red Bull Salzburg in Austria \u2014 that will come under the EU\u2019s regulatory umbrella as of 2027.<\/p>\n
Some supervisors think AMLA will ultimately adopt a more restrictive approach, avoiding an extension of its regulatory reach to companies in other sectors.<\/p>\n
Kaplan hopes AMLA will also rethink the criteria for assigning responsibility within franchises and networks.<\/p>\n
\u201cThis isn\u2019t a call for less regulation; it\u2019s a call for effective regulation,\u201d he said. \u201cWhile the goal of preventing people from hiding behind network or franchise structures is legitimate, the current drafting goes too far.\u201d<\/p>\n
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