EC ¦ De-prioritisation of Level 2 Acts in Financial Services Legislation

Commission freezes 115 Level‑2 financial services measures to cut red tape — what it means for financial crime compliance

The European Commission has told the three European Supervisory Authorities (EBA, ESMA, EIOPA) and the Anti‑Money Laundering Authority (AMLA) that it will not adopt 115 Level‑2 implementing and delegated acts deemed non‑essential before 1 October 2027. These measures come from empowerments included in Level‑1 legislation adopted between 2019 and 2024. The Commission’s stocktake found roughly 430 empowerments in the acquis across financial services; 115 of those have been classified as not necessary for the effective functioning of the underlying Level‑1 rules or for achieving EU policy goals. Where Level‑1 acts impose deadlines to adopt Level‑2 rules, the Commission says it will propose amendments or repeals as part of forthcoming Level‑1 reviews.

Why the pause matters for financial crime teams

Financial crime compliance functions often rely on a mix of Level‑1 obligations and detailed Level‑2 technical standards and implementation acts. A sudden proliferation of Level‑2 instruments can create practical burdens: new reporting templates, tighter notification rules, additional due‑diligence or data‑formatting requirements and operational changes to trade, custody or payments processes.

By pausing adoption of selected Level‑2 acts, the Commission is aiming to reduce near‑term regulatory complexity and compliance costs for firms. For AML/CFT teams specifically, five implications stand out.

1. Reduced immediate rule‑change risk

   Where the paused acts would have introduced new reporting templates, data‑standards or supervisory college procedures, firms get breathing space. This lowers the risk of short‑term compliance gaps caused by overlapping implementation schedules, vendor reconfiguration delays, or rushed internal rollouts. AML units can prioritise delivering existing statutory obligations and known supervisory expectations over absorbing multiple new technical requirements at once.

2. Slower harmonisation of granular practices

   Level‑2 acts often aim to harmonise technical approaches across Member States. Delaying those acts means that, for some topics, supervisory divergence may persist longer. For example, templates, thresholds and specific cooperation procedures that remain at national discretion can produce uneven reporting quality, varying interpretations of suspicious activity criteria, or differing approaches to supervisory escalation. Cross‑border groups should maintain active monitoring of local supervisory guidance and continue to align internal standards where feasible.

3. Targeted impact on AML architecture and data workstreams

   The annex to the Commission’s letter lists a range of measures, including some directly relevant to AML/CFT (for instance, ITS for AMLA reporting to EPPO, RTS/ITS on AML/CFT supervisory colleges and templates for cooperation agreements with third‑country supervisors). Delays to those acts will affect planned IT changes, data mappings and reporting pipelines. Firms that planned investments around mandated new formats can reallocate resources short term, but should avoid decommissioning projects that support wider compliance objectives (data quality, lineage, taxonomy), because future reactivation or rework could be costly.

4. Opportunity to simplify internal controls and reduce duplication

   The Commission frames this as a simplification measure in line with broader savings and investment union objectives. Compliance functions can use the interval to rationalise processes, remove duplicated controls introduced in response to anticipated technical standards, and standardise cross‑business workflows. This is a pragmatic chance to focus on risk‑based priorities rather than checklist compliance for newly imposed technicalities.

5. Need for heightened regulatory horizon scanning and engagement

   Although the Commission will not adopt the listed acts before October 2027, it will propose to amend or repeal certain empowerments when Level‑1 rules are revised — many reviews are scheduled over the next two years. Financial crime teams must therefore maintain active horizon scanning. Early engagement with industry bodies and supervisors will be important: where empowerments remain on the table in revised Level‑1 texts, they may reappear with a new timeline or altered scope.

Bastian Schwind-Wagner_Follow "The Commission’s pause on 115 non‑essential Level‑2 measures until 1 October 2027 reduces immediate implementation pressure on firms and creates room to prioritise core AML/CFT obligations and data quality improvements. Compliance teams should use this breathing space to consolidate controls, maintain robust horizon scanning, and engage with policymakers ahead of Level‑1 reviews."

Practical steps for compliance and risk teams

Compliance leaders should treat the Commission’s decision as both a de‑risking event and a planning signal.

• Reassess project roadmaps and prioritise core AML/CFT deliverables that are already mandated by Level‑1 legislation or by national supervisors. Keep contingency plans for reactivating paused projects if Level‑1 revisions restore empowerments.
• Maintain or improve data foundations. Even where mandated templates are delayed, high‑quality customer and transaction data, consistent taxonomies and strong lineage reduce long‑term costs and speed future adaptation.
• Coordinate cross‑border compliance approaches within corporate groups to limit the effects of prolonged technical divergence among Member States. Where possible, adopt stronger internal standards to ease future alignment.
• Continue engagement with trade associations, legal counsel and competent authorities. Industry input during Level‑1 reviews can influence whether empowerments are amended, preserved or removed.
• Track AMLA, EBA, ESMA and EIOPA publications closely. The Commission’s letter requests the ESAs and AMLA to publish the letter and annex; those postings, plus any subsequent consultation papers or opinion pieces, will provide the most direct signals.

Wider supervisory and policy implications

The Commission’s approach relieves short‑term implementation pressure on both industry and the ESAs. It also shifts some scrutiny back to co‑legislators: Parliament and Council will see any proposed deletions or amendments when Level‑1 texts are revised. The net effect should be a smaller set of urgent, high‑priority technical measures that supervisors and firms need to implement quickly.

However, delaying harmonised Level‑2 rules does not remove the underlying policy aims. In areas like AML/CFT, where cross‑border coordination and common templates can materially improve intelligence sharing and analysis, prolonged absence of common technical standards could slow systemic progress. Policymakers will need to balance simplification and burden relief against the potential cost of fragmented implementation.

Conclusion

For financial crime professionals, the Commission’s decision provides short‑term relief from an oncoming wave of technical rule‑making while creating a period of regulatory uncertainty. The safe course is pragmatic: pause resource commitments for the paused measures where appropriate, preserve investments in data and controls that have enduring value, and intensify horizon scanning and stakeholder engagement. Over the next two years, many Level‑1 reviews will determine which empowerments survive; active input from industry will be important to shape what the eventual technical landscape for AML/CFT will look like.

Dive deeper

• EC ¦ De-prioritisation of Level 2 acts in financial services legislation ¦ Link