Art. 18 Determination of sufficient understanding of operations | RTS on group-wide minimum requirements and additional measures for third-country subsidiaries and branches | AML

This article works in tandem with Article 17, which establishes criteria for determining "sufficient prominence." Together, these two articles form the basis for identifying a parent undertaking in the Union for groups headquartered outside the EU.

Article 18 specifically tackles the second key qualifier: "sufficient understanding of operations." It provides a non-exhaustive list of circumstances that indicate an obliged entity has this sufficient understanding, such as the ability to direct strategy, decide on important transactions, coordinate management or control functions, or have critical outsourcing arrangements in place for other Union-based obliged entities.

Crucially, the article also contains a clear tiebreaker hierarchy: if the two tests point to different entities, sufficient prominence always wins out over sufficient understanding of operations.

Important points:

Where the circumstances listed do not determine sufficient understanding of operations, the obliged entity with the highest number of full-time equivalent compliance staff in the Union takes precedence.
If sufficient understanding of operations identifies a different entity than the one identified by sufficient prominence, the determination of sufficient prominence prevails.
Competent authorities and obliged entities should note that the list of qualifying circumstances is explicitly non-exhaustive, meaning other factors may also be considered.

1. Pursuant to Article 2(1) number (42)(b)(iii) of Regulation (EU) 2024/1624 sufficient understanding of operations shall be determined with any of, but not limited to, the following circumstances:
  1. the obliged entity having the right or ability to decide on the strategy or to direct the activities of the other obliged entities established in the Union;
  2. the obliged entity having the right or ability to decide on important transactions, including the transfer of profits or losses of the other obliged entities established in the Union;
  3. the obliged entity having the right or ability to coordinate the management or to decide on the control function(s) of one or more of the other obliged entities established in the Union;
  4. the obliged entity having critical or important outsourcing arrangements in place for one or more of the obliged entities established in the Union.
1. Where paragraph 1 does not determine sufficient understanding of operations, this shall be based on the obliged entity with the highest number of full-time equivalent staff members of the compliance functions referred to in Article 16(2) of Regulation (EU) 2024/1624 in the Union.
1. In case the determination of sufficient understanding of operations leads to identify an obliged entity in the Union different from the obliged entity having sufficient prominence, the determination of sufficient prominence shall prevail over the determination of sufficient understanding of operations.