Home Cyber Crime & Security EU sets out anti-money laundering plans

EU sets out anti-money laundering plans

Valdis Dombrovskis and Mairead McGuinnes: presented the AML plans at a press conference in Brussels today | Credit: Lukasz Kobus (c) EC - Audiovisual Service / European Union 2021

The European Commission has today presented plans for a new European Union (EU) anti-money laundering (AML) watchdog as it looks to overcome fragmentation in the bloc’s approach to tackling ‘dirty money’.

Plans for the ‘Anti-Money Laundering Authority’, already handed the acronym AMLA and which ‘should be’ operational in 2024, were presented on 20 July as part of a major package of measures to tackle money laundering – the practice of legitimising the proceeds of crime by filtering them into the regular economy to mask their illegal origin.

The long-awaited package was presented at a joint-press conference in Brussels hosted by Valdis Dombrovskis, the Commission’s executive vice-president for an economy that works for people, and financial services commissioner Mairead McGuinness.

Within Europe, Europol estimates that the value of suspicious transactions is equivalent to about 1.3 per cent of EU GDP while worldwide the figure is estimated to be close to three per cent of global GDP, according to a European Court of Auditors study published three weeks ago.

The Commission said in a press release that the unveiled measures ‘greatly enhance the existing EU framework by taking into account new and emerging challenges linked to technological innovation [including] virtual currencies, more integrated financial flows in the [EU] Single Market and the global nature of terrorist organisations’.

EU knows it needs to do more

The legislative package implements commitments in an action plan presented by the Commission in May 2020 and arrives after a series of acknowledgments by the Commission that it needs to do more to tackle the growing scourge of money-laundering.

At present, AML supervision is largely led at a national level within the 27-nation bloc. Commission representatives have previously described a need to improve the working of Financial Intelligence Units (FIUs) – national agencies that track suspicious financial activity.

“The application of AML rules has suffered from a lack of sufficient detail at EU level. This means that transposition at national level can diverge far too easily. And that has resulted in weak links across the internal market. We want this to end,” McGuinness said in a speech in May.

The Commission hosted a half-day conference on AML last September, with Dombrovskis setting out how the EU wanted to step up the AML fight – 30 years on from its first AML directive.

Finance ministers from six member states – Germany, France, Italy, Spain, the Netherlands and Dombrovskis’s native land Latvia – signed a joint paper in 2019 proposing a new EU ‘supervisory function’ and harmonised regulatory framework.

The European Court of Auditors (ECA)’s report, titled ‘EU efforts to fight money laundering in the banking sector are fragmented and implementation is insufficient’, concluded that the EU needs a ‘stronger and more coherent’ oversight framework.

“EU-level weaknesses with regard to money laundering and terrorist financing need to be addressed, and the EU’s supervisory role significantly strengthened”, said Mihails Kozlovs, the ECA member responsible for the 83-page report. “Much more needs to be done to ensure that the EU law is implemented promptly and coherently. For a start, the EU should use regulations in preference to directives wherever possible, given the need for legislation to be implemented coherently at member state level.”

Raft of measures proposed

A regulation to establish AMLA is the natural headline-grabber amid today’s measures, which consists of three further legislative proposals: regulation on AML/countering the finance of terrorism (CFT), containing directly-applicable rules, including in the areas of customer due diligence and ‘beneficial ownership’ (individuals who ultimately own or control a legal entity); a sixth EU directive on AML/CFT containing provisions that will be transposed into national law, such as rules on national supervisors and FIUs; and a revision of a 2015 regulation on transfers of funds to trace transfers of crypto-assets.

AMLA should be operational in 2024 and ‘will start its work of direct supervision slightly later’, once the directive has been transposed and the new regulatory framework starts to apply, the Commission said today.

The new body will co-ordinate national authorities to ensure the private sector ‘correctly and consistently’ applies EU rules. It will also support FIUs to ‘improve their analytical capacity around illicit flows and make financial intelligence a key source for law enforcement agencies’.

At present, only certain categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. 

In other specific proposals, the Commission wants to introduce an EU-wide limit of €10,000 (about £8,650) on cash payments – limits already exist in about two-thirds of member states, although amounts vary; as well as the ‘black’- and ‘grey’-listing of so-called third-country nations reflecting recommendations made by the Financial Action Task Force (FATF), the Paris-headquartered global AML/CFT watchdog.

‘Scale of problem cannot be underestimated’

“We have made huge strides in recent years and our EU AML rules are now among the toughest in the world,” said Dombrovskis. “But they now need to be applied consistently and closely supervised to make sure they really bite. This is why we are today taking these bold steps to close the door on money laundering and stop criminals from lining their pockets with ill-gotten gains.”

“The scale of the problem cannot be underestimated and the loopholes that criminals can exploit need to be closed,” said McGuinness. “Today’s package significantly ramps up our efforts to stop dirty money being washed through the financial system.”

The legislative package will now be discussed by the European Parliament and Council, with McGuinness saying at today’s press conference that she hoped for “as quick as possible progress” though “it won’t happen overnight”.

Various new AML initiatives have also sprung up across different EU nations in the past couple of years. One example is Lithuania’s ‘Centre of Excellence in AML’, which was recently set up by the Baltic state’s Ministry of Finance, central bank and eight commercial banks to boost co-ordination between state authorities and the private sector.

“We welcome the proposed AML package as it is a major step forward towards a stronger Europe in the fight against money laundering and the financing of terrorism,” Lithuania centre director Eimantas Vytuvis told Global Government Fintech. “It will help to address the inconsistent implementation and enforcement of the current EU’s AML directives, enhance supervision at the EU-level and support better co-ordination of FIUs.”

‘European asset registry’ tender

A tender notice for a ‘feasibility study for a European asset registry in the context of the fight against AML and tax evasion’ was published last week (16 July) by the Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG Fisma).

‘Collection of data and interconnection of registers is a key instrument under EU law to speed up access for competent authorities to financial information and facilitate cross-border co-operation,’ the notice states. ‘This project shall look into various possibilities for collecting information to set up an asset registry which may afterwards feed into a future policy initiative.’

The tender has an estimated value of €400,000 (about £346,000) and interested parties have until 1 October to bid. The notice goes on to say that the study will ‘aim at exploring how to collect and link information available from various sources on asset ownership (e.g. land registries, company registers, trusts and foundations registers, central depositories of securities ownership, etc.) and analyse the design, scope, and challenges for such an [EU] asset registry. The possibility to include in the registry data related to the ownership of other assets such as cryptocurrencies, works of art, real estate and gold shall also be considered.’

FURTHER READING

‘Lithuania opens public-private anti-money laundering centre’ – our news story (3 June 2021) on a Centre of Excellence in Anti-Money Laundering (AML) being set up by Lithuania’s Ministry of Finance, Lietuvos Bankas (central bank) and eight commercial banks as they look to boost co-ordination between state authorities and the private sector in tackling illegal financial activity

European Commission scopes launch of anti-money laundering authority’ – our news story (11 December 2019) that the Commission was to undertake a ‘thorough assessment’ of the EU’s AML strategy after finance ministers from six EU member states called for the creation of a new central supervisory body

‘EC financial crime chief calls for stronger international collaboration’ – our news story (3 October 2019) reporting on comments from Raluca Pruna (at the European Banking Summit) that governments should work more closely together to address financial crime, foster collaboration between national units and align regulatory frameworks