The European Parliament adopted yesterday (11 March) an overhaul of EU anti-money laundering rules which includes the introduction of publicly accessible registers for companies and trust owners.
Estimates about the magnitude of money laundering are obviously patchy, but figures converge on a range between 3% and 5% of the world's Gross Domestic Product.
With tighter public budgets and efforts to counter terrorism funding, EU lawmakers have moved the anti-laundering file up their agenda. At the beginning of last year, the European Commission presented a proposal to update and toughen existing rules.
Those were approved by an overwhelming majority of MEPs, who beefed it up with a controversial amendment which introduces public registers for all companies’ owners.
The European Parliament backed up the proposal with 643 favourable votes, while 30 MEPs voted against, and 12 abstained. Member states will debate the Parliament’s text after the May European elections.
'Sunshine is the best disinfectant'
"The public registers will make life more difficult for criminals trying to hide their money," said Judith Sargentini, one of the MEPs responsible for steering the law through Parliament.
In principle, everybody may be free to access the central registers set up in each member state.
By increasing transparency, the new rules are expected to prevent crimes. “Sunshine is the best disinfectant,” said Timothy Kirkhope, of the European Conservatives and Reformists group, speaking during the plenary debate preceding the vote.
The supporters of the proposal believe that more transparency can deter criminals and terrorists from setting up shell companies with the sole purpose of turning illegal money in legitimate funds.
It can also increase the monitoring of dodgy companies, as non-governmental organisations, or the press, may provide informal support to law enforcement authorities in chasing wrong-doers.
The European Commission welcomed the swift adoption of its proposal by the Parliament, but warned against the risks to privacy and data protection which may arise from the public registers proposed by MEPs.
“It is important to ensure adequate guarantees that information is reliable and up-to-date. And we also need to ensure the proper respect of data protection laws,” commented Tonio Borg, the commissioner in charge of consumer protection during the plenary debate.
In past statements, the President of the Eurogroup, Jeroem Dijsselbloem, also said that public registers may pose problems of data protection and privacy. Many member states are likely to echo his concerns.
But the Parliament says those concerns can be addressed. The registers “would be publicly available following prior identification of the person wishing to access the information,” it says in a note.
Moreover, MEPs “inserted several provisions to protect data privacy and to ensure that only the minimum information necessary is put in the register,” the note adds.
A gamble on gambling?
The new rules would increase requirements for banks, financial institutions, auditors, lawyers, accountants, tax advisors and real estate agents, among others, “to be more vigilant about suspicious transactions made by their clients.”
Gambling services are also included in the scope of the revised directive, as they may be used for money laundering purposes.
Casinos will have to abide by similar requirements as banks, “but other gambling services posing a low risk may be excluded by member states”, reads a Parliament note explaining the derogation offered by MEPs to the gambling industry, after heavy lobbying.
But “the Commission prefers not to introduce this derogation, as it may be interpreted too widely and be misused”, said commissioner Borg.
“If exemptions are to be granted, they will need to be risk-based and supported by clear evidence,” said Maarten Haijer, secretary general of EGBA, the association which gathers top European betting and gaming operators.
-- European Parliament --
"For years, criminals in Europe have used the anonymity of offshore companies and accounts to obscure their financial dealings. Creating an EU-wide register of beneficial ownership will help to lift the veil of secrecy of offshore accounts and greatly aid the fight against money laundering and blatant tax evasion", highlighted the European Parliament Rapporteur on this issue Krišj?nis Kari?š (European People’s Party - EPP).
"This text, as adopted by the Parliament, will help to prevent criminals from hiding illicit money in obscure corporate structures by shining a light on the beneficial ownership behind them. Transparency of ownership is of the utmost importance,” said MEP Emine Bozkurt (S&D).
"Nobody doubts that proceeds from financial activities are a major problem," said MEP Kyriacos Triantaphyllides (GUE/NGL). "Controlling information that a company transfers is crucial when it comes to detection and location of criminal activities,” he added.
-- Business groups --
Ron Goudsmit, Chairman of the European Casino Association (ECA), explained that the broadened scope of the directive, to include also gambling services, “will help to ensure that all forms of fraud and money laundering through online gambling or match-fixing are prevented, and will create a level playing field between all gaming operators as well as lead to better consumer protection in the European Union”.
Nevertheless, ECA complains for the €2000 ceiling for single transactions which the directive introduces to trigger due diligence by casinos. ECA considers it too low.
European Lotteries “takes note of the fact that the European Parliament supports the possibility for Member States to exempt certain forms of gambling, following a risk assessment. However, EL considers that the provision whereby Member States need to seek the approval from the European Commission, goes beyond the necessary and sufficient guarantees of control of national implementations already provided in the Directive and undermines the subsidiarity principle as consistently referred to in the CJEU jurisprudence on gambling,” reads a note of EL.
-- Development NGOs --
“Nothing is done yet. The ball is now in the camp of the European heads of states which are struggling to agree. Although France has already announced its support for such a measure, iother major European countries like the UK and Germany are dragging their feet on a decision for overall transparency of shell-companies and trusts,” said Friederike Röder, director of the ONE France organisation which fights against extreme poverty.
Catherine Olier, Oxfam EU policy advisor, said: “The European Parliament showed today that Europe is fed up with shady, behind-the-door practices which allow billions in tax revenues to slip away from the world’s poorest countries. This transparency is vital in ensuring money is kept in those countries who desperately need it for vital public services such as schools and hospitals”.
“The vote of the Parliament is excellent news for the fight against corruption. It was particularly important that these registers be public so that information is available to all, including developing countries which are widely victim of the illicit capital flow to foreign countries. We are now waiting for the cote in the Council: member states have to support this crucial advancement in the fight against fraud and corruption,” Anne-Sophie Simpere from Oxfam France declared.
The spread of international terrorism over the last 15 years has prompted a global tightening against money laundering activities which are often crucial to provide funding for terrorist activities.
The Financial Action Task Force, an inter-governmental body representing rich nations around the world, adopted in February 2012 new standards against money laundering and terrorism financing.
The new standards have been turned into a legislative proposal by the European Commission in February 2013 and have been debated by EU member states and the European Parliament for most part of 2013.