EU finance ministers are expected to call for an EU authority against money laundering and urge the bloc to harmonise rules and close the door to illicit money, according to draft conclusions seen by EURACTIV.
The EU continues to have an outstanding problem with money laundering despite five reviews of its legal framework. The 2018 Danske Bank scandal exposed the regulatory flaws that allowed €200 billion to be brought into the internal market from dubious origins.
Member states are now ready to tackle the two main problems of the current system: the loopholes in the EU legislation due to diverging national implementation and the lack of a central supervisory body.
The latest draft conclusions on anti-money laundering and countering the financing of terrorism, still subject to changes, are expected to be adopted during the next EU finance ministers meeting on 4 November.
Given the rise of COVID-19 cases across Europe, the Ecofin Council has been turned into an informal video conference. Ministers are expected to give their political blessing, and the document will be adopted by written procedure afterwards.
The Commission plans to put forward ideas in early 2021 to reinforce the anti-money laundering framework.
The ministers want proposals for a single EU rulebook, to avoid national disparities during the transposition of the EU directives into national laws, and to lay down the structure and tasks of an EU supervisor at the same time, “in order to allow for simultaneous drafting due to the interdependence of these topics,” the draft conclusions read.
The primary responsibility of the EU supervisor will be a limited number of entities chosen according to a risk criteria, but it could also intervene under exceptional situations and take over from national supervisors if they failed to ensure adequate supervision.
The new European body could conduct general inspections, including on-site inspections “jointly with the national supervisor”, as well as issue direct instructions or impose sanctions.
Some of the institutions that would fall under the remit of the EU authority would be credit institutions; payment institutions; exchange offices, E-money. institutions, other financial institutions, virtual asset service providers and custodian wallet providers.
In order to decide whether the supervision is taken at the EU level, the conclusions proposed to look at the risks arising from the customer base, products, delivery channels and geographical exposure of these institutions.
In regard to the single rulebook, the ministers highlighted the importance of having directly applicable regulation to reduce national divergences in the transposition that undermine an effective implementation of the rules.
The areas that should be harmonised under the new regulation are the types of obliged entities under money laundering rules, customer due diligence requirements, provisions on due diligence for domestic and foreign politically exposed persons, record keeping, internal controls.
They also include group-wide compliance, third party reliance and outsourcing provisions, administrative sanctions consistent with sectorial legislation, reporting obligations, provisions on determining beneficial ownership, provisions on cooperation and exchange of information, and responsibilities and powers of supervisory authorities at the national and European level.
The Commission should particularly focus on achieving “uniform and high standard of customer due diligence”, especially for the identification of the customer and the verification of the customer’s identity, the nature and purpose of the business relationship, the verification of the customer ́s beneficial owner and the ongoing monitoring of the business relationship.
“Such provisions are crucial to prevent illegal money from entering the internal market through the weakest link,” the draft conclusions read.
Recent leaks, including “The Cyprus Papers” revealed by Al-Jazeera or the FinCen papers published by Buzzfeed, have revealed how criminals could take advantage of national flaws to operate in the EU market.
[Edited by Zoran Radosavljevic]