More time needed for new anti-terrorism financing measures

Michel Sapin and Wolfgang Schäuble [European Council]

The European Commission will outline an action plan to combat terrorism financing on Tuesday (2 February). But legislative proposals will require more work to minimise possible side effects on the financial sector, EU officials told EURACTIV.

Cutting off terrorist groups’ funding is an essential pillar of the strategy championed by the French government in the aftermath of the Paris attacks. Accordingly, French Minister of Finance, Michel Sapin, urged his EU counterparts to bolster the legal framework to drain the terrorists’ coffers during the Ecofin Councils of EU finance ministers in November and December.

The European Commission promised to deliver “detailed suggestions” early this year, Vice-President for the Euro, Valdis Dombrovskis, said in December. Addressing terrorism financing is an “absolute priority”, he said.

But officials explained that the specific measures to better control the use of prepaid cards or virtual currencies, two of the main areas of concern, would take some time. Pre-paid cards were used to prepare the terrorist attacks in Paris in 13 November.

EU sources pointed out that these instruments play an important role as financial tools either for investors or for social groups with limited access to bank services or credit card. Therefore, any decision that could have significant side effects on the financial sector needs to be assessed in more detail.

>>Read: EU chills French push for new rules against terrorism financing

The executive will postpone for later this year new requirements to identify the buyers of prepaid cards or to limit the amounts. They will be part of a revised Anti-Money Laundering Directive.

France also aimed at addressing the trafficking of cultural goods, an important source of funding for Islamic State. The terrorist group has been profiting from valuable looted antiquities coming from Syria and Iraq, and some pieces have been found in countries like Bulgaria.

However, new measures on this field would come only next year, as the European Commission is consulting with the External Action Service and third countries to combat the illicit trafficking of antiquities.

The Commission’s action plan will also foresee new measures to improve the process of freezing assets of individuals involved in terrorist acts and to control suspicious cash flows.

>>Read: France targets ‘low-cost’ terror financing at UN

The EU leaders reacted to the brutal attack in Paris by calling on the executive and the Council to rapidly take “further action against terrorist finance”, in particular as regards to asset freezing “and other restrictive measures”.

But the capitals were slow to react. Dutch Finance Minister, Jeroen Dijsselbloem, who is chairing the Ecofin Council this semester, pressed the rest of the capitals during the EU Finance Ministers’ meeting on 15 January to submit their ideas within days on what areas should be further regulated to combat terrorism financing.

>>Read: Paris terrorist attacks

The European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union sent a questionnaire to the national governments before the Christmas break in order to sound out areas where there is most appetite for regulation. 

To date, the Commission applied anti-money-laundering techniques to track down terrorist finances. They are also looking at imposing greater transparency on financial transactions and legal entities in order to make it harder for terrorists to raise money.

The executive put forward initiatives aimed at preventing such financing in three ways: improved cooperation on the exchange of information, enhanced traceability of financial transactions, and greater transparency of legal entities.

  • 2 February: European Commission unveils an action plan to tackle terrorism financing.
  • 2016: New proposals on virtual currencies and prepaid cards.
  • 2017: The executive is expected to put forward measures to address the illegal trafficking of cultural goods.

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