On 24 July 2019, the European Commission adopted a Communication and four reports to support European and national authorities in better addressing money laundering and the financing of terrorism.
The information package serves as a basis for future policy making on further strengthening the EU’s anti-money laundering framework. The overarching Communication – “Towards better implementation of the EU’s anti-money laundering and countering the financing of terrorism framework” – that accompanies them, provides an overview of the content of the four reports published by the Commission: the Supranational Risk Assessment (SRA), and reports on assessment of recent high-profile money-laundering cases in the financial sector, on the Financial Intelligence Units (FIUs), and on the interconnection of central bank accounts registers.
The SRA – which the European Commission is required to draw up under the Fourth EU Anti-Money Laundering Directive – identifies the risks of money laundering and terrorism financing as it affects various sectors and financial products. The new SRA is an update of the first version published by the Commission in 2017.
The 2019 SRA identifies a number of new products/services/sectors that may be susceptible to money laundering and terrorism financing, including cash-intensive businesses, virtual currency, crowdfunding and non-profit organisations, but also privately owned automated teller machines, professional football, free ports, and investor citizenship and residence schemes.
The SRA serves as a tool for Member States and helps identify and tackle money laundering and terrorism financing risks by identifying and describing areas requiring attention by analysing risks in both the financial and non-financial sectors and identifying newly emerging risks.
Assessment of recent high-profile money-laundering cases
The report on assessment of the high-profile money-laundering cases in the financial sector in the period from 2012 to 2018 is an analysis of ten recent, widely known money-laundering cases within the EU in which banks have been involved. It aims to provide a picture of the current shortcomings and possible solutions. The analysis shows, among other things, that there are still substantial shortcomings in compliance by various banks with their obligations under the Anti-Money Laundering Directive, regarding, for example, performing risk assessments, investigating clients, and reporting unusual transactions to the FIUs. The analysis also shows that supervisory authorities were not always effective in pre-emptively identifying shortcomings: in a number of cases they intervened only when significant risks had already materialised, or in the face of repeated compliance and governance errors.
The report on the Financial Intelligence Units (FIUs) assessed the framework for cooperation between the FIUs and third countries, as well as obstacles and opportunities to enhance cooperation between the FIUs within the EU. The assessment shows that a number of FIUs do not provide qualitative feedback to entities subject to a reporting obligation with regard to reports by the latter of unusual transactions. This, as well as the lack of models for making a report, hampers the quality of the reports.
It also appears that not all FIUs comply with their obligation to exchange information with other FIUs. The lack of the right IT resources for operation of the FIU networks is also an important factor making it more difficult for information to be shared between FIUs. Finally, the report states that the lack of regulation regarding the exchange of information between FIUs within the EU and FIUs in third countries leads to a non-harmonised approach to such exchange. The solution to these problems, with a view to facilitating cooperation between FIUs, is seen in the development of a new coordination and support mechanism, such as an overarching FIU for the EU.
Interconnection of central bank accounts registers
The report on the interconnection of central bank accounts registers assesses various operational or emerging IT solutions at EU level which may serve as examples for the interconnection of central bank accounts registers. Such interconnection – which is intended to result in a centralised automatic mechanism – is an obligation for EU Member States under the Fifth Anti-Money Laundering Directive. It must enable the timely identification of natural persons or legal entities that hold or control payment accounts and bank accounts with an IBAN identification number, as well as safe deposit boxes that can be held by a credit institution within the national territory. The various national FIUs should have direct, immediate, and unfiltered access to the information held in the centralised mechanism. That information must also be accessible to the competent national authorities for the purpose of fulfilling their obligations under the Anti-Money Laundering Directive. The Member States must also ensure that each FIU is able to provide the information held in the centralised mechanism to other FIUs in a timely manner.
The European Commission states in the report that it will enter into dialogue with stakeholders – such as governments, FIUs, and law enforcement authorities – because interconnection appears to be technically feasible and would speed up access to financial information and facilitate cross-border cooperation.
In the Communication, the European Commission states that the fight against money laundering and terrorism financing is an ongoing task, with a regulatory framework that requires regular updates if it is to keep pace with new developments. Although steps have already been taken, mainly through legislative amendment, to improve the existing framework, there are still major differences in how the framework is actually applied. In an integrated internal market, such divergences or even errors in application of the framework constitute a threat to the integrity of the EU’s financial system, and to the security of the European Union in general. This demands ongoing, determined, rapid, and coherent action on the part of authorities such as the FIUs so as to ensure that anti-money laundering legislation is fully implemented in a coherent and effective manner. The European Commission indicates that it will continue to closely monitor implantation by Member States (or further implementation) of the recommendations in the SRA and the anti-money laundering rules. It is in any case important for Member States to properly implement and apply the strict anti-money laundering rules that exist at EU level in order to prevent criminals from taking advantage of the weak links within the EU and abusing the financial systems.
Finally, the European Commission indicates that further harmonisation of anti-money laundering legislation should be considered, for example by converting the anti-money laundering directive into a regulation, whereby a harmonised and directly applicable framework could perhaps be established for the European Union.
Please do not hesitate to contact us if you would like more information about anti-money laundering regulations at both EU and national level.