A seminar hosted by Judge Malcolm Simmons
It is essential that banks and other ‘gatekeepers’ apply measures to prevent money laundering and terrorist financing.
Traceability of financial information has an important deterrent effect. The European Union adopted the first anti-money laundering Directive in 1990 in order to prevent the misuse of the financial system for the purpose of money laundering. It provides that gatekeepers (‘obliged entities’) shall apply customer due diligence requirements when entering into a business relationship (i.e. identify and verify the identity of clients, monitor transactions and report suspicious transactions). This legislation has been constantly revised in order to mitigate risks relating to money laundering and terrorist financing.
In 2015, the EU adopted a modernised regulatory framework encompassing Directive (EU) 2015/849 on preventing the use of the financial system for money laundering or terrorist financing and Regulation (EU) 2015/847 on information on the payer accompanying transfers of funds – makes fund transfers more transparent, thereby helping law enforcement authorities to track down terrorists and criminals.
Both instruments take into account the 2012 Recommendations of the Financial Action Task Force (FATF) (see MEMO/12/246), and go further on a number of issues to promote the highest standards for anti-money laundering and to counter terrorism financing.
The 5th Anti-Money Laundering Directive, which amends the 4th Anti-Money Laundering Directive was published in the Official Journal of the European Union on 19 June 2018. The Member States must transpose this Directive by 10 January 2020.
These amendments introduce substantial improvement to better equip the Union to prevent the financial system from being used for money laundering and for funding terrorist activities.
These amendments will:
- Enhance transparency by setting up publicly available registers for companies, trusts and other legal arrangements;
- enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks;
- limit the anonymity related to virtual currencies and wallet providers, but also for pre-paid cards;
- broaden the criteria for the assessment of high-risk third countries and improve the safeguards for financial transactions to and from such countries;
- set up central bank account registries or retrieval systems in all Member States;
- improve the cooperation and enhance of information between anti-money laundering supervisors between them and between them and prudential supervisors and the European Central Bank.
These amendments introduce substantial improvement to better equip the Union to prevent the financial system from being used for money laundering and for funding terrorist activities.
These amendments will:
- Enhance transparency by setting up publicly available registers for companies, trusts and other legal arrangements;
- enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks;
- limit the anonymity related to virtual currencies and wallet providers, but also for pre-paid cards;
- broaden the criteria for the assessment of high-risk third countries and improve the safeguards for financial transactions to and from such countries;
- set up central bank account registries or retrieval systems in all Member States;
- improve the cooperation and enhance of information between anti-money laundering supervisors between them and between them and prudential supervisors and the European Central Bank.
The Proposal for a Directive amending Directive 2015/849 was presented by the Commission on 5 July 2016 in the context of the implementation of the Action Plan for strengthening the fight against terrorist financing adopted in February 2016 and of the Panama Papers revelations of April 2016.
On 26 June 2017 the Commission published its first Supranational Risk Assessment Report as required by the 4th Anti-money Laundering Directive. The Commission assessed the vulnerability of financial products and services to risks of money laundering and terrorist financing. This risk analysis is conceived as a key tool to identify, analyse and address money laundering and terrorist financing risks in the EU. It aims at providing a comprehensive mapping of risks on all relevant areas, as well as recommendations to Member States, European Supervisory Authorities and obliged entities to mitigate these risks. This risk analysis support Member States and obliged entities when carrying out their respective risk assessments.
The Commission adopted Delegated Regulation (UE) 1675/2016 identifying third countries presenting strategic deficiencies in their regime on anti-money laundering and countering terrorist financing (AML/CFT).
Delegated Regulation (UE) 1675/2016: identifies the following countries as presenting strategic deficiencies in their AML/CFT regime: Afghanistan, Bosnia and Herzegovina, Guyana, Iraq, Lao PDR, Syria, Uganda, Vanuatu, Yemen, Iran, Democratic People’s Republic of Korea.
Terrorists and criminals have demonstrated their ability to transfer funds quickly between different banks, often in different countries, but lack of timely access to financial information means that many investigations come to a dead end. There is therefore a clear need to enhance cooperation between authorities responsible for combating terrorism and serious crime when financial information is a key part of an investigation.
The Commission is proposing to enhance the use of financial information by giving law-enforcement authorities direct access to information about the identity of bank-account holders contained in national centralised registries. In addition, the proposal gives law enforcement the possibility to access certain information from national Financial Intelligence Units (FIUs) – including data on financial transactions – and will also improve the information exchange between FIUs as well as their access to law enforcement information necessary for the performance of their tasks. These measures will speed up criminal investigations and enable authorities to combat cross-border crime more effectively.
The Commission’s services work closely with the European Supervisory Authorities in the implementation of the AML/CFT rules. The joint committee of the European Supervisory Authorities on AML/CFT issues guidelines and opinions to help national competent authorities to understand the regulatory expectations.
The European Commission has adopted on 8 November 2018 an opinion, in exercise of its powers under the EBA Regulation, requiring the Maltese anti-money laundering supervisor (Financial Intelligence Analysis Unit) to continue taking additional measures to fully comply with its obligations under the fourth Anti-Money Laundering Directive.
EU- Wide Cooperation
Expert Group on Money Laundering and Terrorist Financing meets regularly to share views and help the Commission define policy and draft new legislation.
Committee on the Prevention of Money Laundering and Terrorist Financing may also be convened to give its opinion on implementing measures put forward by the Commission.
The European Commission takes part in the informal network of Financial Intelligence Units (the EU FIUs Platform).
International Context
The Commission is a member of the Financial Action Task Force (FATF), the main international body concerned with combating money laundering, the financing of terrorism and other threats to the integrity of the international financial system.
The Commission is an observer in Moneyval – the Council of Europe body assessing compliance with AML/CFT standards.
The Commission is an observer at the Egmont Group of Financial Intelligence Units, that draws upon operational experience to inform policy considerations, and works to improve the understanding of ML/TF risks amongst its stakeholders. It also provides an international platform for the secure exchange of expertise and financial intelligence between FIUs across the globe (including all EU FIUs).
