|The European Commission this week adopted several key proposals to better thwart terror groups by increasing corporate transparency, subjecting virtual currency to anti-money laundering rules, lowering the identity threshold for prepaid cards and increasing international information sharing among financial intelligence units.
The amendments to the country’s Fourth Anti-Money Laundering (AML) directive are the first foray to implement a February Action Plan created to bolster the fight against terrorist financing, boost tax transparency and tackle tax abuse.
The commission’s moves are informed by the terror attacks in Brussels, Belgium and Paris that killed more than 160 people, and the knowledge that these groups have used anonymous prepaid cards in attacks, while in some cases being supported by donors working through anonymous shell companies. The group also specifically cited the Panama Papers as an impetus for change.
As part of the initiative, the time frame for country transposition of the Fourth Directive, itself finalized in May 2015, has been shortened from June 2017 to the end of this year. The commission is also coming out with a list of risky “third countries” that will require banks to give these regions more scrutiny for ties to financial crime.
The proposals “will help national authorities to track down people who hide their finances in order to commit crimes such as terrorism,” said First Vice-President Frans Timmermans in a statement.
Member States will “be able to get and share vital information about who really owns companies or trusts, who is dealing in online currencies, and who is using pre-paid cards. Making public the information on who is behind companies and trusts should also be a strong deterrent for potential tax-evaders.”
The commission is encouraging member states to also amend their own laws to be in line with the updated proposals, though they still must be adopted by the European Parliament and Council of Ministers.
One of the major changes that will be celebrated by civil society groups, journalists and the general public is a change to allow planned beneficial ownership registries to be open to the general public, rather than only law enforcement and financial institutions.
Currently, under the fourth directive, the information about the beneficial ownership of companies and trusts is already accessible to “competent authorities and obliged entities” in view of facilitating the performance of their “customer due diligence obligations,” according to the commission, in a related fact sheet.
The commission, however, changed its tune.
The group now proposes to “also provide public access to certain essential beneficial ownership information held in registries regarding companies and trusts that engage in economic activities with a view to gain profit.”
Though, for “privacy reasons, access to information in relation to trusts not engaged in economic activities, such as family trusts set up to finance studies, will “only be granted to persons and organizations that can demonstrate a legitimate interest,” an ill-defined term that will only gain clarity as groups push the boundaries of what information is available to which organizations.
“Today, we are putting forward stricter transparency rules to cut terrorist financing and step up our fight against money laundering and tax avoidance,” said Věra Jourová, the EU’s Commissioner for Justice, Consumers and Gender Equality.
“The update of the Fourth Anti-Money Laundering Directive will prevent any loopholes in Europe for terrorists, criminals or anyone trying to play with taxation rules to finance their activities. Better cooperation to fight these issues will make the difference.”
Here is a snapshot of the amendments proposed to the Fourth EU AML Directive, which are specifically crafted to address terrorism, tax dodging and anonymous shell companies:
Countering terrorism financing:
Stricter transparency rules to prevent tax avoidance and money laundering: