EU gauges stronger rules to fight illicit funds, strengthen AML compliance, oversight of member-state regulators with new pan-bloc body as they tweak fincrime, tax blacklists
The European Union is considering stronger rules to counter the flow of dirty money into the region’s banks and other economic sectors in response to embarrassing and still-rumbling illicit funds scandals, along with updates to blacklists designating regional fincrime and tax scofflaws, EU officials said on Thursday.
Following a spat of money-laundering scandals at several lenders that highlighted weak oversight by national authorities, the EU is also considering setting up a new agency or beefing up existing EU-wide agencies.
In tandem, EU officials are also working on re-introducing a controversial AML blacklist of “high-risk third countries” that caused a high-profile row with the United States – with the result being that top U.S. Treasury officials formally chastised the list and urged banks not to comply.
Updated EU policy listing toward ‘high-risk third countries’
Ministers exchanged views on the main elements of the Commission’s revised methodology for preparing a list of “high-risk third countries” in the area of money laundering and terrorist financing, an initiative dubbed by many the EU AML blacklist.
In the last go-around, the U.S. Treasury issued a public chastising of the EU list, on both its conclusions and methodologies, a rare divergent diatribe from longtime allies in the global fight against financial crime. The EU is hoping for a different outcome this time.
Once the methodology is settled, the Commission will put forward a new draft list of countries in the form of a delegated act, EU officials said.
The 5th directive on anti-money laundering and terrorist financing, adopted in May 2018, sets out an obligation to identify third country jurisdictions which have strategic deficiencies in their anti-money laundering and terrorist financing regimes that pose significant threats to the financial system of the EU.
To read more on the updated EU AML blacklist methodology, click here.
Much of the hasty and fast-tracked changes to bolster AML across the EU comes as a reaction to the Danske Bank money laundering scandal, which saw some $230 billion in suspect Russian funds move through the operation’s Estonian branch.
Last year, the Estonian branch of Danske Bank emerged as the epicenter of the largest money-laundering scandal in the EU.
Two Maltese banks have stopped operations since last year because of money-laundering allegations while several top leaders at Danske and other banks like Swedbank have seen massive executive turnover while other EU institutions, like Deutsche, face a bevy of probes around what they saw coming from Danske and what they reported to authorities.
New rules under consideration could increase controls over sectors where risks of money laundering are high, such as financial services, gaming and real estate, Finance Commissioner Valdis Dombrovski.
One official said stricter rules could also hit intermediaries, like lawyers or tax advisers. The EU has already changed its anti-money laundering rules twice over the past five years to keep up with emerging threats and close loopholes.
As part of the overhaul, many ministers supported the creation of a new agency at EU level that would take over supervision powers from national authorities, officials said.
“We need to be ready to discuss some forms of EU supervisory body. It should have an independent structure and decision-making,” Finnish Finance Minister Mika Lintila said at the end of the meeting.
The European Central Bank and the EU parliament have called for an EU agency against money laundering, which they believe could better counter the flow of illicit money, estimated by the United Nations to amount to around $2 trillion a year globally.
EU removes UAE, Switzerland from tax haven lists
The European Union has removed the United Arab Emirates, Switzerland and several other countries from its list of countries that are susceptible to tax evasion, citing recent legal developments, according to the WSJ.
The countries have implemented reforms aimed at promoting transparency and preventing tax fraud, the Economic and Financial Affairs Council said in a statement.
The council removed the UAE and the Marshall Islands from its list of “noncooperative jurisdictions,” or countries that have not sufficiently responded to the EU’s concerns about tax fraud and avoidance. The Marshall Islands will remain on a list of countries with pending commitments to fulfill, the council said.
For a list of countries that remain on the list, click here.
Albania, Costa Rica, Mauritius, Serbia and Switzerland have changed their tax laws in ways that promote good tax governance principles, the council said, (via Reuters).
To read the full report on the EU AML update, click here. To read the EU update to its tax blacklist, click here.