On May 7, 2020, the European Commission issued an Action Plan to provide concrete measures over the next 12 months. It will strengthen its enforcement, supervision and coordination of the EU’s rules to combat money laundering and terrorist financing.
The Commission issued what it characterized as a more transparent, refined methodology to identify high-risk third countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CFT) regimes. The methodology is meant to enhance its engagement with third countries and bring more cooperation with the Financial Action Task Force (FATF).
The Commission also issued a new list of third countries with strategic deficiencies in their AML/CFT frameworks.
The Action Plan has six pillars. Each is designed to improve the EU’s overall effort to combat ML and TF, and to strengthen the EU’s global role in this area. The six pillars are intended to better harmonize and make the EU regime more effective.
Six Pillars of the Action Plan
The six pillars are as follows:
- Effective application of EU rules: The Commission will continue to monitor closely the implementation of EU rules by EU Members to ensure that national rules are consistent with the highest possible standards. The plan encourages the European Banking Authority (EBA) to use its new powers to combat money laundering and terrorist financing. The timeline is ongoing.
- A single EU rulebook: The integration of the EU’s internal market and financial system should be matched by a single set of AML/CFT rules. Diverging interpretations of the rules cause loopholes in its systems. Criminals can exploit the loopholes. The Commission will propose rules in Q1 of 2021.
- EU-level supervision: In the first quarter of 2021, the Commission will propose to establish an EU-level supervisor. At present, each EU Member individually supervises EU AML/CFT rules. The Commission will propose rules in Q1 of 2021.
- A coordination and support mechanism for EU Member Financial Intelligence Units (FIUs): FIUs in EU Members play a critical role in identifying transactions and activities that could be linked to criminal activities. The Commission will propose rules in Q1 of 2021.
- Enforcing EU-level criminal law provisions and information exchange: Rapid and trustworthy information-exchange is crucial. EU rules facilitate cooperation and exchanges of information between law enforcement authorities. The future Financial Crime Center of Europol will promote combating money laundering and terrorist financing. The Commission will issue guidance on the role of public-private partnerships to clarify and enhance data sharing. The Commission will issue guidance in Q1 of 2021.
- The EU’s global role: The EU is determined to increase its efforts to that it is a single global actor in the AML/CFT area. The EU will adjust its approach to third countries with deficiencies in their regime concerning AML/CFT. Pending the application of its new methodology issued with its Action Plan, the updated EU list ensures better alignment with the latest FATF list.
The Commission initiated a public consultation when it issued its Action Plan. Authorities, stakeholders and citizens have until July 29 to provide their feedback.
The EU Anti-Money Laundering Directive requires the Commission to identify high-risk third countries with strategic deficiencies in their regime regarding AML/CFT. The Commission issued a new list, The list is supposed to be better aligned with the lists published by the FATF.
Countries which have been listed are: The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.
Countries which have been delisted are: Bosnia-Herzegovina, Ethiopia, Guyana, Lao People’s Democratic Republic, Sri Lanka and Tunisia.
The Commission’s Anti-Money Laundering Package of July 2019 underscored various weaknesses in the EU AML/CFT framework. The Package motivated the Action Plan.
The EU announcement underscores a major problem with blacklists. On subjects such as AML/CFT there are multiple sources of listing. They include informal groups, such as FATF, and even individual countries. In addition, significant overlap exists in the subject matter of the OECD’s Global Forum on Tax Transparency and Exchange of Tax Information. The OECD, FATF, the EU, the World Bank Group, and governments make small jurisdictions spend a disproportionate amount of time meeting their engagement and evaluation schemes.
Given the scandals and/other problems that have occurred recently with Danske Bank, Swedbank, Banca Privata d’Andorra, FBME in in Cyprus, conducting supervision at an EU-level makes sense.
The next (May) issue of the IELR will have a more comprehensive discussion of the Action Plan.