“A string of developments across the European Union suggests that the battle against money laundering is far from won.”
In September 2019, Dutch bank ABN AMRO was investigated for money laundering. The same month, German authorities raided Deutsche Bank’s Frankfurt headquarters looking for information related to a money laundering scandal. Also in September, Swedbank agreed to allow Sweden’s Economic Crime Authority to interview a lawyer whom the bank employed to investigate its compliance with anti-money laundering regulations.
In the UK, The Transparency International’s report “At Your Service” painted a fairly alarming picture of the extent to which laundered money has trickled into the UK, concluding, “the UK has a big problem with dirty money.” This led to an increased discussion of anti-money laundering measures in UK news.
The problem:The way that loopholes have been exploited by those looking to launder money in Europe, the damage this does to the reputation of the financial system and the potential effect on EU members’ economies have all been noted by the EU. The EU have been aware of the problem of money laundering and has been taking steps to tackle the problem for a number of years, but now the EU appears to recognise that more action needs to be taken.
The proposal at this stage lacks clarity and we are short of precise details. What is clear however, is the need for something to be done. In the past, the EU has made a number of attempts to tackle money laundering, however the results thus far have been mixed. The Fourth Money Laundering Directive:The Fourth Money Laundering Directive (4MLD) was introduced by the EU as a well-intentioned way to address the problem. Yet, the Justice commissioner openly criticised more than 70% of EU members for failing to meet their obligations. This is perhaps the starkest reminder that Europe has a problem.
In the year following the deadline for implementing 4MLD, only a handful of member states had transposed it into national law. Their slow and unsatisfactory transposition rendered the EU’s attempts to tackle money laundering futile.
The Fifth Money Laundering Directive:Now, we have the Fifth Money Laundering Directive, which is set for implementation by 20 January 2020. Given the above history however, new efforts are less than optimistic.
The EU Commission is aware that its anti-money laundering efforts have fallen short in recent years. In July 2019 it released reports assessing its measures thus far – particularly the Fourth and Fifth MLDs – and examining their shortcomings. Valdis Dombrovskis, VP for the Euro and Social Dialogue, suggested in a statement accompanying reports that the analysis “gives more proof that our strong anti-money laundering rules have not been equally applied in all banks and EU countries”.
The directives have served a purpose and have made respectable attempts to tackle the problem of money laundering. They have also shown that the EU is ready and willing to tackle the problem. But ultimately, they have illustrated the core problem of enlisting a decentralised collection of national authorities to tackle an international issue. While the laundering of money often involves it being moved across borders, tackling financial crime is mostly dealt with by national authorities, which can lead to a lack of cooperation and consistency. “We have stringent anti-money laundering rules at EU level, but we need all Member States to implement these rules on the ground,” added Vera Jourova, Commissioner for Justice, Consumers and Gender Equality. Perhaps, such a widespread problem demands a concerted, coordinated and consistent approach.
Now it appears that the EU is convinced of the need for a central authority to tackle money laundering. A draft document shows that the EU is preparing to tighten its rules and is considering creating one agency to tackle money laundering. And this action cannot come soon enough!
By Amani-Cane Elouazani
Sources:1. Transparency International UK, The cost of secrecy: The role played by companies registered in the UK’s Overseas Territories in money laundering and corruption (December 2018) https:// www.transparency.org.uk/publications/cost-of-secrecy/
2. Transparency International UK, At your service: Investigating how UK businesses and institutions help corrupt individuals and regimes launder their money and reputations (October 2019) https://www.transparency.org.uk/publications/at-your-service/
3. Rahman Ravelli, The Art World and The Fifth Money Laundering Directive (November 2019) https://www.rahmanravelli.co.uk/articles/the-artworld-and-the-fifth-money-laundering-directive/
4. Rahman Ravelli, The EU Comission’s Plans for an Anti-money Laundering Agency (November 2019) https://www.rahmanravelli.co.uk/articles/the-eu-commission-plans-for-an-anti-money-laundering-agency/
5. Jonathan Watson, Corruption: EU revives blacklist proposal to tackle money laundering (October 2019) https://www.ibanet.org/Article/NewDetail.aspx?ArticleUid=02953D00-CDCA-4798-85AE-4A4B4878158C