Towards better implementation of the EU’s anti-money laundering and countering the financing of terrorism framework

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Towards better implementation of the EU’s anti-money laundering and countering the financing of terrorism framework





I.Introduction

Risks of money laundering and the financing of terrorism remain a major concern for the integrity of Union's financial system and the security of its citizens. According to Europol, as much as 0.71.28% of the European Union’s (EU) annual Gross Domestic Product is ‘detected as being involved in suspect financial activity’. The fight against money laundering and terrorism financing is therefore an important priority for the Union and part of delivering the Security Union.

Over time, the Union has developed a solid regulatory framework for preventing money laundering and terrorist financing, in line with international standards adopted by the Financial Action Task Force. The regulatory framework needs to keep pace with the increasing integration of financial flows in the internal market, the evolving trends, technological developments and the ingenuity of criminals to exploit any gaps or loopholes in the system.

This Communication summarises a set of reports relating to the Union’s legal framework for preventing money laundering and terrorist financing and its implementation. It is accompanied by the Commission’s biennial supranational risk assessment of money laundering and terrorist financing risks facing the Union’s internal market, as well as an assessment of recent alleged money laundering cases involving EU credit institutions, and Reports on cooperation between Financial Intelligence Units and on the interconnection of national centralised automated mechanisms of the Member States on bank accounts.

The findings set out in this Communication and in the reports adopted today are intended to inform the debate about how the anti-money laundering/countering the financing of terrorism framework could be further improved and to provide the basis for further discussions with relevant stakeholders.

II.Context: Development of the Legal Framework to date

The Union has considerably strengthened its legal framework on preventing money laundering and terrorist financing in recent years. The 4th Anti-money Laundering Directive was adopted in May 2015 and had to be transposed by Member States by June 2017.

As part of the Action Plan for strengthening the fight against terrorist financing adopted in February 2016 , and in response to the Panama Papers revelations of April 2016, the 5th Anti-money Laundering Directive was adopted in April 2018 and Member States are to transpose it into national law by January 2020. This revision increases transparency of beneficial ownership information, gives Financial Intelligence Units wider access to information, enhances the cooperation between supervisors, and regulates virtual currencies and pre-paid cards to better prevent terrorist financing.

As regards the financial sector, new rules on information sharing and dissemination should significantly improve cooperation among prudential and anti-money laundering/countering the financing of terrorism supervisors , and strengthen the European Banking Authority’s role in ensuring compliance with Union rules and enhancing cooperation on issues related to anti-money laundering and combating of terrorism financing.

Moreover, Directive 2018/1673 on combating money laundering by criminal law complements this preventive framework by harmonising the definition of the criminal offence of money laundering and related sanctions. The Directive entered into force in December 2018 and Member States have until December 2020 to transpose it.

Directive 2019/1153 facilitating the the use of financial and other information further strengthens the criminal law legal framework by speeding up the access to financial information for law enforcement authorities and by enhancing the exchange of financial information between law enforcement authorities and Financial Intelligence Units. The Directive will enter into force in August 2019 and Member States will have until August 2021 to transpose it.

III.Money Laundering and Terrorism Financing Risks and Areas for Improvement

Despite the recent enhancement of the legislative framework, challenges remain. The Commission publishes today a series of reports that assess risks and identify areas for improvement.

a)Assessment of risks affecting the Union

Firstly, the Commission presents a supranational risk assessment of the money laundering and terrorist financing risks affecting the Union internal market and relating to cross border activities, as required by Article 6 of the 4th Anti-Money Laundering Directive. It updates the first supranational risk assessment adopted in 2017 and follows up on recommendations made to actors involved in the fight against money laundering and terrorist financing.

The report shows that most recommendations of the first supranational risk assessment have been implemented by the various actors. At the same time, some horizontal vulnerabilities remain, particularly on anonymous products, on identification of beneficial owners and on new unregulated products like virtual assets. Some of them are expected to be addressed through the upcoming transposition of the 5th Anti-Money Laundering Directive, for example through the inclusion of virtual currency providers in the scope of the Directive and the expansion and wider accessibility of beneficial ownership registers. Other horizontal vulnerabilities relating to Financial Intelligence Units and financial supervision have been identified in the Commission’s report on Financial Intelligence Units and the Commission’s report on the assessment of recent alleged anti-money laundering cases involving EU credit institutions. The report makes recommendations for each sector and the compliance with these recommendations will be followed up in the next supranational risk assessment to be issued within two years.

b)Areas for improvement of the EU anti-money laundering / terrorism financing framework