The European Commission has submitted its new 2021 legislative package on anti-money laundering (AML) and countering the financing of terrorism (CFT) to the co-legislators and the European Economic and Social Committee. In its opinion, adopted during the December plenary session, the EESC fully supports the proposals, but also stresses the urgency of implementing these measures and suggests key additions.
The creation of the new Anti-Money Laundering Authority (AMLA), which should be operational by 2026, is widely supported by the EESC. The Committee also reiterates its proposal for a European Pact to combat behaviour that damages the ethical and political principles of our democracies and undermines public goods, and suggests the creation of a new civil society advisory body in the field of AML. In addition, the Regulation on crypto-assets needs to be implemented as a matter of urgency. The European Commission should also push for urgent action regarding the delayed and incomplete transposition of the previous AML Directives demonstrated by some Member States, and specific measures should be put in place to monitor shell companies. It also should consider how to extend the measures to money laundering channels outside the financial system. Finally, the EESC firmly believes that it is necessary to draw up a new, realistic, comprehensive list of high-risk third countries.
Rapporteur Javier Doz Orrit said: It is urgent that civil society, European institutions and national governments act together. Estimates put the volume of money laundering in the EU at between 1% and 1.3% of EU27 GDP, in other words between EUR 140 and 208 billion. We have to stop this intolerable immorality, even more in times of pandemic. The EESC agrees with the AML legislative package and proposes further actions.
My hope is that the proposed legislation will soon be implemented in its entirety by all Member States. It is extremely important, for example, that the ultimate owners of companies or NGOs likely to be used in money laundering or terrorist financing operations are known. This should also apply to non-EU entities wanting to do business with European entities, added co-rapporteur Benjamin Rizzo.
AMLA as the core of an integrated EU oversight and intelligence system
The Commission´s legislative package aims to address money laundering and the financing of terrorism in a way and on a scale as yet unseen. Reports by the Commission and the European Court of Auditors, academic studies and now the Pandora Papers and other similar publications highlight the severity of the money laundering phenomenon in the EU. At the core of this new package is the creation of the Anti-Money Laundering Authority (AMLA). AMLA will have direct supervisory powers and greater powers of coordination and cooperation with national authorities, with which it will ensure that EU rules are correctly and consistently applied by the private sector. AMLA is supposed to start its activities in 2024, and direct supervision in 2026.
The EESC firmly supports the creation and design of AMLA. Ideally, this new authority should be fully operational, including supervision, by 2026. More cooperation between the Commission and other institutions is needed whilst AMLA is not yet operational. Effectiveness in the fight against money laundering and related offences also requires a cultural change, and the involvement of organised civil society. This is why the EESC reiterates its proposal for a European Pact, and suggests creating a civil society advisory body within AMLA, to help restore public confidence and inform European citizens about the very negative impact of money-laundering. Effective coordination of AMLA with the European Public Prosecutor's Office (which should be put in place without delay) and Europol (which should be given greater powers and resources), may be the key to the practical success of the legislative package.
The package's content distribution and new crypto regulation
The legislative package is distributed between the first AML-CFT Regulation, covering the supervision of the private sector, and the sixth AML Directive, focusing on the institutional system and its adaptation in each Member State. Among other measures, the first AML-CFT Regulation extends the list of obliged entities to include crypto-asset service providers, crowdfunding platforms and migration operators. The sixth AML Directive clarifies competences, tasks and access to information of Finance Intelligence Units (FIUs) and national supervisors. It also improves the mechanisms for cooperation between them and with other authorities. The provisions of both (the Regulation and the Directive) aim to harmonise national legislation and automate the recording and transmission of information. In the same package, the Commission also proposes a reform of the 2015 Funds Transfer Regulation to cover crypto-assets, their traceability and identification, and their service providers.
The EESC finds this distribution of content to be adequate, as well as the provisions of both the Regulation and the Directive seeking to harmonise national legislation and automate recording and transmission of information. The Regulation on crypto-assets and the crypto-assets market is a step forwards, but should be implemented as a matter of urgency, and does not replace all the instruments needed to protect users from the financial and criminal risks of these financial products.
The urgency of EU27 transposition
There is a general urgency for civil society and national governments to support the adoption and proper implementation of the legislative package. EU institutions should facilitate public-private partnerships in this area. Directive 2018/1673, which establishes a common definition of the offence of money laundering, as well as Directive 2019/1937 on the protection of people who expose economic and political corruption, have yet to be transposed in all Member States. The EESC considers this delay inacceptable and calls on the Commission to push for urgent action. The Commission should also produce a new Directive on a common definition of related offences, in which the corresponding penalties for these offences should fall within certain ranges.
Shell companies, money laundering outside the financial system, and high-risk third countries
The EESC is very concerned about at existence of a huge number of shell companies in the EU, which play a key role in money laundering and tax avoidance. Specific measures should be set up to monitor these companies and the firms that manage them. No company likely to be used in money laundering or terrorist financing operations should be allowed to register in any Member State if the ultimate owners are not known, or are related to such activities.
In addition, the EESC calls on the Commission to consider how to apply the legislative package to money laundering channels outside the financial system. New EU legislation is needed regarding the market in works of art and high-value assets, free ports, customs warehouses and special economic zones, certain commercial or trade transactions, real estate investment, gambling, etc.
Finally, the European Economic and Social Committee considers it necessary to draw up a new, realistic and comprehensive list of high-risk third countries. The Commission should also enact a rule that companies and individuals involved in financial crime or money-laundering should be excluded from public procurement procedures.