The Dutch banking organisation (Nederlandse Vereniging van Banken, NVB) on 21 November 2019 has presented (press release in Dutch) a proposal for improving European anti-money laundering (AML) legislation. This proposal consists of a position paper, The case for further reform of the EU’s AML Framework, and an action plan, Financial crime cross border.
I am not impressed by the proposal, for one thing because they do not limit te proposal to the banking sector. Further NVB is not realistic on the practical possibilities of banks (and other obliged entities) to fulfill the demands of AML rules.
There is a lot to be said on the proposal, for instance:
- The NVB promotes a harmonized EU AML-regulation, instead of the current national AML-rules. This might be good for banks; they already have a lot of European legislation to observe. It is not a good idea for the other obliged entities under AML-legislation. Currently one of the weaknesses of AML-legislation is that the system that originally was developed for banks was transplanted to a great variety of company types. The one-size-fits-all method of AML-legislation does not work.
- Actually it is time to assess the concept of AML thoroughly and to differentiate better between the different types of companies that have to observe these rules. Main problems: too many changes, to complicated rules (especially for smaller companies) and rules that are not adequate for specific company types.
- The NVB seems to think the register of beneficial owners (‘UBO-register’) is a useful tool. In reality it is completely useless, for several reasons. NVB asks to “ensure harmonised full access to data by obliged entities throughout the EU“: this practically means the UBO-register is public, with great dangers for the beneficial owners. The NVB does not seem to know that many obliged entities are unregulated companies.
- It is remarkable that NVB proposes a European AML-supervisor for “the EU’s most risky obliged entities“. Who are that? Why are they not only speaking about themselves?
- It is in fashion to urge for more sharing of information, between the banks but also between banks and governmental authorities. NVB writes that EU law should “explicitly allow certain forms of cooperation between gatekeepers“. It is peculiar that they write this in general form. Are there barriers for banks to cooperate? I have the impression this is not the case, banks are doing that already (like in the Netherlands iDEAL). Points of attention are careful data collection, data protection and observing competion law. It looks as if NVB thinks that all ‘obliged entities’ or ‘gatekeepers’ are the same. That is not the case. It is not a good idea if banks are going to share their information with all other obliged entities (including car sellers and casinos).
- The NVB seems to think that all EU countries are equal in the quality of the AML-systems and their organisation of AML. This is not the case and rule of law is weak in some countries.
Currently the clients of banks are increasingly having problems with the KYC-activities of banks. Often the KYC-employees lack knowledge of the customers and their activities and sometimes make grave mistakes. Already now a lot of harm is being done to customers that are annoyed by banks.
It is important that the system of AML-legislation is lifted up to a higher level and is adequately adjusted to the information position and the intellectual and practical possibilities of the obliged entities.
NVB in its proposal has taken the wrong direction. Tom Keatinge’s criticism in his recent article on FATF on overburdening countries and treating them as peers (when they are not) also applies to the obliged entities.
AML has to become realistic and reasonable.