Neglecting the dark side of AML/CFT | Anti-Money Laundering Regulation is on its way

The process in the direction of harmonization of European anti-money laundering (AML) legislation is continuing. Read the article on the main results of the Video conference of economics and finance ministers, 4 November 2020. On AML the following:

Anti-money laundering and terrorism financing
Ministers discussed the Council conclusions on anti-money laundering and terrorism financing, which aim to provide the Commission with guidance in advance of its legislative proposals in 2021 on a single rule book, EU-level supervision and a coordination and support mechanism for member states’ financial intelligence units.

During the discussion, ministers expressed broad support for the draft Council conclusions as prepared by Coreper and at expert level.

In the draft conclusions, the Council outlines various areas in which the Commission should consider harmonising the EU rules via a directly applicable regulation. The Council also supports setting up an EU-level supervisor with direct supervisory powers over a selected number of high-risk obliged entities, as well as the authority to take over supervision from a national supervisor in clearly defined and exceptional situations.

Olaf Scholz, Germany’s Federal Minister of Finance and Vice Chancellor

The fight against money laundering and terrorism financing is a top priority for the German presidency. Recent alleged money laundering cases, including in the EU, underline the urgency to act. More harmonised rules and EU-level supervision will allow us to be more effective and to strengthen the EU’s anti-money laundering framework. It is an important sign that we all stand united for tough anti-money laundering measures.
— Olaf Scholz, Germany’s Federal Minister of Finance and Vice Chancellor

Following the video conference, the Council approved the conclusions by written procedure on 5 November 2020.

> Council conclusions on anti-money laundering and countering the financing of terrorism, 5 November 2020
> Commission’s action plan

 

According to the Council conclusions the following areas should be included in the Anti-Money Laundering Regulation:

  • types of obliged entities, including virtual asset service providers;
  • customer due diligence requirements – including adequate remote due diligence solutions as well as electronic identification and verification –;
  • provisions on due diligence for domestic and foreign politically exposed persons;
  • record keeping;
  • internal controls;
  • group-wide compliance;
  • third party reliance and outsourcing provisions consistent with sectorial legislation;
  • reporting obligations, including suspicious transactions reports;
  • provisions on determining beneficial ownership;
  • provisions on cooperation and exchange of information;
  • supervisory measures and sanctions, while respecting the specificities of national systems and enforcement set-ups;
  • the respective responsibilities, general tasks and supervisory powers of supervisory authorities at European and national level.

The Council proposes a EU AML/CFT supervisor that will start with supervision of the financial sector and will in future also include the non-financial sector, even when that the non-financial sector is composed of a wide range of professions, whose scope, professional legal requirements and licensing criteria are not harmonized [27, 28].

Types of obliged entities
The Council calls on the Commission to review the types of obliged entities paying specific attention to ML/TF risk deriving from entities providing de facto financial services or parts thereof, or services directly related, integrated or built on top of financial services, such as technical financial services and solutions but not having been classified as financial institutions under current legislation [17].

European data hunger 
The Council invites the Commission to ‘widen the scope for the use of data‘. It wants an expansion of information-sharing possibilities within groups of companies as well as between other obliged entities not belonging to the same group or the same sector [20, 40-42].

It shows the dangerous general trend of too high expectations of information-sharing and it reminds of the inaugural lecture on 16 November of Jan-Jaap Oerlemans, “Limiting data hunger” (Grenzen stellen aan datahonger).

The dark side of AML/CFT legislation
The Council does not pay any attention to the negative effects of current AML/CFT-legislation, caused e.g. by de-risking and by improper sanctions (example). Organisations and individuals are harmed by exclusion by AML/CFT-obliged entities and by the bureaucracy the legislation is causing.

The European Commission and the Council neglect the dark side of AML/CFT legislation and the danger of violation of civil rights, like data protection rights. EDPS reminded the European institutions recently: Data Protection requirements must go hand in hand with the prevention of money laundering and terrorism financing.

Is still a disaster necessary before Europe starts to look at the dark site of AML/CFT legislation?

Over Ellen Timmer, advocaat ondernemingsrecht @Pellicaan

Verbonden aan Pellicaan Advocaten, http://www.pellicaan.nl/, kantoor Rotterdam, telefoon 088-6272287, fax 088-6272280, e-mail ellen.timmer@pellicaan.nl ||| Weblogs: algemeen: https://ellentimmer.com/ || modernisering ondernemingsrecht: http://flexbv.wordpress.com/ ||| Motto: goede bedoelingen rechtvaardigen geen slechte regels
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2 reacties op Neglecting the dark side of AML/CFT | Anti-Money Laundering Regulation is on its way

  1. Anonymous zegt:

    Completely agree. After the war on drugs, the war on terror, the war on money laundering is the next ghost-like threat that will be targeted with reckless abandon. It’s a big racket, that will only line the pockets of data brokers, software companies and those in the revolving door.

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