EU ‘dirty money’ action plan faces resistance, criticism

The European Commission wants to cre­ate a cen­tral author­i­ty to tack­le mon­ey laun­der­ing, but some EU mem­bers are rebelling against the plan.

Douglas Dalby, Icij.Org, May 22, 2020,

The European Commission is con­sid­er­ing estab­lish­ing a cen­tral author­i­ty to enforce a uni­fied approach among mem­ber states to tack­le mon­ey laun­der­ing and ter­ror­ist financing.

At the release of a six-point action plan ear­li­er this month, exec­u­tive vice-pres­i­dent Valdis Dombrovskis detailed a tight, 12-month time­frame for its implementation.

We need to put an end to dirty mon­ey infil­trat­ing our finan­cial sys­tem,“ he said.

Under the plan, Europe would also align itself more close­ly to the cri­te­ria used by the Financial Action Task Force (FATF), a glob­al, inter-gov­ern­men­tal watch­dog, to assess gov­er­nance in coun­tries out­side of the bloc.

The Commission has set a July 29 dead­line for feed­back from inter­est­ed par­ties, includ­ing cit­i­zens. Reuters has report­ed that the plan has faced resis­tance already from three mem­ber states embroiled in mon­ey laun­der­ing scan­dals: Estonia, Hungary and the Czech Republic.

Malta, anoth­er mem­ber state under fire for lax finan­cial reg­u­la­tion, also opposed the new mea­sures, accord­ing to sources at the closed video con­fer­ence. Maltese offi­cials sub­se­quent­ly denied this.

Advocacy group Transparency International has crit­i­cized the plan for dif­fer­ent rea­sons, describ­ing it as “high on gen­er­al­i­ties but low on specifics.”

The organization’s senior pol­i­cy offi­cer, Laure Brillaud, said recent inves­ti­ga­tions reveal­ing the extent of mon­ey laun­der­ing in the European bank­ing sec­tor required more spe­cif­ic measures.

Urgent and effec­tive action is more impor­tant now than ever, with the COVID-19 pan­dem­ic lead­ing to a marked increase in crim­i­nal activ­i­ty involv­ing cross-bor­der finan­cial flows,“ she said.

Europe has passed sev­er­al pieces of anti-mon­ey laun­der­ing leg­is­la­tion over the past three decades but indi­vid­ual mem­ber states have been slow to enact it. Differences in inter­pre­ta­tion and imple­men­ta­tion in mem­ber states have also cre­at­ed loopholes.

This has allowed sig­nif­i­cant vari­a­tions to occur in the way mem­ber states deal with one anoth­er and with exter­nal juris­dic­tions when it comes to finan­cial flows.

Luanda Leaks, the ICIJ-led inves­ti­ga­tion into the finan­cial affairs of Angolan bil­lion­aire Isabel dos Santos and her close asso­ciates, demon­strat­ed the key role played by Portuguese banks in facil­i­tat­ing busi­ness expan­sion and the pur­chase of lux­u­ry prop­er­ties, super-yachts, jew­el­ry and exten­sive travel.

Portugal’s Central Bank gave dos Santos a clean finan­cial bill of health, despite her sta­tus as a polit­i­cal­ly exposed per­son (PEP) and sev­er­al com­plaints by Portuguese law­mak­er, Ana Gomes, in the European Parliament.

This allowed dos Santos to bor­row from European banks and even to con­trol her own bank in Portugal, which Angolan pros­e­cu­tors allege were used as deals between her shared inter­ests and state owned com­pa­nies and harmed the state to the tune of $1 bil­lion. She denies any wrongdoing.

Citing “recent mon­ey laun­der­ing scan­dals,” in February the Commission demand­ed that Portugal enact Euro-wide mon­ey laun­der­ing leg­is­la­tion, which it had failed to do by the Jan. 10 dead­line. The country’s law­mak­ers com­plied short­ly afterwards.

The Commission also pub­lished its lat­est list of so-called “non-co-oper­a­tive tax juris­dic­tions,”  adding the Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.

Conversely, “fol­low­ing progress made,” it removed Bosnia and Herzegovina, Ethiopia, Guyana, Laos, Sri Lanka and Tunisia from the list.

A Commission offi­cial said the amend­ments were a direct result of “high-lev­el com­mit­ments” these coun­tries had made with FATF to strength­en their anti mon­ey-laun­der­ing regimes.

The three coun­tries imple­ment­ed a num­ber of reforms based on the action plans  agreed with FATF,” he said.

A new analy­sis by openDemocracy has iden­ti­fied more than 700 U.K. shell com­pa­nies black­list­ed in the Ukraine.

Transparency International said this week that this was “a stark reminder of Britain’s role as a glob­al hub for finan­cial crime.”

FATF chief David Lewis told ICIJ recent­ly that gov­ern­ments were fail­ing to stop orga­nized crim­i­nals and cor­rupt regimes from wash­ing vast sums each year.

Recent laun­der­ing scan­dals have includ­ed: the drain­ing of funds from 1MDB, Malaysia’s gov­ern­ment-run devel­op­ment fund; the wash­ing of Russian crim­i­nal funds through a stock deal­ing scam known as “mir­ror-trad­ing;” and anony­mous shell com­pa­nies push­ing bil­lions of dol­lars in dirty mon­ey through banks in the Baltic region.

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