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Stricter regulation of virtual assets and specialised gatekeeper professions should be priorities in combating money laundering

Governments need to step up their efforts and coor­di­na­tion to com­bat mon­ey laun­der­ing and ter­ror­ist financ­ing by adopt­ing stricter reg­u­la­tion and super­vi­sion of the vir­tu­al assets sec­tor and the spe­cialised “gate­keep­er” pro­fes­sions, such as lawyers, accoun­tants and oth­er ser­vices providers who often help laun­der­ers, accord­ing to the Council of Europe’s anti-mon­ey laun­der­ing and counter-ter­ror­ist financ­ing body MONEYVAL.

In its annu­al report for 2021, released today, MONEYVAL exam­ines the action required to improve the com­bat against mon­ey laun­der­ing. It also assess­es com­pli­ance with inter­na­tion­al stan­dards and devel­op­ments in the legal and insti­tu­tion­al frame­works to pre­vent mon­ey laun­der­ing and ter­ror­ist financ­ing in the 34 juris­dic­tions*** that were sub­ject to its mon­i­tor­ing as at 31 December 2021.

Elżbieta Frankow-Jaśkiewicz, Chair of MONEVYAL, said: “The Pandora papers scan­dal in 2021 demon­strates the grow­ing scale of the mon­ey laun­der­ing threat and the per­sis­tence of laun­der­ers in abus­ing the inter­na­tion­al finan­cial sys­tem to hide their illic­it pro­ceeds. We are fac­ing a com­bi­na­tion of well-known mon­ey laun­der­ing meth­ods and new­er trends requir­ing robust action and coor­di­na­tion from gov­ern­ments in Europe and around the world”.

The ‘Pandora Papers‘ showed that spe­cialised pro­fes­sion­als can be com­plic­it in the large-scale transna­tion­al mon­ey laun­der­ing schemes involv­ing cor­rupt politi­cians and high-net-worth indi­vid­u­als seek­ing to evade tax­es, often using off­shore juris­dic­tions and com­plex cor­po­rate struc­tures. In recent years MONEYVAL has worked with the Financial Action Task Force (FATF) to enhance their reg­u­la­to­ry regime, which result­ed in 2021 in the mod­i­fi­ca­tion of the inter­na­tion­al FATF stan­dard to reg­u­late transna­tion­al oper­a­tions of “gate­keep­ers” and improve their glob­al compliance.

The emerg­ing vir­tu­al assets sec­tor and the increas­ing use of cryp­tocur­ren­cies are becom­ing a sig­nif­i­cant chal­lenge to com­bat mon­ey laun­der­ing since the tra­di­tion­al forms of con­trol that banks and insti­tu­tions have on finan­cial flows and ser­vices can­not be used and finan­cial prod­ucts are made avail­able through the inter­net from any­where in the world.

In its report, MONEYVAL con­cludes that its mem­ber states and juris­dic­tions con­tin­ue, on aver­age, to demon­strate a mod­er­ate lev­el of effec­tive­ness com­bat­ing mon­ey laun­der­ing and the financ­ing of ter­ror­ism. The medi­an lev­el of com­pli­ance with FATF stan­dards is below the sat­is­fac­to­ry thresh­old in the super­vi­sion of the finan­cial sec­tor, pri­vate sec­tor com­pli­ance, trans­paren­cy of legal per­sons, con­vic­tions for mon­ey laun­der­ing offences, con­fis­ca­tions of assets, finan­cial sanc­tions for ter­ror­ism and pro­lif­er­a­tion of weapons of mass destruction.

MONEYVAL expects to com­plete its 5th round of eval­u­a­tions in 2024. By the end of 2021, 18 of the 22 juris­dic­tions eval­u­at­ed by MONEYVAL in the 5th round of mutu­al eval­u­a­tions were sub­ject to its enhanced fol­low-up pro­ce­dure for their insuf­fi­cient lev­el of com­pli­ance with AML/CFT stan­dards: Albania, Andorra, Croatia, Cyprus, the Czech Republic, Georgia, Gibraltar, Hungary, Latvia, Lithuania, Malta, Poland, Republic of Moldova, Serbia, Slovakia, Slovenia, the UK Crown Dependency of the Isle of Man and Ukraine. Armenia, the Holy See, San Marino and Israel (the lat­ter was joint­ly eval­u­at­ed by the FATF and MONEYVAL) are sub­ject to MONEYVAL’s reg­u­lar fol­low-up procedure.

***Due to its exclu­sion from the Council of Europe on 16 March 2022, the Russian Federation is no longer a mem­ber of MONEYVAL. MONEYVAL now eval­u­ates 33 coun­tries and jurisdictions.***

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