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The European Commission today unveiled a comprehensive approach to further strengthen the EU’s fight against money laundering and terrorist financing.
The Commission has published an ambitious and multifaceted action plan, which sets out concrete steps that the Commission will take over the next 12 months to better enforce, monitor and coordinate EU rules on combating money laundering and financing the terrorism. The aim of this new comprehensive approach is to close the remaining gaps and eliminate the weak links in the EU rules.
Executive Vice President Valdis Dombrovskis said: “We need to end the dirty money that infiltrates our financial system. Today we are further strengthening our defenses to combat money laundering and terrorist financing, with a comprehensive and far-reaching action plan. There should be no weak links in our rules and their implementation. We are committed to delivering on all of these actions, quickly and consistently, over the next 12 months. We are also strengthening the EU’s global role in terms of shaping international standards to combat money laundering and terrorist financing. “
The Commission has also published today a more transparent and refined methodology for identifying high-risk third countries that have strategic weaknesses in their anti-money laundering and anti-terrorism regimes that pose significant threats to the EU financial system. This will enhance our engagement with third countries and ensure greater cooperation with the Financial Action Task Force (FATF).
Finally, the Commission has also adopted a new list of third countries with strategic weaknesses in their frameworks to combat money laundering and terrorist financing.
Action plan for a comprehensive EU policy on the prevention of money laundering and terrorist financing
Today’s Action Plan is based on six pillars, each of which aims to improve the EU’s overall fight against money laundering and terrorist financing, as well as strengthening the EU’s global role in this area. . When combined, these six pillars will ensure that EU rules are more harmonized and therefore more effective. The rules will be better supervised and there will be better coordination between the authorities of the Member States.
The six pillars are as follows:
Effective application of EU rules: The Commission will continue to closely monitor the application of EU rules by Member States to ensure that national rules conform to the highest possible standards. In parallel, today’s Action Plan encourages the European Banking Authority (EBA) to make full use of its new powers to tackle money laundering and terrorist financing.
A single EU regulation: While current EU rules are far-reaching and effective, Member States tend to apply them in a wide variety of different ways. Divergent interpretations of the rules lead to loopholes in our system, which can be exploited by criminals. To combat this, the Commission will propose a more harmonized set of rules in the first quarter of 2021.
Monitoring at EU level: Currently, it is up to each Member State to individually monitor EU standards in this area, and as a result, gaps may arise in the way standards are monitored. In the first quarter of 2021, the Commission will propose the creation of a supervisor at EU level.
A coordination and support mechanism for the Financial Intelligence Units of the Member States: Financial intelligence units in Member States play a critical role in identifying transactions and activities that could be linked to criminal activity. In the first quarter of 2021, the Commission will propose to establish an EU mechanism to help coordinate and further support the work of these bodies.
Enforce the provisions of criminal law and information exchange at EU level: Judicial and police cooperation, based on EU instruments and institutional arrangements, is essential to ensure the proper exchange of information. The private sector can also play a role in the fight against money laundering and terrorist financing. The Commission will issue guidance on the role of public-private partnerships to clarify and improve data exchange.
The global role of the EU: The EU actively participates in the Financial Action Task Force and on the world stage in shaping international standards in the fight against money laundering and terrorist financing. We are determined to intensify our efforts so that we are a unique global actor in this area. In particular, the EU will have to adjust its approach to third countries with weaknesses in their regime regarding money laundering and the fight against terrorist financing that put our single market at risk. The new methodology published today together with this Action Plan provides the EU with the necessary tools to do so. Pending the application of the revised methodology, today’s updated EU list ensures better alignment with the latest FATF (Financial Action Task Force) list.
To ensure inclusive discussions on the development of these policies, the Commission launched today a public consultation on the Action Plan. Authorities, stakeholders and citizens will have until July 29 to provide their comments.
Refined methodology
The Commission today published a new methodology to identify high-risk third countries that have strategic weaknesses in their national anti-money laundering and anti-terrorism regimes, which represent significant threats to the EU financial system. The objective of this new methodology is to provide more clarity and transparency in the process of identifying these third countries. The new key elements refer to: (i) the interaction between the EU and the FATF inclusion process; (ii) a greater commitment to third countries; and (iii) reinforced consultations of experts from the member states. The European Parliament and the Council will have access to all relevant information at different stages of the procedures, subject to appropriate management requirements.
Updated list
Under the Anti-Money Laundering Directive (AMLD), the Commission has a legal obligation to identify high-risk third countries with strategic deficiencies in its regime regarding money laundering and the fight against terrorist financing. Pending the application of the refined methodology mentioned above, the Commission has today revised its list, taking into account developments internationally since 2018. The new list is now better aligned with the lists published by the FATF.
Countries that have been included in the list: Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.
Countries that have been excluded from the list: Bosnia-Herzegovina, Ethiopia, Guyana, Lao People’s Democratic Republic, Sri Lanka and Tunisia.
The Commission modified the list in the form of a Delegated Regulation. It will now be submitted to the European Parliament and the Council for approval within a month (with a possible extension of one month). Given the Coronavirus crisis, the date of application of the current Regulation that includes third countries and, therefore, applies new protection measures, only applies from October 1, 2020. This is to ensure that all stakeholders Have time to prepare properly. However, the exclusion of countries is not affected by this and will enter into force 20 days after its publication in the Official Gazette.
Background
The Commission package against money laundering of July 2019 highlighted a number of weaknesses in the EU framework against money laundering and the fight against terrorist financing. While the transposition and entry into force of recent legislation will address some of these problems, other problems remain. In response to this package, the European Parliament and the Council invited the Commission to investigate what steps could be taken to achieve a more harmonized set of rules, better supervision, including at EU level, as well as better coordination between Units of Financial Intelligence. Today’s Action Plan is the Commission’s response to this call to action, and the first step in achieving the Commission’s priority of offering a new comprehensive framework to combat money laundering and terrorist financing. The new methodology to identify and mitigate the threats that strategic deficiencies in the fight against money laundering and terrorist financing from third countries pose to the integrity of the EU financial system, also issued today, will further equip the EU to deal with external risks.
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