“The rules we have to prevent Money laundering are among the toughest in the world, “said European Commission Vice-President Valdis Dombrovskis,” but they must now also be applied systematically. “
There haven’t been enough of these in recent years. In practice, many EU Member States do not implement the rules or are simply too lax in monitoring and auditing suspicious financial transactions. That is why the European Commission has now officially made a proposal that Brussels has been working on for months: It wants to create a new EU supervisory authority that will keep a close eye on financial developments in the member states and monitor and audit large transnational financial institutions, which are a potential risk .
However, this powerful agency is not expected to start operating for another three years, and it will be another five years before it is fully effective. The EU member states have basically agreed on the establishment of this central supervisory authority, similar to the one that already exists for banks, but are arguing about the physical seat.
Dombrovskis: Every money laundering scandal is one too many
Substantial “dirty” sales
EU Finance Commissioner Mairead McGuinness admitted when presenting the new legislative proposals: “Money laundering is a clear and present threat to citizens, democratic institutions and the financial system.” Transactions with “dirty” money account for around 1.5% of the gross domestic product in the EU – that is 133 billion euros. “The scale of the problem cannot be underestimated and the loopholes that criminals can exploit must be closed,” said McGuinness.
In order to achieve this, the Commission wants to standardize the rules for combating money laundering – that is, the transfer of “dirty” money from criminal activities into the normal, “clean” money cycle – across Europe. All member states would have to make it transparent to whom which companies, financial service providers and real estate actually belong. These could no longer be managed in the EU in the name of anonymous companies, trustees and representatives. The registers of bank accounts and their account holders would be merged across the EU.
Directive number six
The Commission notes that the repeated breakdown of assets into smaller units, the nesting of businesses, and electronic transactions across a number of overseas accounts all make it very difficult to keep track of funds generated through drug trafficking, illegal prostitution, and illegal gambling Human trafficking and other crimes of this nature.
A new anti-money laundering directive – version number six – aims to make it harder for organized crime and terrorist financiers to do business. The rules have been tightened further compared to the currently applicable fifth directive. Cryptocurrencies – privately created electronic currencies like Bitcoin, which the EU believes are particularly good for anonymous transactions – are also being targeted. In the future, cryptocurrency providers will have to disclose the identity of the account holder.
Cash Transaction Limits
Another proposal presented by Dombrovskis today is controversial among the Member States. He wants to limit cash payments to a maximum of 10,000 euros. He points out that cash is an easy way of getting into money laundering. For example, drug proceeds can be circulated by inflating the sales of a pizzeria owned by the criminals. Properties are bought and paid for with suitcases full of cash.
Some EU member states have already set an upper limit for cash payments. In Greece, for example, it is just 500 euros. In other countries, such as Germany or Austria, there is no limit at all. Around 70% of all payments to end users in the EU are made in cash.
Austrian Finance Minister Gernot Blümel supports the fight against money laundering, but says it is an illusion to believe that criminals only use cash. “We are seeing that white-collar criminals are increasingly switching to digital, and we have to intensify here in the future,” said Blümel in Vienna last week. “I think that is more effective than arbitrary caps that are fueling the current trend towards the elimination of cash.” He explained that cash must be kept as a means of payment that does not require technical assistance.
The money laundering scandal at Danske Bank – the FinCEN files – was exposed after many years
Dombrovskis is particularly concerned about the reputation and stability of the EU as a financial center. “Every money laundering scandal is one too many,” he said.
Last September thanks to the so-called FinCEN files, It became clear that even well-known major European banks have circumvented EU money laundering regulations. In 2018 it was found that a Danish bank had laundered money through a small branch in Estonia for years – up to 200 billion euros. The Danske Bank scandal sparked the Commission’s new anti-money laundering initiatives. These still have to be approved by the European Parliament and the 27 EU member states.
This article has been translated from German.