friday, 3 july of 2020

Money laundering

Brussels takes member states to court over dirty-money failings

Brussels has taken legal action against the Netherlands, Belgium and Austria for failing to enforce EU rules against money-laundering — part of a broader push to reinforce compliance in the wake of recent dirty money scandals.

The European Commission said the three countries would face the European Court of Justice for not applying "fundamental aspects" of legislation the bloc adopted in 2015 to beef up due diligence checks by banks, improve the transparency of corporate ownership and boost information sharing among national watchdogs.

Brussels said the failings include that Austria had not properly applied the rules to its gambling sector and that Belgium had omitted to put in place “mechanisms” for exchanging documents with regulators in other countries.

The lapses are an embarrassment for Brussels at a time when it is trying to move on from multiple scandals, including the discovery in 2018 of €200bn of suspicious transactions at Danske Bank’s Estonian branch and revelations that Deutsche Bank was caught up in a vast Russian programme to illicitly shift criminal funds to the west.

The findings are likely to further the determination of Brussels to press ahead with plans it published in May to overhaul safeguards against dirty money.

The plans include creating an EU-level financial supervisor and converting existing EU laws into regulations that directly apply without needing to be adopted by national parliaments.

France this week circulated a 17-page note to other capitals calling for ambitious measures, including the creation of a "true European system of financial supervision" for tackling laundering and terrorist financing. The note, seen by the Financial Times, says that the EU needs a central authority with "significant preventive powers," including to scrutinise and intervene in the work of national regulators.

Since the EU proposals were announced in May, discussions about the creation of an EU financial conduct authority have been galvanised by the collapse of German fin-tech company Wirecard after revelations of accounting fraud.

Valdis Dombrovskis, the EU commission’s executive vice-president for financial policy, said on Thursday the bloc's anti-laundering rules were "robust" but needed to be "applied consistently".

"We will make sure that everyone in both private and public sectors applies the rules rigorously," he said.

The commission has faced a running battle with national governments to ensure full application of the 2015 law, which needs to be transferred on to national statute books in order to take effect. At one point, Brussels had formal proceedings open against every single EU member state for failing to meet a July 2017 deadline for having the measures in place.

Since then, the commission has monitored and cajoled individual countries to fix specific holes in their rules. Referral to the Court of Justice is the final step if repeated administrative warnings have not been adhered to.

Brussels on Wednesday sent second-stage warnings to Italy, the Czech Republic and Denmark. Two countries, Ireland and Romania, have already been referred to the court of justice for incomplete application of the rules.

Diplomats point out that the 2015 legislation is complex to apply, requiring operational changes such as the setting up of registers of beneficial owners of companies and new systems for information sharing.

(Published by Financial Times, July 2, 2020)

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