On 10 July 2020, the European Parliament (Parliament) adopted a resolution on a comprehensive pan-EU strategy for the prevention of money laundering and terrorist financing, following the publication of the European Commission’s Action Plan in May (resolution text, press release).
Key provisions of the resolution
The resolution supports a much stricter, “zero-tolerance” stance towards Member States who fail to transpose the provisions of the Anti-Money Laundering Directives (AMLDs) into national law within required timeframes. Further, the Parliament encourages consistent application of freezing and confiscation orders to simplify the process to recover illicit funds across the EU. These measures aim to prevent Member States from becoming weak links and susceptible to criminal exploitation.
The Parliament restates a need for the Commission’s revised methodology for assessing high risk third countries with strategic deficiencies to be robust and transparent. The Parliament also urges consideration of the development of a supplementary “grey list” alongside the Commission’s revised list of high risk third countries which comes into force in October 2020. In addition, the Parliament supports the immediate listing of non-cooperative jurisdictions and the creation of a robust benchmarking process to determine readiness for list removal.
The theme of international cooperation is evident in the resolution. The Parliament reiterates the importance of enabling national Financial Intelligence Units (FIUs), law enforcement and judicial systems to access relevant information and support each other on cross-Member State cases. In particular, the Parliament calls for interconnected and high-quality beneficial ownership registers equipped with high standards of data protection, and encourages the Commission to resolve data quality challenges which impede this.
Finally, the resolution appreciates the extension of anti-money laundering/counter terrorist financing (AML/CTF) supervision into the prudential remit. However, the Parliament also welcomes further measures to enhance supervision across the EU. Specifically, it supports the European Central Bank (ECB) being granted independent powers to revoke the banking licence of EU institutions acting in breach of AML/CTF laws, regardless of consideration by local AML/CTF supervisory bodies.
Impacts of this resolution
The Commission has already commenced infringement action against 3 Member States (Austria, Belgium and the Netherlands) for a lack of implementation of 4AMLD. This evidences that action will be taken if deemed required, and thus Member States are encouraged to continue to implement AMLD requirements as a matter of urgency. Additionally, as the Brexit transition period spans over the transposition dates for both 5 and 6AMLD, the UK is by no means excluded from this expectation.
It is currently not clear whether a “grey list” will be developed by the Commission. Firms will need to stay abreast of developments to ensure procedures and controls, such as know your customer and risk assessments, are updated accordingly as required. In addition, firms will need to continue to closely monitor third country list additions and removals to ensure they are operating in line with the latest obligations.
Data quality and integrity are prerequisites to effective cross-border information sharing, and therefore data is likely to continue to be a key focal area at both national and institutional level in the context of AML-CTF prevention. Data challenges stemming from legacy and/or disparate systems have the potential to significantly impact AML/CTF compliance, and so enhanced synergies will be required between institutional Risk and Data officers.
The potential for increased powers of the ECB indicates that supervised entities will be subject to even greater scrutiny. If the ECB is granted such powers, there will be a need for firms to maintain proactive and open communication channels with the ECB as well as existing conduct and prudential regulators. This will be key to understanding their supervisory objectives and enable firms to translate the implications of these into the ongoing operation of their anti-financial crime frameworks.
The Parliament expects to see rapid and continuous progress made on the provisions set out in the Commission’s May 2020 AML/CTF Action Plan. Despite the operational and economical challenges posed by the coronavirus pandemic, there remains a firm focus on the AML/CTF agenda.
Member States and firms alike hold dual accountability for the design and implementation of robust and agile processes and controls to contribute to the bloc-wide prevention of money laundering and terrorist financing. Therefore it is imperative that firms continue to pay careful consideration to compliance as well as business continuity.