European Commission plans to plug gaps in AML and CTF rules

Written by Ruby Hinchliffe
12th May 2020

The European Commission (EC) has published a plan to shut down “loopholes” and remove weak links in the EU’s current anti-money laundering (AML) and combating the financing of terrorism (CFT) rules.

The plan will be enacted over the next 12 months, accompanied by the launch of a public consultation on the subject, which will be open until the end of July.

The EC’s plan will disrupt the current model of supervision

“We need to put an end to dirty money infiltrating our financial system,” says the EC’s executive vice president Valdis Dombrovskis.

To address the “diverging interpretations” of its AML and CTF rules by European banks, the EC’s Action Plan proposes a “single EU rule book” to be unveiled in the first quarter of 2021.

The EC’s plan will disrupt the current model of supervision too, which sees each member state monitor the implementation of EU rules individually.

In the first quarter of next year, the EC will propose to set up an EU-level supervisor to plug the “gaps” in the current model.

“The Commission’s new plans are a long time coming”

The EC calls for the European Banking Authority (EBA) to “make full use of its new powers” to tackle AML and CTF, and plans to ensure that national rules are in line with the “highest possible standards”.

The plan also proposes an “EU mechanism” to support member states’ financial intelligence units (FIUs), which identify suspicious transactions and activities.

In addition to this support, the EC has unveiled a new methodology to identify high-risk third countries, paired with a new list of third countries which have “strategic deficiencies” in AML and CFT rules.

The new list, which will require European banks to look more closely at clients from October, includes the Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.

Countries no longer listed are Bosnia-Herzegovina, Ethiopia, Guyana, Laos, Sri Lanka and Tunisia.

One of the final points of the plan encourages member states to exchange information more freely between judicial, government and private authorities. New guidance is set to be issued on the role of public-private partnerships, but a date has not been set.

“The Commission’s new plans are a long time coming,” says Chris Ives, senior manager at global risk consulting firm Kroll. “Public-private partnerships are key to stakeholders working together to effectively tackle the problem.”