Thursday, February 25, 2021

EU Doesn’t Prosecute for Money Laundering, Financing of Terrorism and Corruption


The EU’s Response: Focus on Process and Financial Institutions’ Policies and Programs

The ability of criminals and terrorists to swiftly transfer funds between bank accounts enables them to more easily prepare their acts of terror or to illegally launder the proceeds of crime across different EU member states. To address this challenge, the EU has developed a solid regulatory framework for countering money laundering and terrorist financing, in line with international standards adopted by the Financial Action Task Force (“FAFT”). FAFT, about which we have blogged here and here, is an inter-governmental policymaking body focused on establishing international standards and policies to combat money laundering and the financing of terrorism. Since its creation in 1989, FATF has issued 40 recommendations to fight money laundering and 9 special recommendations to fight terrorist financing.

On July 24, 2019, the European Commission adopted a Communication to the European Parliament and Council summarizing a series of reports concerning the EU’s implementation of the AML and counter-terrorist financing framework from 2012 through 2018. These reports included: (1) a Supranational Risk Assessment Report; (2) a report on publicly known money laundering cases concerning EU banks; (3) a Financial Intelligence Unit Report; and (4) a report on the interconnection of central bank account registries.

The reports’ findings largely mirrored previous FAFT recommendations and directives issued by the EU. For example, these new reports found, among other weaknesses, that public authorities intervened in money laundering only after significant scandals occurred or repeated compliance and governance failures. The Commission considered a variety of approaches to best address money laundering risks, including whether to turn the EU’s AML rules into directly applicable regulations. Absent from these reports, however, was any discussion about whether to focus on deterring money laundering through prosecutions of individuals engaged in the underlying criminal activity.

This Communication was preceded by the European Parliament’s adoption, on April 19, 2018, of the European Commission’s proposal for an expansive Fifth Anti-Money Laundering Directive (“AMLD5”) to address recent trends in money laundering and terrorist financing, including the Panama Papers and recent terrorist attacks in Europe. The AMLD5 emphasized five key goals for its member states to achieve by the end of 2019:

  • Enhancing transparency about the beneficial owners of companies operating in the EU by making public central registers for legal entities;
  • Guaranteeing that all member states have centralized national bank and payment account registers or central data retrieval systems;
  • Expanding the authority of the EU Financial Intelligence Units\, increasing their access to centralized bank account registers, and facilitating their cooperation across nations through interconnected registers;
  • Addressing the risks of virtual currencies and pre-paid cards being used for terrorist financing and money laundering; and
  • Enhancing safeguards for financial transactions involving high-risk, non-EU countries.

Achieving these goals is undoubtedly important to the detection of future crime. But the AMLD and subsequent reports, directives, and the Communication are silent on how member states should deter bad actors, including through prosecutions of such individuals.

We concede that there may be ongoing criminal investigations by individual EU member states of which we are unaware. Nonetheless, the clear import of the above is that the EU tends to focus very strongly – if not almost exclusively – on process-based fixes for money laundering risks. These fixes are obviously critical. However, and with the exception of the Danske Bank prosecutions, any discussion of individual prosecutions appears strikingly absent.

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