Thursday, February 25, 2021

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


Given the above, we suggest a modest proposal: as part of their enforcement tool bag, countries in the EU should prosecute at least some individuals, including not just bankers located in the country at issue, but also bad actors located in other countries who have abused the home country’s financial institutions to launder their money. And, to be clear, these people should be imprisoned. As an example, perhaps Denmark could prosecute some Estonian or Russian money launderers.

Interestingly, and in a recent guest blog, the authors of the Basel AML Index 2019 noted that, according to the FATF Mutual Evaluation Report of 2016, the U.S. received a higher level of performance in AML effectiveness (67%) than in technical AML compliance (63%). Stated otherwise: one thing that the U.S. is relatively good at, at least when compared to other countries, is actually enforcing the AML already on its books, even if those laws are not perfect.

We are aware of many counter-arguments and potentially numerous competing legal and practical considerations, including the following:

  • The EU lacks a uniform prosecutorial body;
  • EU countries lack a robust framework for sharing AML information;
  • Legal and practical issues, including data privacy concerns, create obstacles for cross-border investigations;
  • EU respect for national sovereignty counsels against cross-border prosecutions;
  • Prosecuting cross-border bad actors does not represent a comprehensive or long-term solution, because other bad actors will just take the place of the prosecuted;
  • Any suggestion that the solution to a societal problem is to jail more people is, unfortunately, all-too-American (and the U.S. suffers from both a high crime rate and mass incarceration);
  • The strong willingness of the DOJ to prosecute foreign officials, executives and companies is arguably xenophobic; and
  • The U.S. government is hypocritical and should focus on its own AML enforcement problems – particularly as to the issue of beneficial ownership, in which the U.S. lags behind much of the globe in regards to imposing sufficient requirements.

Duly noted. Nonetheless, the apparent lack of such prosecutions in the EU stands out. As the DOJ at least has articulated in theory via the Yates Memorandum (if not acted on, in a consistent and meaningful manner), a key to defeating business crime is to punish individual bad actors. Otherwise, criminal enterprises will just shift their efforts from bank to bank, and from country to country – seemingly immune from any real deterrence. Prosecutions are only one tool among many to address the global problem of money laundering and corruption. They are also imperfect and must be used in concert with other efforts. Indeed, U.S. enforcement authorities acknowledge the need to focus on process and the integrity of institutions’ BSA/AML policies, and accordingly expand compliance obligations and pursue related enforcement actions against institutions. But the apparent near non-existence of individual prosecutions in the EU – including as to underlying criminal schemes – is hard to understand.

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