.svg)
Although greater harmonisation has been welcomed almost universally in Europe, the EU’s anti-money laundering (AML) package must be serious about reining in fragmentation, private and state actors alike have warned.
There is a lot of room for Europe to improve in its regulation of AML, panellists agreed at the QED’s AML conference in Brussels on Tuesday (October 26).
The EU published its proposal to revamp AML and counter-terrorist financing (CTF) rules on July 21, with the aim of streamlining and centralising its efforts to prevent financial crime.
This includes four pieces of legislation to strengthen AML efforts, with the centrepiece of its ambition to create an overarching AML regulator for the whole bloc.
The EU is all aligned in accepting that a lot has to be done, and that money laundering is posing a serious threat to the economy, as well as the financial system, said Raluca Prună, the European Commission’s financial crime chief.
“This package is an ambitious and serious policy reply about how to better equip the Union to fight financial crime,” she said. “We know that this is a goal shared with the co-legislators.”
For this reason, a smooth legislative negotiation should be anticipated, she speculated.
However, for Luis Garicano, a Spanish member of the European Parliament (MEP), there is a need for the legislation to be beefed up.
“The truth is that the AML scandals keep coming, we are seeing a non-stop set of scandals,” he said, referring to investigative journalism scoops such as the Pandora and Panama Papers, as well as scandals revolving around EU financial institutions, such as Danske Bank and the Netherland’s ABN AMRO.
“As long as we have the current system, which is as weak as the weakest link, then the EU is going to have trouble fighting this scourge,” he said.
To make matters worse, EU countries often implement the directives in a way that is extremely weak, he argued. “This is neverending.”
For the AMLA to be effective, it needs the right amount of resources, he said.
As it stands, the AML Authority (AMLA) will be allotted 250 staff members and €45m, he pointed out. “I think it is very insufficient to have 250 staff members to supervise all the financial system, and as we will see, it is only really the financial system at this point,” he said, suggesting that the EU should also target other sectors in its supranational approach.
The other issue is location, he said. “There is currently no guidance by the commission, and what I’d like is some guidance on what kind of location can be successful,” he said.
“If you look at the last four or five agencies that the EU has put in place, they are more or less not succeeding or they are having a lot of trouble in recruiting people and filling up positions,” he said, continuing that location is important to solve that.
It is also concerning that the AMLA will not have a financial intelligence capability, Garicano said. “The idea is that it is going to coordinate and promote joint analysis. The ambition here is non-existent and we know that when in Europe you say coordinate, it means you don’t want to do anything.”
The more harmonisation at the EU level, the better, agreed Elie Beyrouthy, American Express’ government affairs chief. “The whole industry, especially financial institutions, are very, very happy with the single rulebook,” he said.
“From a payments institution perspective, something that was missing in the regulatory framework is that you had the PSD [Payment Services Directive] which was really full harmonisation that provides players with passporting but then an AML regime that requires minimal harmonisation,” he said.
This model made it almost impossible for passporting to function, Beyrouthy pointed out.
“You needed to deal with home regulators and host regulators whenever an entity was providing business,” he said, stressing that this has been a huge problem for payment institutions that operate in the EU, adding that this is a good point that has been addressed in the package.
It remains to be seen now in the negotiations how much member states rein in the AML package’s harmonisation commitments, he said, cautioning: “It is essential that all of the harmonisation elements are kept in there.”
