5 reasons money launderers won’t worry about the EU crackdown – POLITICO
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Brussels has set its sights on dirty money.
The European Commission on Tuesday unveiled a broad set of anti-money laundering initiatives to drive dirty money out of the bloc after repeated surveillance failures.
The crowning glory of the four-part package is a plan to introduce a new European anti-money laundering authority, known as the LBA. The new EU agency is expected to be in place within the next three years and begin direct supervision by 2026, with the power to impose fines of several million euros.
But some lawmakers and think tanks warn that the package may not be enough to quell illicit financiers and suspicious activity amounting to some 160 billion euros across the bloc. Here are five reasons money launderers are likely to shrug their shoulders at Brussels initiatives – for the moment.
1. AMLA cannot be built in a day
Tuesday’s package is ambitious. The new agency is expected to hire 250 people to directly supervise the riskiest financial institutions in the bloc with an annual budget of 45 million euros. But AMLA cannot be built overnight. The watchdog is not expected to begin direct surveillance duties until early 2026. It’s been almost five years of the status quo, which has proven ineffective in tackling dirty money.
It would have made more sense to strengthen the existing powers of the European Banking Authority against dirty money and improve its flawed governance structure, according to the director general of the Brussels think tank of the Center for European Policy Studies, Karel Lannoo . Rather, the EBA will be stripped of its powers.
“Now there is a discontinuity and a void of about two years,” Lannoo said. “You’re going to demotivate EBA from the work they’ve done. Why should they still care ”in the meantime?
2. The block still has blind spots
A string of dirty money scandals since 2018 has exposed a blind spot in EU banking supervision. Governments have interpreted the bloc’s dirty money guarantees differently for years when they enshrine them in national law. This leaves many loopholes for criminals to exploit in countries that do not require all companies, such as crowdfunding platforms and diamond dealers, to report suspicious transactions.
The Commission on Tuesday proposed a single regulation that will harmonize the bloc’s rules, which AMLA will monitor, to remedy the situation. Legislative negotiations on uniform rules can take years, however, and some capitals have yet to introduce existing EU rules. Brussels has cracked down on the bloc’s latecomers in recent years with threats of courts and sanctions. It also takes time.
3. Other sectors remain vulnerable
AMLA’s direct responsibilities are limited to the financial sector. This means that it will always be up to governments to tackle dirty money in other sectors, such as gambling, legal services and auditing. The new watchdog will be able to take over the supervision of specific cases when and if national authorities are not doing their job properly. But as recent history in Denmark and Estonia shows, it is difficult to determine where national supervisors are asleep at the wheel.
“No authority in the EU can oversee all those responsible for enforcing anti-money laundering laws, especially in the non-financial sector such as trading in property, real estate, lawyers and gambling “said German EU Greens lawmaker Sven Giegold. Member States.”
4. The darknet can get around the fintech rules
Finance is becoming more and more digital. It is therefore only natural that part of the Commission’s AML package includes a bill that also targets fintech. The bill aims to introduce disclosure requirements for buying and selling crypto assets within the EU. This means that any EU business or financial company that moves a digital asset into or out of the block will need to provide details on who moves the money around.
That said, the internet is global – Europeans could still evade darknet disclosure rules by finding a Chinese crypto asset provider to transfer funds to Russia, for example.
5. The politics of power – what else?
Even if EU lawmakers quickly agree on common rules and the composition of the LBA, there is a risk that the whereabouts policy could delay the watchdog introduction scheduled for 2024. You can’t put a shovel in the ground if capitals can’t agree on where to start building. EU agencies have influence and power while boosting national economies through their well-paid employees. Capitals have been prepared to fight tooth and nail for the lucrative price of an agency, as most recently demonstrated by the EBA’s move to Paris. A deadlock could quickly emerge if a similar fight begins over AMLA – the German fund industry, BVI, has already launched its rallying cry to the German government to fight for the watchdog.
“The German government must fight for Frankfurt to be the seat of the new European authority,” Thomas Richter, CEO of BVI, said in a statement. “Failure like the one that happened with the EBA should not happen again.”
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