Tuesday

26th Sep 2017

EU proposes €5mn fines for money laundering

  • Malmstrom: 'Dirty money has no place in our economy' (Photo: bundesbank.de)

Individual staff should be fined up to €5 million and firms, such as banks, should be fined 10 percent of turnover if they flout anti-money-laundering rules, the European Commission has proposed.

It put out its latest bill on the subject with little fanfare in Strasbourg on Tuesday (5 February).

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

But its communique noted that the criminal practice, worth up to €1.2 trillion a year worldwide, creates "high risk ... to the stability of the financial system."

One of the bill's sponsors, home affairs commissioner Cecilia Malmstrom, added that it helps people who peddle drugs and guns or who shut up women in brothels to enjoy respectability and luxury lifestyles. "Dirty money has no place in our economy," she said.

Other proposed sanctions against rule flouters include withdrawal of bank licences if a bank is involved, banning executives from holding board seats and public naming and shaming.

The new bill says every company must hold reliable information on the identity of its ultimate owner and to divulge it when asked by investigators.

It says traders in "high value goods," such as diamonds or furs, should make background checks on clients who hand over €7,500 or more in cash and to report suspicious transactions.

It says casinos, including online casinos, should do checks on transactions of €2,000 or more.

It also urges EU countries to create "Financial Intelligence Units" which are to exchange information "spontaneously or upon request" to make it easier to follow cross-border money trails.

The draft law is the commission's third attempt to firm up standards since 2005.

A recent series of scandals shows there is plenty of room for improvement.

Bank records indicate that the killers of Russian anti-corruption activist Sergei Magnitsky laundered tens of millions of euros of stolen money in Austria, Cyprus, Estonia, Finland, Latvia and Lithuania.

The US in December ordered the UK-based HSBC bank to pay a €1.4 billion fine for laundering cash for Colombian and Mexican drug lords.

The US in August also accused the UK's Standard Chartered Bank of hiding €201 billion of illegal Iranian transactions.

Who's money is it anyway?

Some MEPs, who, together with EU countries, will negotiate the final form of the bill over the next two years, voiced concerns it might violate data privacy.

But others said it does not go far enough.

"As far as provisions on the 'beneficial owner' are concerned ... the opportunity to efficiently identify and combat money laundering and fiscal evasion has been lost," an independent Italian MEP, Sofia Alfano, who chairs parliament's committee on organised crime, said on Tuesday.

The Brussels-based NGO, Transparency International, noted: "Centralised national registries of beneficial ownership would make it easier for banks and other institutions to identify who the ultimate owners of companies and trusts are."

In most firms which sell real products or services, it is clear who owns what.

But people who want to hide their wealth create shell companies in lax jurisdictions such as Cyprus, Luxembourg or the UK, which are controlled by nominee directors or trustees on their behalf. The shell companies then become the beneficial owners of new shell companies in other places, multiplying layers of secrecy.

In one loophole in the EU bill, a person who owns less than 25 percent of a firm does not need to be declared.

The draft law also does nothing on "bearer shares."

Bearer shares are documents the physical possession of which confers company ownership, meaning they can be passed around to avoid detection. The UK, the EU's biggest financial centre, is one of the last jurisdictions in the world which still allows them despite World Bank pleas for abolition.

The EU bill says only that they are a "risk."

Laws don't stop crime

Loopholes aside, Transparency International added that the real problem is not lack of rules but the lack of will to enforce them.

A study on member states' compliance with existing laws by the Belgian branch of accounting firm Deloitte, published in 2011, showed big gaps in national financial cultures.

Previous EU legislation already required banks, notaries, accountants, lawyers and real estate agents to file "suspicious transaction reports [STRs]" with authorities.

Entities in Cyprus, an offshore banking centre, in 2009 filed 428 STRs, while entities in Estonia, which has a similar sized population, filed 4,534.

Entities in Austria, whose banks do big business in post-Soviet countries, filed 1,059 STRs in 2008, while entities in 2009 in Finland, which is half its size, filed 27,781.

Meanwhile, The Netherlands put the big EU countries to shame.

Dutch entities in 2009 sent in 163,933 reports.

Excluding the UK, a special case due to the size of its financial services sector, the Dutch figure was way more than France (17,310), Germany (9,046), Italy (20,660) and Spain (2,904) put together.

EU monitoring Cyprus passport sales

The European Commission has said it is in a "dialogue" with Cyprus amid concerns on loopholes in its passport sale scheme.

News in Brief

  1. Tusk: No sufficient progress yet in Brexit talks
  2. EU commission provides €2mn for food quality studies
  3. Almost a third of Europeans unaware of cost-free roaming
  4. No immediate declaration after Tallinn digital summit
  5. Alternative women's rights fund raises €292mn
  6. Russian gay rights activist calls for EU action
  7. Food maker shamed on inferior products in Croatia
  8. British PM to meet EU president on Brexit

Stakeholders' Highlights

  1. European Jewish CongressExpresses Concern Over Worrying Gains for the Far-Right AfD
  2. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  3. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  4. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  5. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  6. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  7. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought I 27 September, 2017
  8. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  9. Mission of China to the EUChina Leads the Global Clean Energy Transition
  10. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  11. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  12. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels

Latest News

  1. Macron calls for far-reaching EU overhaul
  2. Egg scare prompts EU to consider national food safety officers
  3. EU commission says Spanish website seizures are legal
  4. EU commission sees 'more evidence' of dual food quality
  5. A social Europe needs better housing
  6. London firms seek free trade after Brexit
  7. Macron to lay out plan for EU 'pioneers'
  8. Polish president disappoints EU on judicial reform

Stakeholders' Highlights

  1. Mission of China to the EUPresident Xi Urges Bigger Global Role for Emerging Economies
  2. EU2017EEAre We Socially Insured in the Future of Work?
  3. European Jewish CongressFrench Authorities to Root Out "Societal Antisemitism" After Jewish Family Assaulted
  4. European Federation of Local Energy CompaniesClean Energy for All? On 10.10 Top-Level Speakers Present the Clean Energy Package
  5. UNICEFUp to Three Quarters of Children Face Abuse & Exploitation on Mediterranean Migration Routes
  6. Swedish EnterprisesEurope Under Challenge; Recipe for a Competitive EU
  7. European Public Health AllianceCall to International Action to Break Deadlock on Chronic Diseases Crisis
  8. CES - Silicones EuropePropelling the construction revolution with silicones
  9. EU2017EEEU 2018 Budget: A Case of Three Paradoxes
  10. ACCAUS 'Dash for Gas' Could Disrupt Global Gas Markets
  11. Swedish Enterprises“No Time to Lose” Film & Debate on How Business & Politics Can Fight Climate Change