How EU Banks and Residents Will Really feel the Influence of the Proposed Anti-Cash Laundering Measures

In my previous blog postI highlighted the draft legislations associated to the EU Anti-Cash Laundering and Countering the Financing of Terrorism (AML/CFT), how real prospects are already feeling the (adverse) impacts of present measures, and the way these measures are placing intense strain on the monetary trade.

Let’s now take a deeper have a look at the draft measures being proposed and a sensible answer to the issue of cash laundering that the European Parliament is overlooking.

6AMLD Makes a Reversal

Below the brand new proposal, the EU’s Sixth Anti-Cash Laundering Directive (6AMLD) makes a whole reversal that successfully will increase the penalties for a lot of crimes and offenses. It additionally makes conviction for cash laundering simpler because the burden of proof rests partially on the accused.

Right here some simplified examples for example how this works:

  • You’re a decide pocketer and steal a pockets with €50 in it. For first time offenders, the sentence can be group service. But, the second you employ the cash to purchase your self an ice cream, you’re laundering cash. Fortunately, as the quantity is low, the utmost penalty is just eight weeks imprisonment. If the ice cream man is aware of the cash you’re utilizing to pay is stolen, then he’s complicit in cash laundering.
  • You have got extra money in your checking account than one would anticipate you to have primarily based in your revenue. Prior to now, the prosecutor needed to show it had malicious origins. With 6AMLD, the prosecutor can argue that it’s the proceeds of cash laundering, and all of the sudden you’re the one who has to show that it didn’t come from a criminal offense.

You could possibly argue that that is solely an issue for lawbreakers and that the penalties are too mild anyway, however it erodes the authorized precept. You can not simply enhance all sentences without delay by way of a again door and on the similar time cut back the burden of proof. Whichever means you have a look at it, legal penalties have been established in all nations after a lot dialogue and cautious consideration of all the professionals and cons. 6AMLD drives proper by way of that.

A New Authority is Not a Answer to the Drawback

It’s typically jokingly mentioned that politicians have two customary options for an issue: an investigative committee and a brand new authority. The Anti-money Laundering Authority (AMLA) is simply that – a brand new authority.

The arrival of the AMLA creates extra mandatory coordination between all authorities, extra discussions about their tasks, extra gray areas in between, and an additional authority whose guidelines and laws should be carried out. The web outcome: extra confusion and extra complexity. Including complexity solely exacerbates the issue and won’t cease precise criminals – the cash launderers – from discovering the gaps and exploiting them.

It should take some 5 years for the AMLA to be confirmed proper or flawed. In both case, it’s 5 years misplaced. In 5 years, there can be new politicians who will wish to present their vigour by saying a brand new authority that they are saying will remedy the issue.

An Apparent however Ignored Answer

Cash laundering is a worldwide downside that means that the most effective answer can be worldwide too. However seeing that’s unattainable, the most effective possible answer inside the EU is an EU broad answer. The IMF recently stressed the point that no nation by itself can fight cash laundering and “countries must innovate together to find a solution.”

The AMLA is offered as the answer to enhance the trade of knowledge between the nationwide FIUs and guarantee constant supervision. However why not an EU FIU changing all nationwide FIUs? If all suspicious transactions are reported to the identical authority, then there is no such thing as a want for the trade of knowledge anymore as all data is contained in a single place. This may additionally present the likelihood to comply with the cash throughout borders to detect the biggest cash laundering organisations utilizing essentially the most superior strategies to cover their actions. Particularly as these extremely skilled organisations are fairly able to making particular person transactions seem official, having a single supply of knowledge to trace the mix of those transactions would rapidly name out the cash laundering sample.

Why isn’t such an answer proposed?

There could be just one motive: privateness. The second you say the phrase “privacy” within the presence of politicians, the environment freezes, and everyone turns into very cautious. That is comprehensible as privateness is treasured to many individuals on this digital big-brother world. However as an alternative of fixing the cash laundering downside with an amazing thought-out answer, an answer with the suitable steadiness between privateness safety and cash laundering prevention, and with all privateness safeguards in place, the politicians dump the issue on the person banks,  stating that they have to adhere to the GDPR laws. Banks that don’t actually have a correct home view, not to mention an EU-wide. The variety of suspicious transactions reported to the FIU is rising quickly throughout Europe, and with stricter measures introduced, these numbers will solely develop. As if that isn’t a privateness concern.

DNB requires a extra balanced strategy

There’s a shed of sunshine. A minimum of one regulator requires a extra balanced strategy. In September 2022, the Dutch regulator DNB revealed the paper From Recovery to Balance, through which they argue for a extra balanced strategy that reduces the affect to real prospects. In Spring 2023, the Dutch authorities introduced corresponding measures.

An Various and Efficient Answer

There’s an alternate that might vastly enhance cash laundering detection: enable the banks to immediately share cash laundering-related data. It’s placing that the measures don’t even contact on this topic, the place it’s the high measure of the proposal for PSD3 by the European Fee (EC), introduced on the finish of June.

Is it a very new concept? No, there are already some initiatives between banks that go additional and trade transactional information to seek out cash laundering. Within the Netherlands, the 5 largest banks trade the pseudonymised transactions of their enterprise prospects: TMNL. Right here you see a transparent conflict with privateness. These banks wish to add retail transactions as retail accounts are simply as prone to facilitate the motion of cash. Nevertheless, the legislative adjustments required to make this occur fail lengthy earlier than the vote in Parliament as a consequence of privateness issues.

Once more, an answer from the EC or European Parliament (EP) that provides the suitable steadiness between privateness safety and cash laundering prevention is important. Imposing the duty of discovering international, well-hidden cash laundering networks on particular person banks with out giving them the mandatory means is like forcing the blind to see and the deaf to listen to.


Real residents can be hit more durable if the measures introduced by the EP are adopted and made legislation. The prevailing large variety of reported transactions is a creeping assault on the privateness of residents, and this quantity will develop. On the similar time, the measures miss the most effective alternative to actually strengthen the combat towards cash laundering: efficient trade of knowledge to determine and unravel subtle worldwide cash laundering schemes. Additionally, the measures introduced will not be an answer to the GDPR concern; merely stating that the banks should act GDPR-compliant is just not an answer in any respect. The unhappy conclusion is that the measures introduced make the state of affairs extra complicated and unclear, and the EP doesn’t seem to acknowledge the dangerous uncomfortable side effects.

Is the cash laundering concern easy to resolve? Completely not! However who mentioned that governing can be easy? It’s making robust selections when mandatory. It’s naïve to assume {that a} worldwide downside could be solved by placing extra strain on the person banks with out giving them the means wanted. Banks will be unable to successfully combat cash laundering with their arms tied behind their backs. The proposed measures protect the cash launderers’ privateness, whereas real prospects endure. These measures will do little to discourage cash laundering and as an alternative give criminals the flexibility to increase their nefarious enterprise throughout Europe.

Writer: (Wiebe Fokma)
Date: 2023-09-04 05:00:00

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Alina A, Toronto
Alina A, Toronto
Alina A, an UofT graduate & Google Certified Cyber Security analyst, currently based in Toronto, Canada. She is passionate for Research and to write about Cyber-security related issues, trends and concerns in an emerging digital world.


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