EU Commission adopts ambitious and multifaceted action plan for a single EU AML System

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EU Commission adopts ambitious and multifaceted action plan for a single EU Anti-Money Laundering System

8 May 2020

Regulatory News Alert

Context and objectives

On 7 May 2020, the European Commission adopted an action plan, which puts forward concrete measures that the Commission will take over the next 12 months to better enforce, supervise and coordinate the EU's rules on combating money laundering and terrorism financing. The aim of this approach is to shut down any remaining loopholes and remove any weak links in the EU's rules.

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The action plan builds on six pillars. Each pillar aims at ensuring that the EU rules are more harmonized :

1.    Effective application of EU rules: as the 5th Directive has still not been transposed in eight Member States, the Commission started infringement proceedings and is planning to continue to monitor the implementation of EU rules. Additionally, following recent EU reforms, the European Banking Authority (EBA) is equipped with tools and is encouraged to make full use of its new powers to tackle money laundering and terrorist financing.

2.    A single EU rulebook: as Member States tend to apply EU rules in a wide variety of different manners, criminals are able to take advantage of the loopholes created by diverging interpretations of the rules. As a consequence, the Commission decided to take action and propose a more harmonized set of rules in the first quarter of 2021.

However, the action plan does not explicitly indicate whether this will lead to a new regulation. This question will be subject to further analysis to ensure the highest level of harmonization. A number of areas in which divergence should be minimized were highlighted, namely the list of obliged entities, customer due diligence requirements, internal controls, and reporting obligations.

3.    EU-level supervision: as outlined in a Commission Report on the assessment of recent alleged money laundering cases, some structural weaknesses in the EU's anti-money laundering framework persist.  Since it is up to each Member State to individually supervise EU rules in this area, gaps can develop in how the rules are supervised.

The role and scope of this EU-level supervision—as well as the supervisory body that should be tasked with carrying out this role—will be proposed following a thorough assessment of all options, also based on the feedback received in the public consultation.

In the first quarter of 2021, the Commission will propose to set-up an EU-level supervisor. The EU-level supervisor will be established as part of a comprehensive new policy to fight money laundering and terrorist financing.

4.    A coordination and support mechanism for Member State Financial Intelligence Units: Financial Intelligence Units in Member States play a critical role in identifying transactions and activities that could be linked to criminal activities. However, several technical difficulties in the functioning of the secure communication channels have created difficulties. Several Financial Intelligence Units fail to comply with their obligation to exchange information with other Financial Intelligence Units.

In the first quarter of 2021, the Commission will propose to establish an EU mechanism to help remedy the weaknesses that were identified and provide a secure communication channel.

5.    Enforcing EU-level criminal law provisions and information exchange: judicial and police cooperation, on the basis of EU instruments and institutional arrangements, is essential to ensure the proper exchange of information. The private sector can also play a role in fighting money laundering and terrorist financing. The Commission will issue guidance on the role of public-private partnerships to clarify and enhance data sharing.

6.    The EU's global role: the EU is actively involved within the Financial Action Task Force (FATF) and on the world stage in shaping international standards in the fight against money laundering and terrorist financing.

The Commission amended the list of high-risk third countries in the form of a Delegated Regulation. It will now be submitted to the European Parliament and Council for approval within one month (with a possible one month extension). The date of application of Regulation listing third countries – and therefore applying new protective measures – applies as of 1 October 2020. The delisting of countries however will enter into force 20 days after publication in the Official Journal. Unlike the EU's list of non-cooperative tax jurisdictions, there will be no “grey-list”.

Pending the application of the revised methodology, the updated EU list ensures better alignment with the latest FATF list.

Next steps

The Commission intends to deliver on all these actions by early 2021. To gather the views of citizens and stakeholders on these measures, the Commission launched a public consultation in parallel to the adoption of this action plan. Feedback is welcome until 29 July 2020.

How can Deloitte help?

Deloitte’s advisory specialists and dedicated services can help you design and implement your business strategy in light of the evolution of regulatory frameworks and market trends.

Deloitte’s AML/CTF advisory specialists and dedicated services will also help you design and implement your renewed business strategy in light of the future evolution of the AML/CFT framework.

Key Deloitte AML services are:

  • AML/KYC remediation plan
  • AML/CTF training
  • AML/CTF policy, procedure, and process design or review
  • Assistance in risk assessment drafting regarding Money Laundering/Terrorist Financing
  • DKYC: externalizing KYC processes

Deloitte’s Regulatory Watch Kaleidoscope service helps you stay ahead of the regulatory curve to better manage and plan upcoming regulations.

Contacts

Subject matter specialists

Pascal Eber
Partner – Operations Excellence & Human Capital
Tel : +352 45145 2649
peber@deloitte.lu

Eric Collard
Partner – Forensic & AML, Restructuring
Tel : +352 45145 4985
ecollard@deloitte.lu

Bastien Collette
Director – Advisory & Consulting (AML/CTF)
Tel : +352 45145 3372
bacollette@deloitte.lu

Maxime Heckel
Director – Advisory & Consulting (AML/CTF)
Tel : +352 45145 2837
mheckel@deloitte.lu

Alice Lehnert
Director – Advisory & Consulting
Tel : +352 45145 2605
alehnert@deloitte.lu


Regulatory Watch Kaleidoscope service

Simon Ramos
Partner – IM Advisory & Consulting Leader
Tel : +352 45145 2702
siramos@deloitte.lu

Jean-Philippe Peters
Partner – Risk Advisory
Tel : +352 45145 2276
jppeters@deloitte.lu

Benoit Sauvage
Director – RegWatch, Strategy & Consulting
Tel : +352 45145 4220
bsauvage@deloitte.lu

Marijana Vuksic
Manager – Regulatory & Consulting
Tel : +352 45145 2311
mvuksic@deloitte.lu

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