Corruption, EU – Baltic States, Financial Services, Legislation, Markets and Companies

The revised international standards on money laundering were adopted by the Financial Action Task Force in February 2012; presently, the Commission has prepared a proposal updating the EU's legal framework. That proposal draws on collaboration between the two Commissioners – M. Barnier and Cecilia Malmström.

Commissioner M. Barnier spoke about at the conference about the importance of the EU anti-money laundering rules for the internal market. Commissioner Cecilia Malmström revealed this issue from a different, but equally important, angle – that of internal security and protection of the EU's economy against serious and organised crime.

The European Police Office, Europol, completed in the start of March 2013 a large report on crime in the EU, the paper called “Serious and Organised Crime Threat Assessment”, in which money laundering was listed as one of the main crime threats to the EU.

Commissioner’s approach to laundering

Since Commissioner C. Malmström took office over three years ago, an important part of her work comprised efforts in combating organised crime. These efforts have been guided by three simple observations.

First, as most serious and organised crime is driven by profit, which tend to be very large – not to say huge, most of those profits are laundered in one way or another. The Commissioner revealed that according to recent estimates, criminal proceeds from transnational organised crime such as drugs trafficking, counterfeiting, human trafficking and small arms smuggling amounted to 1, 5% of global GDP in 2009. The United Nation’s authorities suggested that no less than 1,6 trillion US Dollars may have been laundered that year.

Second, serious and organised crime creates great damage, both to innocent victims and to the EU's economy as a whole. According to a report from the police in the United Kingdom, serious and organised crime has social and economic costs of 20 billion pounds a year in the UK alone.

Finally, the Commission has seen that organised crime groups are becoming increasingly complex, sophisticated and international in the way they operate. There are an estimated 3600 international organised criminal groups active in the EU, involved in trafficking in drugs, human beings, firearms and other illicit goods, fraud, cybercrime and other criminal markets. They launder and re-invest criminal profits, often in illegal activities, to strengthen their power and abilities to evade prosecution. Such groups pose a serious and growing challenge to the police and other law enforcement authorities in the EU. 

Reference: Cecilia Malmström, EU Commissioner for Home Affairs, SPEECH/13/233, 15 March 2013.

Commission’s initiatives

From abovementioned three observations, the Commission drew conclusions (already in November 2010) in a Communication known as the EU Internal Security Strategy in Action.

The Commission’s approach is based on the so-called following the money principle, which is regarded as extremely important.  Commission thinks that tracing the illicit proceeds of crime back to the criminal networks is necessary to detect, prosecute and dismantle those networks as well as to seize and confiscate their criminal wealth.

Efforts to prevent and prosecute money laundering, involving authorities and private actors at all levels, are therefore extremely important to deter and fight organised crime.

Based on that conclusion, the Commission has taken a number of initiatives in the last years.

First, the proposed 4th Anti-Money Laundering Directive contains a number of innovations. The extension of the scope of the Directive to cover more cash transactions and gambling activities, and the use of a more risk-based approach are regarded as important elements. So are the new rules on cooperation between the financial intelligence units ('FIUs') in the member states. Cooperation between the FIUs with Europol, in cases having a cross-border dimension, also contributes to a coherent and efficient EU response.

Secondly, the Commission proposed in 2012 a new EU legislation to make it easier for courts in the member states to seize and confiscate assets derived from serious and organised crime. The proposal would fill gaps in existing EU rules which are exploited by organised crime groups. In particular, it contains clearer and stronger rules on extended confiscation – that is confiscation of criminal assets which cannot be linked directly to a single criminal offence.

It makes it easier to confiscate assets which have been passed on to third-parties. It also envisages confiscation in limited circumstances without any criminal conviction, where the person is dead, permanently ill or has fled. That proposal is now being discussed between the European Parliament and the Council.

Thirdly, the EU has set up EU agencies like Europol and Eurojust to support national authorities in their work and exchange information on financial and other serious crimes.

These agencies perform well; however the Commission is working on reforms to improve their efficiency and ability to help member states even better, e.g. for Europol, a proposal to update its legal mandate should be adopted soon.

Finally, training programmes for law enforcement and judicial authorities have been created, with the support of EU agencies like Cepol, the European Police College, and the European Judicial Network to build trust and help them cope with the complexities of financial investigations. The Commission will soon adopt a Blueprint for how to step up training of law enforcement officials in all member states, including on financial crime and money laundering.

Besides, the Commission is working on several initiatives during 2013; the following have been mentioned: 

First, corruption often paves the way for organized criminal activity, and through that the laundering of criminal profits. Corruption affects, to varying degrees, all member states of the EU, and the efforts made to address it varies from country to country. The Commission will therefore publish, for the first time, a report – the EU Anti-Corruption Report – later in 2013 reviewing the member states’ efforts to tackle corruption and identifying possible improvements.

Secondly, the Commission is planning to propose a Directive to ensure that deterrent sanctions apply when money laundering happens in practice, despite more effective preventive measures laid down in the 4^th Anti-money Laundering Directive.

The Directive would lay down minimum rules for all member states concerning what types of acts should be considered criminal money-laundering and what level of criminal sanctions should apply.

A final decision on whether to propose such a directive has not yet been taken, but it is clear that the member states’ legislation differ significantly both when it comes to the definition of money laundering and to the level of criminal sanctions.

The fact that what is punishable as money laundering in one member state is not seen in the same way in another one may complicate cooperation between police and prosecutors across borders and in some cases it may be exploited by criminals. The Commission has launched a study to find out more about the magnitude of these problems, and possible solutions.

Conclusion

The Commission is of the opinion that the 4^th Anti-Money Laundering Directive is likely to make a big contribution to the EU's security by helping prevent money-laundering. However, the Commission will work hard to support law enforcement authorities' efforts to follow the money, disrupt criminal groups and confiscate their illicit wealth.

The Commissioner concluded that the EU authorities and the member states have to do all what they can, especially in times of economic crises, to make sure that the EU defends the legal economy, for the benefit of citizens, taxpayers and consumers.

Main reference: http://europa.eu/rapid/press-release_SPEECH-13-233_en.htm?locale=en