In February, the European Commission published its “Action Plan for strengthening the fight against terrorist financing”. It referred to recent terrorist attacks, most notably in Paris, which underlined the need for the EU to work across all policy areas to prevent and fight terrorism. Measures to cut off sources of finance, to make it harder for those using funds to escape detection and to use information to the best effect, make a powerful contribution to that fight.
The Action Plan is described as a further step up in the fight against terrorist financing. However, this rather modest description does not begin to encapsulate the broad range of policy areas that would be affected, in an already complicated and fast-changing legal landscape.
Firstly, within the Action Plan, the Commission has called on member states to bring forward the implementation of Directive (EU) 2015/849, known as the Fourth Anti-Money Laundering Directive (AMLD.) The current deadline for implementation of AMLD is June 2017, but the Commission suggests it should be brought forward to the end of 2016. The tighter timetable would put pressure on the UK Government, which has promised a consultation on AMLD. Assuming this is to be a 12-week consultation, that would leave less than six months to produce and bring into force implementing legislation before the Commission’s proposed deadline.
Secondly, even though AMLD is yet to be implemented, the Commission has proposed amendments to it. For example:
- It would set out what enhanced due diligence means in practice, in relation to financial flows to and from “blacklisted” countries, that have strategic deficiencies in the sphere of anti-money laundering;
- Virtual currency exchange platforms would be brought under the control of supervisory authorities in member states, and within the licensing and supervision rules of existing EU legislation;
- Further requirements may be put in place for issuers and users of pre-paid cards, such as customer identification and verification at the time of online activation.
- Centralised bank and payment account registers or electronic data retrieval systems (which, in fact, many member states have already) would be established, to provide authorities with access to information on bank and payment accounts.
Thirdly, the Commission would propose a Directive on criminal offences and sanctions, under which there would be “minimum rules” on the definition of money laundering. Currently, although all member states have criminalised money laundering, there are apparently differences which create obstacles in cross-border judicial and police cooperation. In the case of the UK, its legislation already goes beyond other international minimum standards, and so may not be affected, depending on the details to be proposed.
Fourthly, the Commission acknowledges that the problem of illicit cash movements needs to be tackled. One problem is that the 500 note is particularly attractive to money launderers wanting to transport large volumes of cash. The Commission states that it will “work with” the European Central Bank and other relevant parties. In this regard the UK is ahead of the game as the financial sector has agreed to withdraw it from sale.
Fifthly, the Commission is to explore measures for freezing the assets of terrorists. The Commission suggests that, via Articles 67 and 75 TFEU, there could be a EU freezing regime that would go beyond the UN regimes in place. Furthermore, there might be mutual recognition of national freezing orders. Such proposals would be made by the fourth quarter of 2016.
There are further proposals in the Action Plan, but the above list is probably sufficient to make the point that its proposals are potentially far-reaching and complex. Moreover, the Action Plan is to be added to other recent developments in the field of anti-money laundering law, notably AMLD, and the Commission’s proposed directive on combating terrorism, which would introduce a comprehensive criminal offence of terrorist financing (COM(2015) 625.) The Action Plan may be a “further step”, but only in the context of a multitude of staircases pointing in different directions, reminiscent of a scene from the film Labyrinth starring the late David Bowie.
Finally, no piece about EU legal developments at the moment is complete without a mention of Brexit, and whether the decision to stay or go would make a difference to the UK’s legal framework. Of note is that EU law builds upon and takes into account recommendations of the Financial Action Task Force (FATF), of which the UK was a founding member. According to the National Risk Assessment produced in October, the UK continues to play a leading role in developing global standards and the production of guidance. Given this background, it seems highly unlikely that the UK would allow strategic deficiencies to creep into its anti-money laundering system, with the reputational consequences that would follow. Arguably, therefore, the regulatory environment may not change dramatically whether the UK is in or out. Having said that, it will be interesting to see the results of the recent “Cutting Red Tape” consultation on anti-money laundering regulation.