In the committees dealing with civil liberties and economic affairs, MEPs have voted in favour of stronger EU rules against money laundering. The overwhelming majority expressed their determination in fighting illegal funding which is indeed a crucial element in criminal activities.
Over the past 15 years, we have witnessed an increase in international terrorism and organised crime. Lawmakers have therefore pushed for measures that combat money laundering; thus fighting terrorist and other criminal activities.
According to United Nations estimates, in one year money laundering can add up to five per cent of global GDP. Figures show that, in Europe, money laundering can be as high as €600 billion every year. In reaction to the increasing threat of money laundering, a task force, on an intergovernmental basis, was set up to address related issues.
By 2012, the financial action task force adopted new standards that combat money laundering and terrorism. The European Commission turned these standards into legislative proposals. Since then, these proposals have been widely debated and are on the way to being put to a vote.
European Home Affairs Commissioner, Cecilia Malmström, has commented on why laundered money has no place in the European economy. She insisted we have to make sure to avoid money laundering through our banking system and the gambling sector. Therefore, there should be no legal loopholes allowing organised crime or terrorist activities.
Over the past week, at committee level, MEPs have endorsed the key principles proposed by the Commission. However, they went a step further by agreeing on the establishment of public registers. These registers would include the list of ultimate owners of trusts, foundations and companies.
The aim behind such measure is to deter illegal activities and to put an end to anonymous companies, which are often used as a means to evade tax or to provide illegal funds to criminals.
The public registers are likely to empower civil society organisations and the press, especially because it would be easier for them to expose criminal activities. This having been said, it remains to be seen whether such registers will function effectively in practice. Indeed, some are arguing that this measure might be impractical and disproportionate to the objectives it seeks to achieve.
The draft law will be put to a vote at the March plenary session in Strasbourg. This will allow more time for further negotiations with member states.
The draft law seeks to introduce measures that enhance diligence in the activities of financial institutions. It also seeks to give member states the authority to decide whether certain minor activities are exempted from stricter compliance-checking obligations or not.
This amendment has been labelled as the ‘anti-Mubarak’ amendment, mainly because it also extends to people who are politically-exposed at an international level.
Therefore, through their vote, MEPs have extended the scope of the proposal by the Commission. This is because the proposed measure was limited to “politically-exposed persons”. By adding the term foreign, the scope is extended in a way to also include wealthy foreigners who disguise their illegal revenues by making use of companies or trusts.
The draft law seeks to introduce measures that enhance diligence in the activitiesof financial institutions
Transparency International has demonstrated that Hosni Mubarak, the former Egyptian President, managed to save millions of Swiss francs even though his salary was estimated to be about €6,000 a month. Thus, the ‘anti-Mubarak’ amendment seeks to extend the EU´s fight against money laundering also in this regard. This means that members of legislative bodies, heads of state, members of government and supreme court judges are all included.
Many have regarded this vote as a giant step forward in the fight against tax evasion and money laundering. It has also been suggested the European Parliament may have gone too far.
What is certainly undisputed is that the vote represents a clear appeal for greater transparency. Calling for the establishment of a public register also reflects on the serious intentions of the European Parliament in putting an end to hidden company ownership.
The idea of having an interconnected system of public registers facilitates the work of investigators. Through this step, MEPs have targeted individuals who launder money as a result of criminal activities, including: terrorists, smugglers, arms dealers and drug traffickers.
David Casa is a Nationalist MEP.