EU warns on failure to apply money laundering rules

Brussels has rebuked national governments in the EU for failing to apply rules aimed at making it harder for terror organisations and criminal gangs to hide their money by shifting it around European countries.

Vera Jourova, the EU justice commissioner, told the Financial Times that as many as 17 EU countries may have failed to put the rules in place on time, despite them having more than two years to do so. The measures require countries to set up national registers showing the ultimate “beneficial owners” of companies, which can then be accessed by authorities throughout the EU.

Europol and other EU law enforcement agencies have said that the plans would make it harder for people to hide assets behind complex corporate structures, and simpler for authorities to work together to track suspicious cross-border transactions. They also set tougher due-diligence requirements for banks, lawyers and accountants.

Ms Jourova said she had sent letters to 14 countries last week over concerns that they have failed to put the rules on their national statute books at all. She also sent letters to another three countries where the measures appear to have been only partly implemented.

The rules, known as the “fourth anti-money laundering directive”, were supposed to take full effect across the EU on June 26.

The only EU nations to provide full confirmation to Brussels that the measures were implemented on time were the UK, France, Germany, Italy, Spain, Slovenia, Sweden, Austria, Belgium, the Czech Republic and Croatia.

Ms Jourova said the performance was unacceptable at a time when the EU has made the fight against illegal finance one of its top priorities in the wake of a spate of terror attacks.

“This directive equips us much better,” she said. “It sets safeguards regarding financial flows from high-risk third countries, it deals with modern risks such as pre-paid card payments and operations in virtual currencies.”

The letters are the first stage in formal legal proceedings that will lead to the European Commission taking national governments to the European Court of Justice if the rules are not applied.

“I now expect swift action from the member states concerned to fix this,” Ms Jourova said. “I hope this is just a small hiccup, not a sign of serious foot-dragging.”

Brussels relies on notifications from national capitals to know whether directives that have been agreed on at EU level have actually been “transposed” on to national statute books. While there are often lapses and delays, it is unusual for so many countries to miss the official entry into force of an EU law.

A report by the commission, published last month, identified 40 products and services that are particularly vulnerable to targeting by terrorists and other criminals seeking to launder money. They include crowdfunding platforms, virtual currencies, online gambling, real estate and even non-profit organisations.

“A common technique for criminals is to create shell companies, trusts or complicated corporate structures to hide their identities,” the report warned. “This widespread issue is not limited to certain jurisdictions or certain types of legal entities or legal arrangements.”

The United Nations Office on Drugs and Crime estimates that between 2 and 5 per cent of global gross domestic product is laundered each year.

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