Anti-Money Laundering

1. Anti-Money Laundering European Commission DG Internal Market and Services David Schwander The European future priorities in tackling money laundering ALDA Brussels, 09.10.2014

2. The issue… • Criminal proceeds: US$ 2.1 trillion in 2009 • Amount available for money laundering: US$ 1.6 trillion • Amount of funds intercepted by law enforcement: <1% • Amount of seizures: <0,2% • Source: UNODC, Commission SWD(2013) 21

3. Approach to tackle ML/TF • Global approach through FATF • Short term priorities (4th AMLD and FTR) • Long term priorities

4. Financial Action Task Force (FATF) • Global standard-setter for measures to combat ML and TF • Intergovernmental body with 36 members and the participation of over 180 countries through a global network of FATF-style regional bodies • Commission = one of founding members of FATF • original FATF standards amended in the aftermath of 9/11,fully revised in June 2003 ( Third AMLD), latest revision of standards in February 2012 ( Commission's proposals, Fourth AMLD)

5. Global approach • FATF • "The FATF calls upon all countries to implement effective measures to bring their national systems for ML, TF and PF into compliance with the revised FATF Recommendations" (FATF Recommendations, Feb. 2012) • G8 and G20 • "Our financial systems are exposed to significant risks from money laundering and terrorist financing. We fully support the FATF Standards and commit to implementing them effectively" (June 2013 G8 Communiqué). • European Council • "There is a need to deal with tax evasion and fraud and to fight money laundering, within the internal market and vis-à-vis non-cooperative third countries and jurisdictions, in a comprehensive manner (…). The revision of the third anti-money laundering Directive should be adopted by the end of the year;" (May 2013 European Council Conclusions).

6. Currentlegalframework • Third Anti-Money Laundering Directive (2005/60/EC) • In place since 2005 • European framework built around the international FATF standards • applies to financial sector, lawyers, notaries, accountants, real estate agents, casinos, company service providers and all dealers in goods when payments are made in cash in excess of €15 000 • Changes in international standards (February 2012)

7. Why the revision? • to adapt legal framework to counter new threats of ML and TF • to reflect recent changes due to revised FATF Recommendations • to counter criticism that MS implementation has been inconsistent with FATF Recommendations (e.g. on simplified due diligence) • to strengthen the Internal Market

8. The Commission'sproposals • A Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (4th AML Directive) • A Regulation on information accompanying transfers of funds basic approach:  keep text where possible  streamline text where possible

9. Principal obligations imposed by currentframework • Identification of customer and the “Beneficial Owner” • Obligation to report suspicious transactions • Ongoing monitoring • Record keeping • Supervision • Staff protection

10. Main elements of new DIRECTIVE • risk-based approach • coverage of tax crimes as predicate offence • coverage of gambling sector  beyond FATF requirements • cash payments of €7 500 or more  beyond FATF requirements • customer due diligence (CDD) • Politically Exposed Persons (PEPs) • information on beneficial owner  beyond FATF requirements • reinforcement of sanctioning powers  beyond FATF requirements • Cooperation between Financial Intelligence Units • European Supervisory Authorities (ESA)

11. Risk-basedapproach • Understand ML/TF risks, target resources more effectively and apply preventive measures that correspond to risks of particular sectors/activities • Evidence-based measures at three levels: • Member States  identify, understand and mitigate risks + share results • Institutions and persons covered by Directive  identify, understand and mitigate risks and document/update assessment of risk • Supervisors  resources can be focused on areas where risks of ML/TF are greater • Risk assessment work also carried out at supra-national level • Make CDD-rules more risk sensitive – based on indicative and non-exhaustive risk factors: • enhanced measures where risks are greater, • simplified measures where risks are demonstrated to be less

12. KeyMilestones in the process • Feb 2012 Adoption of FATF international standards • Feb 2013 Adoption of COM proposal for a 4th AML Directive • June 2013 G8 Communiqué – fight against tax evasion is now a major topic and linked to the AML debate • March 2014 – EP completes its first reading • June 2014 – Council, under GR Presidency, agrees on a general approach • ------------------------------------------------------------------------------- • October 2014 – kick off of Trilogues – to reconcile EP and Council positions • End 2014 – Political agreement? • 2 years transposition period

13. Future challenges • Ensure effective implementation of AMLD and RBA • EU Supranational risk assessment • Improve operational cooperation between all players - public and private sector

14. Thank you for your attention!