European Commission announces reform plans – AML Regulation and EU AML supervisor in the making?

3 minutes

On 7 May 2020, the European Commission (the “Commission”) introduced a new set of proposals to address money laundering and terrorist financing on an European Union (“EU”) level (see link). These proposals exit of:

  1. an Action Plan for a Comprehensive EU policy on Preventing Money Laundering and Terrorist Financing (the “Action Plan”);
  2. a new methodology to identify high-risk third countries that have strategic deficiencies in their national anti-money laundering and countering terrorist financing regimes (the “New Methodology third countries”); and
  3. an updated list of high-risk third countries with strategic deficiencies in their regime regarding anti-money laundering and countering terrorist financing (the “Updated List of high-risk third countries”).

Below, we will discuss the Action Plan, the New Methodology third countries and the Updated List of high-risk third countries.

  1. Action Plan

The Action Plan is built on the following six pillars:

  1. Effective application of EU rules (timeline: ongoing);
  2. A single EU rulebook (timeline: Commission proposal Q1 2021);
  3. EU-level supervision (timeline: Commission proposal Q1 2021);
  4. A coordination and support mechanism for FIUs (timeline: proposal Commission Q1 2021);
  5. Enforcing EU-level criminal law provisions and information exchange (timeline: Commission proposal Q1 2021);
  6. The EU’s global role in combatting AML/CFT (timeline: methodology Q2 2020).

In the Action Plan, the Commission announces, inter alia, that it will introduce a more harmonised set of rules with respect to anti-money laundering and terrorist financing a European level. This harmonised set of rules may be introduced via a directly binding EU AML/CFT regulation. Furthermore, the Commission plans to set up a supervisor on the EU-level to oversee the new set of rules. This may be EBA or a newly-formed supervisor.

The Commission has launched a public consultation so that authorities, stakeholders and citizens can provide their feedback. The public consultation runs until 29 July 2020 (see link).

  1. The New Methodology third countries

Secondly, the Commission has published a new methodology to identify high-risk third countries that have strategic deficiencies in their national anti-money laundering and countering terrorist financing regimes. The key new elements concern: (i) the interaction between the EU and Financial Action Task Force listing process; (ii) an enhanced engagement with third countries; and (iii) reinforced consultation of EU Member States experts.

  1. Updated List of high-risk third countries

Lastly, the Commission has listed the following countries as high-risk third countries with strategic deficiencies in their regime regarding anti-money laundering and countering terrorist financing: The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe. The following countries will be delisted: Bosnia-Herzegovina, Ethiopia, Guyana, Lao People’s Democratic Republic, Sri Lanka and Tunisia.

The Commission will amend the list in the form of a Delegated Regulation. The Delegated Regulation is submitted to the European Parliament and Council for approval within one month (with a possible one-month extension). The addition of the aforementioned countries to the Updated List of high-risk third countries are planned to apply from 1 October 2020.

Leading role of the Netherlands

The Netherlands plays a leading role in the push of a European approach in the fight against money laundering and terrorist financing. For example, the Netherlands, together with France and Germany (amongst others), published a position paper that advocated a European supervisory mechanism for money laundering and terrorist financing (see link).