EU BYTES Anti-Money Laundering
Now that I have completely gone off topic, let me get back to what I wanted to discuss with you today, the good old AML. I can imagine faces cringing whilst reading about this, especially those that know the very demanding process of implementing AML measures to abide by European and national law. The 2020 Work Programme sets out a new
Action Plan on Anti-Money Laundering to “ensure the integrity of the European financial system and reduce the risks of instability. It “will seek to improve the supervisory system and improve the enforcement of the rules”. Not a big surprise after several banking scandals. A breath of fresh air for those of you who are
already complying with current rules? Well, don’t get too cosy, because there is no guarantee that reporting obligations might not get an update. Plus, there is no guarantee whatsoever that there might not be a suggestion of more stringent rules on how transactions are to be monitored. And, as you will see below, it can go much further than that. By the way, initially the Action Plan was set for end of March but is now postponed for Commission approval to 6 May.
Roadmap before the Action Plan
As most of you know, AML has been an ongoing process. The last time I extensively reported on the matter was in October when I discussed the European Commission’s supranational risk assessment published in July 2019. I went through how offline casinos and other forms of gaming were perceived in terms of risk. Quick re-cap: State or public company casinos are lower risk, but casinos are overall still seen as the “most exploited channel to launder money through gambling activities”. Result: Threat level 4 (very significant). Vulnerability level 2 (moderate).
For other games: - Betting: threat 3, vulnerability 3. - Bingo: threat and vulnerability 1.
- Gaming machines outside of casinos: threat and vulnerability 2.
- Lotteries: threat and vulnerability 2. - Poker: 3 in both cases. On 12 February 2020, the European Commission published a Roadmap which also set out a period for feedback by citizens and stakeholders. The premise thereof is that “the EU legal framework needs to be enhanced. The minimum harmonisation approach adopted in the existing EU legislation results in 28 different national frameworks. These differences create loopholes in our preventive framework, which criminals exploit to launder money as shown by the cross-border nature of many money laundering scandals in the EU.” This potentially implies a reversal of the efforts you have put into abiding by the rules through a legal interpretation allowing the glove to fit the system you have in place or planned to have in place. Why? Because now everyone will be looking at the same glove. First, everyone will want that glove to be the right size. Once the size is established, it will be up to you to fit the determined size. Another premise the Roadmap is based on is
that new technologies are an opportunity creator for laundering money, including virtual currencies. Being innovative is sometimes not the easiest task.
Cash Management
Regarding feedback by stakeholders and citizens mentioned above, the deadline thereof was 11 March. There have been 45 responses made publicly available. I have not seen any responses from the gambling sector. I would like to mention though, the feedback provided by the European Cash Management Companies’ Association (ESTA), and not because it briefly mentions casinos (in a non-significant manner). And, not because (as might not be the surprise many anyway) it is stated that: “Cash is…not a convenient means for criminals.” And, “…the largest part of money laundering is conducted with non-cash channels.” My interest lies within the context of Article 11 (d) in the 4th Anti-Money Laundering
Directive regarding the implementation of “customer due diligence in case of several operations which appear to be linked”, whilst keeping the threshold of €2,000 for due diligence in mind. A sticky issue, as I have mentioned repeatedly, as I don’t think anyone really knows what “linked” means in practice. But, obviously in principle. ESTA has said: “Cash is the trigger of the large
majority of suspicious transaction reports. It constitutes…a weakness of criminal organisations. Even without cash, illicit activities would continue anyway, but their detection would be rendered more difficult, as [Financial Intelligence Units] do not yet have the means to monitor a series of small wire transfers connected to each other. Less cash would not reduce illicit profits; it would only make them less visible to [Law Enforcement Authorities].” Worth thinking about if you have a cash or electronic payment intensive business. Indeed, I think the cash vs. electronic payments element will be one key discourse on defining what “operations which appear to be linked” means, if, or once the silent lion will be awoken.
5th AML Directive
If you remember, in October I also discussed the 5th AMLD which looks at prepaid cards, providers of exchange services and custodian wallet providers (think cryptocurrencies), transaction with high-risk third countries, and beneficial ownership registers. The introduction primarily derived from last years’ terrorist attacks across Europe and was supposed to be transposed into national law by January 2020. Cyprus, Hungary, the Netherlands, Portugal, Romania, Slovakia, Slovenia and Spain have been sent letters of formal notice for not having notified any implementation measures. As stated in the press release: “Without a satisfactory response from Member States within 2 months, the Commission may decide to send them reasoned opinions.” Even in time of Corona, I see no reason why this might be postponed (by much). Greetings from Brussels.
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