Money laundering is the process by which criminals “clean” the benefits of their activities to hide their illegal origin. It is usually associated with the types of organised crime that generate huge profits in cash, such as trafficking in drugs, weapons and human beings as well as fraud.
Although it is not possible to measure money laundering in the same way as legitimate economic activity, the scale of the problem is enormous. The United Nations Office on Drugs and Crime (UNODC) estimates that between EUR 715 billion and 1.87 trillion is laundered each year (between 2 and 5% of global GDP).
EU legal measures against money laundering
Since money laundering is a complex, wide-spread and multi-faceted activity, it is tackled from several different angles. The focus is on regulating financial institutions to prevent money laundering, and on disrupting it through law enforcement response.
The keystone of the European system remains the Anti-Money Laundering Directive (AMLD), adopted in 2015 and amended in 2018, which requires financial operators and some non-financial operators, the so-called "gatekeepers", to report any suspicious transactions to Financial Intelligence Units. The Directive reflects the Recommendations of the Financial Action Task Force (FATF), which is the international standard setter in the fight against money laundering and terrorist financing.
In May 2020, the European Commission adopted an action plan for a comprehensive Union policy on preventing money laundering and terrorism financing to increase the effectiveness of the EU regime. Following the Action Plan, in July 2021, the European Commission adopted a new Anti-money laundering package, proposing to establish a single rulebook directly applicable to private entities and an Anti-Money Laundering Agency that will strengthen EU-level supervision and support the work of Financial Intelligence Units.
Criminalisation of Money Laundering
Directive on combating money laundering by criminal law contributes to law enforcement cooperation against money laundering by closing loopholes in the definition and sanctioning of money laundering across the EU.
The directive translates into EU law the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism - the Warsaw Convention, and recommendations issued by the FATF in relation to the criminalisation of money laundering and terrorist financing. It complements and reinforces the application of Anti-Money Laundering Directive by ensuring a robust law enforcement and judicial response to the laundering of illicit money.
Enhancing access to financial information by law enforcement and supporting law enforcement fight against criminal finances
Terrorists and criminals have demonstrated their ability to transfer funds quickly between different banks, often in different countries, but lack of timely access to financial information means that many investigations come to a dead end. There is therefore a clear need to enhance cooperation between authorities responsible for combating terrorism and serious crime when financial information is a key part of an investigation.
The Directive on laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences enhances the use of financial information by giving law-enforcement authorities direct access to information about the identity of bank-account holders contained in bank account registries. In addition, it gives law enforcement the possibility to access financial information available to national Financial Intelligence Units (FIUs), including data on financial transactions, and also improves the information exchange between FIUs as well as their access to law enforcement information necessary for the performance of their tasks. These measures will speed up criminal investigations and enable authorities to combat cross-border crime more effectively.
In July 2021, the European Commission adopted a proposal to amend the Directive on laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences to provide law enforcement authorities with access to the system interconnecting bank account registries.
In addition to these developments, Europol has stepped up its efforts to combat highly sophisticated cases of money laundering, scams and frauds that target individuals, companies and the public sector with the establishment in 2020 of the European Financial and Economic Crime Centre (EFECC). EFECC provides operational support to Member States in ongoing cases in the areas of tax crime, fraud, corruption, money laundering, asset recovery, euro counterfeiting and intellectual property crime.
EFECC has established the first transnational public-private information sharing mechanism in the field of anti-money laundering and counter-terrorist financing, the Europol Financial Intelligence Public-Private Partnership (EFIPP). The EFIPP brings together international banks and public authorities to build a common understanding of money laundering and terrorism financing threats, exchange strategic information by jointly drafting typologies, and facilitate the exchange of tactical information associated with ongoing investigations, through domestic public-private partnerships.
Financial Intelligence Units
Financial Intelligence Units (FIUs) play a key role in the fight against money laundering and terrorist financing. These independent and autonomous units are responsible for receiving, requesting, analysing and disseminating information to the competent authorities on potential money laundering or terrorist financing activities. They are usually placed within law enforcement agencies or administrative bodies reporting to Ministries of Finance in EU Member States.
Several entities and persons fall under anti-money laundering and counter financing of terrorism reporting requirements, such as banks, financial institutions, notaries or casinos. They must file a suspicious transaction report without delay to the FIU when they know or suspect that money laundering or terrorist financing is being or has been committed or attempted. The reports are then transmitted to competent authorities, including law enforcement agencies and foreign FIUs. On the basis of these reports, criminal investigations might be launched if necessary.
Coordination at EU and international level
The Commission has made significant efforts to improve coordination and cooperation between FIUs.
The operational cooperation and exchange of information among EU FIUs has been reinforced by the FIU-NET project. Funded by the Commission since its beginning, this project aims to establish a secure computer network for the exchange of financial intelligence.
The Commission is a member of the Financial Action Task Force (FATF), the main international body concerned with money laundering and terrorist financing. The inter-governmental body sets international standards that aim to prevent these illegal activities. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
The Commission is an observer at the Egmont Group of Financial Intelligence Units, that provides an international platform for the secure exchange of expertise and financial intelligence between FIUs to combat money laundering and terrorist financing.
- Anti-Money Laundering Directive - consolidated version
- Directive on combating money laundering by criminal law
- Directive laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences
- Proposal to amend the Directive on laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences
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