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Ladies and gentlemen,
I’m happy to start my week with an important and concerning topic.
We all know about the importance of combatting money laundering and terrorist financing. It is criminal activity and it undermines trust in our financial system.
Money laundering is never out of the news, and the risks increased when COVID-19 hit.
The recovery phase will pose extra challenges, as businesses struggle and money is funneled to the economy.
That is all too tempting for criminals.
The Economist last month argued a rethink of AML strategy is needed if we are to win our fight against crime.
A rethink is exactly what this Commission set out to do.
In May last year we set out our vision for the Union’s future AML system in a detailed Action Plan.
We are almost ready to present these reforms.
And while I cannot this morning outline the details of the Commission’s package - it will be unveiled in July, lightly delayed due to technical issues and the sheer volume of this package.
Nevertheless, I can share with you some elements of our plans, with a bit more detail than in last year’s Action Plan. Everything that I will say today is still subject to confirmation, nothing is written in stone.
At the heart of our plans are more harmonised rules and a new AML Authority at EU level. The idea is to have common standards, common application and common supervision of our rules. That is as it should be in a single market.
Firstly, on our rulebook. Until now, the application of AML rules has suffered from a lack of sufficient detail at EU level. This means that transposition at national level can diverge far too easily. And that has resulted in weak links across the internal market. We want this to end.
Rules for the private sector will be laid down in a directly-applicable EU regulation. There will be the same rules across the EU in the most substantial areas.
In other areas, there will be some margin for the Member States in relation to how they want to organise their system, especially as regards the details about how national supervision and Financial Intelligence Units work.
That does not mean that the current situation will continue in those areas. We know that more work is needed to improve the supervision and the coordination of Financial Intelligence Units, and we intend to address shortcomings there too.
Of course, we need to respect the fact that our system is risk-based. We recognise that certain risks occur only in some Member States. But when risks are relevant for the EU as a whole, then we will act at EU level.
We will also review the list of sectors covered by AML rules in our new proposal. The first step will be to align it with the latest Financial Action Task Force (FATF) standards and cover all types of Virtual Asset Service Providers as Obliged Entities.
This also means ensuring the traceability of transfers of virtual assets. So they will be added to the scope of the existing Transfer of Funds regulation. This regulation imposes transparency on the senders and receivers of payments. So the transfers of virtual assets will be accompanied by the full details of sender and beneficiary.
Another part of our plan is to increase the detail in some areas already included in the AML Directive such as Customer Due Diligence and beneficial ownership.
An important component of the rulebook will be legally binding technical standards to be developed by the future AML Authority, which will add more granularity to the top level rules in the regulation and bring about more harmonisation.
For example, one area where technical standards are planned is Customer Due Dilligence.
And there will be others.
Then there are risks that have not been fully mitigated yet.
Bearer instruments are generally highly exposed to criminal misuse due to their anonymity.
Cash is the most important bearer medium.
Most proceeds of criminal activity are still cash. This cash is then invested in property or high value goods to disguise its illegal origin. These risks are already reflected in our current rules: operators that make or receive payments worth €10,000 or more when trading in goods are subject to AML rules.
But frankly we have to recognise that this has not worked well.
So we are looking at setting an EU-wide upper limit for cash purchases of €10,000.
We recognise and, of course, respect the fact that a number of Member States have already imposed lower ceilings.
A €10,000 limit is high enough not to put into question the euro as legal tender, nor to affect financial inclusion.
We respect the vital role of cash.
At the same time, this limit is low enough to make it harder for criminals to launder large sums of cash.
Second, the flagship of our reform is a new AML Authority. It will have a number of different roles:
- It will be the direct supervisor of certain financial sector entities which operate cross-border and are in the highest risk category;
- It will act as a coordinator and overseer of national supervisors for other entities, including - with a lighter touch - entities outside the financial sector;
- It will coordinate and provide support to Financial Intelligence Units;
- It will also have a regulatory role, preparing technical standards and guidelines;
- And finally, the new Authority will advise the Commission, for example on AML risks outside the EU.
So the Authority will combine supervisory and FIU coordination tasks under one roof.
That will help us get a better understanding of the risks facing the EU – so we have a full picture of the risks and the measures taken to address those risks.
The roles of direct supervisor in the financial sector and indirect supervisor outside the financial sector should be complementary.
A limited number of financial institutions would be directly supervised by the Authority, relieving national supervisors of a significant burden.
Experience in direct supervision, even of a fairly limited number of entities, will enable the Authority to better coordinate national supervisors that supervise the other Obliged Entities.
In this, we want to learn from the experience of the Single Supervisory Mechanism which supervises large EU banks.
Direct supervision should be carried out via Joint Supervisory Teams working with national supervisors, which will also help bring together the Authority and national supervisors.
The new Authority will be funded to a significant degree from fees from obliged entities to avoid being an excessive burden on the EU budget.
We will make sure that fees are reasonable and manageable.
As for timing, our current planning is for the Authority to get off the ground in 2024, reach full staffing in 2025 and start carrying out direct supervision in 2026.
[Other AML action]
Before I finish, I would like to emphasise that the legislative package is not the only thing that the Commission is working on in the AML area. The 2020 Action Plan covers three other non-legislative areas. A word on each of those in turn.
First, we plan to launch a consultation on information exchange and public-private partnerships very soon. The idea is that we will then publish guidance by the end of the year. I’d encourage you all to give your feedback.
Second, on international co-operation, we plan to deepen our involvement in FATF and step up EU coordination on global AML issues.
Global cooperation is vital.
We are very active in FATF. We contribute to mutual evaluations and we participate in more general projects, for example on digitalisation and on possible unintended consequences of international standards.
Third and finally, enforcement.
This remains a top priority for us. Here, our work is much more than just monitoring the transposition of existing Directives.
It involves proactively looking at how the current regime is applied in all Member States. We have commissioned studies on how the AML framework is implemented in each Member State and we will base our enforcement on the findings.
A key priority is making sure that beneficial ownership registers are up and running and fully populated. We are also working on the cross-border interconnection between national beneficial ownership registers – which should start later this year.
And we are promoting awareness of the importance of beneficial ownership among civil society. Beneficial ownership is one of the areas where we plan to add some clarity to the EU level rules in our upcoming proposals.
So these are busy times in the AML field.
I genuinely believe that the work that we are doing now will lay solid foundations for a robust EU anti-money laundering and counter-terrorist financing regime which will stand the test of time.
It is an absolutely vital task.
We have all seen enough news stories about money laundering and the systems in place failing to stop it.
Thank you for your attention.