Money laundering

Question from Sarah Ludford to Commissioner McCreevy: It has plausibly been claimed recently by the City of London Corporation that the European Union's fight against money laundering - and therefore potentially terrorist financing - through creation of an effective regime to deter and detect criminals is being hampered by Member States' inconsistent, uneven and inadequate implementation of the 2001 Second Money Laundering Directive.

With the third Money Laundering Directive due for implementation in 2007, what strategy does the Commission now have for enforcing prompt, proper and uniform implementation of EU law on this vital subject across all Member States, one which maximises the chance of hunting down suspicious transactions while minimising unnecessary cost and red tape for businesses and honest customers?

Response from Commissioner McCreevy: As you are aware, Member States are required to have fully transposed the third anti-money-laundering directive into national law by 15 December 2007 at the latest.

This directive reinforces our actions in the fight against terrorist financing. It provides for harmonised rules under which the obliged entities and persons can apply customer due diligence procedures, taking into account the risk of money laundering and terrorist financing. In order to help Member States ensure a timely and proper transposition of this directive, we are following a threefold strategy.

Firstly, in November 2006 we held an initial transposition workshop. The objective of this meeting was to exchange views and provide clarity on issues of interpretation or any other problem linked to transposition.

Secondly, we have set up a European platform between the Financial Intelligence Units. These are the national authorities competent to prevent and counter money-laundering and terrorist financing by receiving and analysing suspicious transaction reports filed by credit and financial institutions, as well as by selected non-financial businesses and professions. The FIUs are directly involved in the enforcement of the directive. Within the European platform, regular meetings are organised to exchange information, notably on the provision of feedback to reporting entities.

Thirdly, we support the work carried out by the joint Anti-Money-Laundering Task Force which the Committee of European Banking Supervisors has created in association with the European insurance supervisors and the securities markets supervisors. The objective of this task force is to enable the sharing of experience and best practices between financial services supervisors. This is crucial for a consistent implementation of the directive across the European Union. The Commission participates as an observer.

Response from Sarah Ludford: Thank you, Commissioner. It sounds as if you are going to get a lot of information. However, are you going to issue some guidelines to secure more consistent application? Because it seems to me at the moment that we have the worst of all worlds: no level playing field for businesses, and therefore different costs; and no consistent consumer protection, for instance on whether or not the right of customers to obtain access to information under the data protection directive is being overridden by the tipping-off provisions under anti-money-laundering laws, and whether banks are slipping in commercially useful questions under the cover of 'know your customer' principles.

I appreciate what you are doing, but why not issue some guidelines, which would go some way to getting some consistency? Otherwise there is going to be even more of a mess when the third anti-money-laundering directive is implemented.

Response from Commissioner McCreevy: I think that what the honourable Member says is quite reasonable. From my knowledge of previous directives, practice varies from Member State to Member State. Furthermore, within Member States, it probably varies between financial institutions - I am aware of that too, but you must remember it is quite early days. I know that we are now on the third anti-money-laundering directive, but people are learning and, hopefully, with the processes we have set up, such as the bodies I have just referred to, best practices can be established and then people can learn from one another.

I would not rule out making some guidelines in the future, as the honourable Member referred to. Perhaps that will be done in the future, either by the Commission or some agency on our behalf through all these processes. However, as the honourable Member will understand, we have gone for the risk-based approach, which leaves a fair degree of flexibility in the hands of the entities, and that leads to some of the problems we have just outlined.

On the other hand, if you went for the more prescriptive approach, line by line, it would probably take ages to get agreement between the different Member States because of the different cultures in this particular area. Hopefully, we are learning, and I do not rule out any future initiative that would bring greater consistency in this area, which is what, I believe, everybody desires.