On November 8, the European Commission took significant actions against two European Union (EU) Member States to underscore the importance of compliance with the 4th Anti-Money Laundering (AML) Directive, Directive 2015/849. That Directive, according to the Commission,
“reinforces the previously existing rules by:
- “strengthening the risk assessment obligation for banks, lawyers, and accountants;
- “setting clear transparency requirements about beneficial ownership for companies and trusts;
- “facilitating cooperation and exchange of information between Financial Intelligence Units from different Member States to identify and follow suspicious transfers of money to prevent and detect money laundering or terrorist financing;
- “establishing a coherent policy towards non-EU countries that have deficient anti-money laundering and counter-terrorist financing rules;
- “reinforcing the sanctioning powers of competent authorities.”
First, the Commission decided to refer Luxembourg to the EU Court of Justice for transposing only part of that Directive into their national law. The Commission also proposed that the Court of Justice charge “a lump sum and daily penalties until Luxembourg takes the necessary action.”
Second, the Commission adopted an opinion requiring the Maltese anti-money laundering supervisor, the Financial Intelligence Analysis Unit (FIAU), to continue taking additional measures to fully comply with its obligations under the 4th AML Directive. Previously, on July 11, 2018, the European Banking Authority (EBA) investigated and concluded that the FIAU was breaching Union law. It determined, per the Commission, “that Malta failed to correctly supervise financial institutions and ensure their compliance with anti-money laundering rules.” In particular, the Commission called upon the FIAU to take a number of measures, including:
- “Improving its methodology to assess money laundering and terrorist financing risks;
- “Enhancing its monitoring and supervisory strategy by aligning resources with the risk of money laundering posed by certain institutions;
- “Ensuring that the authority is able to react in an appropriate time when a weakness is identified, including by revising its sanctioning procedures;
- “Ensuring that its decision-making is properly reasoned and documented;
- “Adopting systematic and detailed record-keeping processes for offsite inspections.”
Note: The Commission’s actions in these two cases are not unique; it has previously referred Romania and Ireland to the Court of Justice, and taken other actions against 18 other Member States, regarding transposition measures for the 4th AML Directive. In light of the continuing surge of AML enforcement activity in the European Union, however, the Commission needs to continue to assert its AML oversight authority with vigor, even as it sorts out what additional authority it may seek to exert even greater supervision and control over European financial institutions.
In addition, the Commission doubtless has its eye on the 5th AML Directive, which entered into force on July 9, 2018 and which Member States will have to transpose into national legislation by January 10, 2020. Given its experience with many Member States’ delays in fully transposing the 4th Directive, the Commission should be concerned about Member States’ ability to transpose the latest Directive into national law in just over 15 months’ time.