International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, November 18, 2016

Interlinked system of beneficial ownership registers coming soon

The European Commission expects to have in place by next year an interconnected, pan-European system of beneficial ownership registers, as part of the fight against money laundering and tax evasion, the European Commissioner, Věra Jourová, tells MEPs of the Inquiry committee into the Panama Papers scandal.

Ms Jourová, Commissioner for Justice, Consumers and Gender equality, said the linked registers would promote cooperation between member states in the battle against money EU Parliamentlaundering, tax evasion and terrorism financing.  “We foresee having the registers, and soon, I hope next year, they should be interconnected throughout Europe.”

During the hour and half exchange with MEPs, Jourová faced questions about the effectiveness of the Commission’s measures, and particularly against the role of intermediaries.  One MEPs pointed to the example of Nordea bank which in 2015 was fined ‎just €5miilion -- compared to €5 billion in pre-tax profits --  for “major deficiencies” in their anti-money laundering compliance checks.

Jourová maintained that the sanctions -- which could amount to at least 5 million euro or at least 10 percent of annual turnover -- were “robust and strong” and had a deterrent effect.      

High-risk third countries

Under the Commission’s proposals, European banks would also have to carry out additional checks (“due diligence measures”) on financial flows originating from countries with deficiencies in their anti-money laundering and countering terrorist financing regimes.  But Jourová acknowledged that while EU legislation might be effective within Europe, its effectiveness was blunter outside.  “Viz-a-viz high-risk third countries, we are in a weak position and can only exert influence,” she said. 

Many of the European Commission’s proposals against money laundering, tax evasion and terrorist financing are contained in the 4th Anti-Money Laundering Directive (AMLD) which needs to be transposed into respective national laws by June next year.  She insisted that member states had an obligation to implement EU legislation. 

The Commissioner told MEPs that 22 member states had already been reprimanded for ”non-communication” of the 3rd AMLD,  6 of which were referred to the European Court of Justice for non-transposition.  She added that “effective enforcement of existing legislation is as important as the framework.”

Whistleblowers protection

The EU Commissioner said that the recent revelations contained in the “Panama Papers” which was triggered by an anonymous source, highlighted the need for stronger protection for whistle-- blowers.  Under EU law, whistle-blowers are protected in sectorial legislation, for example on market abuse. Jourová said the Commission was currently deciding whether to provide more protection through additional sectorial measures, or whether to adopt a horizontal approach.

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