Lindsay Columbo: EU adopts tougher, more consistent AML rules and penalties

The European Commission issued a statement last week announcing more robust rules on the criminalization of money laundering and penalties for offenses.

The new rules were proposed by the Juncker Commission in December 2016 and are intended to align money laundering offenses and sanctions throughout the EU, with a special emphasis on terrorism financing.

Julian King, Commissioner for the Security Union, said, “We need to hit terrorists and criminals in their pockets — cutting off their access to money is a vital part of preventing their crimes. The new rules agreed today are an important step in the fight against the financing of terrorism, helping to pave the way towards an effective and genuine Security Union.”

The Juncker Commission developed an Action Plan in early 2016 to help Member States combat terrorist financing.

The Plan resulted in three specific measures:

• a regulation on cash controls

• a directive to criminalize money laundering, and

• a regulation on mutual recognition of criminal asset freezing and confiscation orders.

The Member States and the European Parliament came to an agreement on these measures in May 2018.

The new rules are specifically designed to standardize the various definitions of “criminal offenses” and “sanctions” across the EU Member States.

Although all Member States criminalize money laundering, inconsistent definitions created loopholes for bad actors who strategically planned to commit offenses in areas with weaker penalties.

Definitions of money laundering-related crimes across the EU, including activities that may not currently be deemed crimes in all Member States were agreed upon for the new rules.

Minimum penalties across Member States (four years imprisonment for money laundering) were established, along with a formal obligation on Member States to add sanctions where necessary.

The new rules also make cross-border cooperation easier for police and the courts.

The new EU rules will officially take effect after they’re approved by the European Parliament as a whole and the Council of Ministers.

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Lindsay Columbo, Esq. is a founder of eSpear LLC, a developer of due diligence and screening solutions, where she serves as the Global VP of Compliance & Support Services. She previously served as Associate Corporate Counsel, Global Ethics & Compliance for Brightstar Corp. a SoftBank company headquartered in Miami, Florida. She can be contacted here.