EU shines light on shady business deals

Written by Krišjānis Kariŋš, Judith Sargentini, Peter Simon and Timothy Kirkhope on 26 May 2015 in Special Report
Special Report

Parliament has given its stamp of approval to legislation aimed at combating money laundering, which will also help fight tax evasion.

Krišjānis Kariŋš (EPP, LV) is parliament's co-rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

Illegally-laundered money accounts for as much as five per cent of the world's GDP and is a challenge both for the competitiveness of the legal sector, as well as for government coffers. The fourth anti-money laundering directive is aimed at limiting the scope of criminal and terrorist activity in Europe. 

Estimates suggest that money laundering accounts for as much as 2.7 per cent of the world's economic activity (GDP) - €1.4 trillion in 2009. This is a challenge for both the competitiveness of legal business and government coffers.

For years, criminals in Europe have used the anonymity of offshore companies and accounts to obscure their financial dealings. It is clear that authorities need new means to effectively deal with ever-eluding criminals using the fragmentation of the internal market. 

We still do not have a common EU register for owners of companies. Building one for those that hide behind them is a big step - one that we must take. It will help to lift the veil of secrecy of offshore accounts and greatly aid the fight against money laundering and blatant tax evasion.


Judith Sargentini (Greens/EFA, NL) is parliament's co-rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

The EU has opted for increased transparency in the fight against money laundering and tax evasion, with parliament adopting new legislation aimed at tackling both of these things.

These new rules will provide much greater transparency for the shadowy business structures that are at the heart of money laundering schemes, as well as those used by companies to eschew their tax responsibilities.

If we are to truly combat tax crimes and corruption, we need full transparency on who owns what, notably P.O. box companies, which enable profits to be shunted around off the radar. 

To this end, the new rules include crucial provisions on central registers for beneficial ownership, as proposed by the Greens. These registers will be accessible to authorities and obliged entities, but also to civil society organisations and investigative journalists with a legitimate interest. This helps to expose those behind shell companies and other opaque company structures.

Making ultimate beneficial ownership information available to the general public will pressure companies to play by the rules. Public scrutiny is a powerful tool. 

When the information is accessible to all citizens, they can make deliberate choices not to support or to buy from companies that do not have trustworthy company structures. 

The ability to access the beneficial ownership information will be especially valuable for investigative journalists and civil society. 

Their research can reveal information on beneficial ownership that otherwise would stay unnoticed, as was the case with 'LuxLeaks'. The registers also provide the possibility of tackling tax avoidance.

EU member states now have two years to implement the new law and to set up these ultimate beneficial ownership registers.

 

Peter Simon (DE) is parliament's S&D group shadow rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

In order to tackle this global challenge of money laundering, parliament has taken an important step by updating the framework for the fight against money laundering and terrorist financing, which consists of the fourth anti-money laundering directive and the transfer of funds regulation. 

This legislation forces member states to create central public registers, providing detailed information on beneficial owners of all corporate structures such as companies, trusts, foundations and holdings. 

This is a central achievement in the fight against money laundering, because, to date, there were no such registers. And yet, the establishment of the client's identity is the pivotal point in the fight against money laundering. 

The Socialists and Democrats have insisted on the establishment of these registers as a crucial step to improve transparency, by granting full access to law enforcement authorities, lawyers, banks and other obliged entities. 

Parliament had requested a swift linkage of national registers, but the current plan is for the commission to assess technical possibilities only after four years. 

The flow of information should not stop at national borders. A quick ultimate linkage of the registers is needed. This facilitates the work of the investigators, therefore we must continue working on this issue.

 

Timothy Kirkhope (UK) is parliament's ECR group shadow rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

The fight against money laundering has gained a new weapon in its arsenal. The new anti-money laundering legislation, which passed through the European parliament this plenary, aims to shine a light on areas where criminals launder dirty money and cut red tape. Where money laundering is concerned, sunlight is the best disinfectant. 

I firmly believe if you cut off the flow of money, you cut off the long reach of criminal groups and terrorists, and help better protect the stability of our economy and the individual. 
 
This new EU directive aims to bring the law up to date with technological developments that make it much easier to link cash to crimes such as trafficking, terrorism or corruption. It will work on the basis of assessing risks, so that the majority of people who transfer money or set up businesses are subject to less bureaucracy and unnecessary inconvenience. 

However, it will stop fake companies from depositing money and disguising assets, and it will require more information to accompany the transfer of funds, in line with new international standards. 

A global approach to money laundering is essential for success in the fight against criminality. Criminals do not respect international boundaries and legal jurisdictions, so we must have the right legislative tools at our disposal to leave them no place to hide. 

I drafted the parliament's position on strengthening rules regarding information that accompanies all bank and wire transfers, to fill the gaps and loopholes that can be used by criminals and terrorists to launder funds. 

My main aim was to right the wrongs of the past. For years both consumers and business ran into difficulties with implementing previous legislation. Our aim this time has been to create a sensible, proportionate and effective way forward in the fight against money laundering and I believe that this has been achieved. 

About the author

Krišjānis Kariŋš (EPP, LV) is parliament's co-rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

Judith Sargentini (Greens/EFA, NL) is parliament's co-rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

Peter Simon (DE) is parliament's S&D group shadow rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

Timothy Kirkhope (UK) is parliament's ECR group shadow rapporteur on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing

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