New anti-money laundering rules a 'step in the right direction'

Widespread support for creation of EU-wide public of beneficial ownership, writes Krišjanis Karinš.

 

By Krišjanis Karinš

12 Feb 2014

Estimates suggest that illegally laundered money accounts for as much as five per cent of the world's GDP. This is a challenge both for the competitiveness of legal business, as well as for government coffers. Measures which inhibit money laundering are good for business as a whole and good for national budgets in particular.

The fourth anti-money laundering (AML) directive currently being debated in parliament is a step in the right direction. Changes proposed to the directive would make it more difficult for criminal organisations and terrorists to legalise their funds in Europe. As co-rapporteur, I have introduced the creation of an EU-wide register of beneficial ownership as a step in reducing the use of offshore companies as a convenient vehicle to anonymously move funds around Europe - a convenience that criminal organisations have widely adopted. The difficulty for police and state authorities currently is that criminals can set up a chain of anonymous shell companies to hide the path their funds take and whom is actually benefiting from them. The register would make it possible for police and tax authorities to uncover who is actually the true beneficiary of any EU legal entity, making life much more difficult for criminals. A side effect is that it would greatly reduce the possibility to avoid paying required taxes in the member states.

Debates in the parliament, as well as tabled amendments by individual members, clearly demonstrate that there is widespread support for the creation of such a public register. Some MEPs are arguing for unrestricted access to these registers by any and all citizens via a simple internet search. Others are somewhat more concerned about individual data protection and envision a somewhat more regulated approach.

[pullquote]The goal of the changes to the directive are clear - to limit the scope of criminal and terrorist activity in Europe[/pullquote]. The main new tool that we are working on is a European register of beneficial ownership that would lift the veil of secrecy from so-called 'offshore' companies widely used both by organised crime and by companies and individuals wishing to avoid paying their fair share of taxes.