The European Union seeks to eliminate black money in its financial system
The European Union unveiled a project this week on which it began work a year ago to make it more difficult for illicit money to infiltrate the European financial system. A year ago the European Commission started work on a list of countries with a "high risk" of money laundering and terrorist financing. The case of Saudi Arabia, which was emerging as one of the nations to enter this classification, stands out. However, the reforms that the country is implementing to re-organise its economy and modernise its productive system have made it easier for the desert kingdom to "fall" from this sinister classification. On the contrary, Panama has ended up entering the list and, along with 12 territories, will have to submit to greater scrutiny by European banks when they operate in these territories.
The EU has described Panama's efforts to combat money laundering as "deficient", for example in identifying unauthorised money remitters or the absence of adequate verification mechanisms for bank owners. Brussels has explained in a statement that the new methodology they have used for the new list has been made taking into account international developments since 2018.
The list includes up to 12 jurisdictions, including some territories that are part of the United States, such as the Bahamas. Both Riyadh and Washington protested against the inclusion on this list. "Making financial and banking transactions with these countries could expose the European financial system to high risks of money laundering and terrorist financing," explained Justice Commissioner Vera Jourová. She stressed that this classification is a warning and not a system of sanctions. Ms Jourová insisted that the latest scandals have created distrust among European citizens. "Citizens have the impression that the rich and the cheats are playing a different, more privileged game. The EU wants to put an end to that in order to restore citizens' confidence," she said.
Among the territories to be scrutinised by the EU are the Bahamas - as mentioned above - Mauritius, Nicaragua, Panama, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mongolia, Myanmar and Zimbabwe. Following the EU's review of the list, those countries that are left out are Bosnia and Herzegovina, Ethiopia, Guyana, Lao People's Democratic Republic, Sri Lanka and Tunisia. The EU partners reviewed this classification after Riyadh and Washington stated that a transparent and robust process had not been followed to encourage the countries to take action.
The European Commission has reviewed the list in the light of international developments since 2018 and the lists published by the Financial Action Task Force. The coronavirus crisis will delay somewhat the implementation of the new regulation, which will not be applied until 1 October 2020 so that those concerned can prepare themselves. In addition, both the European Parliament and the European Council will have a month to raise objections to the decision taken by the European Commission.
To complement the updated list, the Community authorities have announced their intention to create a European supervisor during the first quarter of 2021. At present, each Member State must be responsible for supervising European standards individually. Brussels believes that this may lead to divergences.
New harmonised rules will also be proposed, which will serve to improve coordination between the new bodies and strengthen the action of the European Banking Authority. "We have to stop the infiltration of dirty money into our financial system. There must be no weak links either in the rules or in the implementation," said European Commission Vice-President Valdis Drombrovskis.
