Money laundering in the financial system hurts us all. It lets criminals conceal the illegal origins of their dirty money, allowing them to profit from crime. At the same time, far too many scandals have involved financial institutions, undermining trust in the financial system.
It’s been estimated that up to $2 trillion is laundered throughout the world every year. Europol, the European Union’s (EU) agency for law enforcement cooperation, assesses the annual cost of money laundering to the European economy at well over $120 billion. The damage to the American economy is around $300 billion annually. That is a serious threat for our societies and economies on both sides of the Atlantic.
Following Congress’s adoption of the much-welcomed Anti-Money Laundering Act at the start of this year, the EU is stepping up to the plate.
The European Commission has just proposed a raft of measures to strengthen our rules on anti-money laundering and countering the financing of terrorism.
EU anti-money laundering rules are already among the toughest in the world. But we have not been immune to scandals.
We have now proposed to step up consistency, coordination and supervision across member states to help increase detection of financial crime.
We will be removing loopholes that have allowed criminals to misuse the EU financial system to wash their dirty money or to finance terrorist activities.
This means that those who are investing in the EU from around the world will be better able to trust our financial system.
The flagship of our reform is a new European body, the Anti-Money Laundering Authority. It will directly supervise some of the riskiest financial institutions that operate in EU countries. It will also support national supervisors and financial intelligence units, which do the work on the ground of tracking financial flows. This will give us an EU-wide picture of money laundering and how well our rules are working. And it will help the investigation and prosecution of financial crimes.
The AML Authority is emblematic of our approach: We want clearer rules that apply consistently no matter where you are in the EU to help us track illegal money in the financial system.
That is why we are also looking at the customer due diligence process. These are the steps that a financial institution must follow for a full picture of the customer and why they want to carry out a given transaction. We want to ensure these rules are consistent across Europe.
Transparency is another vital element in the fight against money laundering. We need to know who ultimately owns or benefits from a company or trust — the so-called “beneficial owner.” So, the new rules will provide more consistent information about beneficial owners in the registers that hold their information, while these registers get more powers to check that the information is accurate and up-to-date.
Cash remains the main way for criminals to launder money, allowing the dirty origins of money to be hidden by buying property or high-value goods like jewellery. The European Commission is proposing an EU-wide limit of €10,000 on cash payments. Around two-thirds of EU countries already have such limits. The limit is high enough to let ordinary citizens continue to use cash – especially important for older people and more vulnerable members of our society – but low enough to make it much harder for criminals to launder money.
And we are not forgetting to address new ways to launder money. Crypto-currency, especially when used anonymously, has emerged as a new avenue for money-laundering. We want to support innovation but also protect against criminal activity. We will ban anonymous crypto-wallets — just as anonymous bank accounts are already prohibited. Similarly, crypto transfers will be traceable, as other money transfers already are.
The financial world is constantly evolving. Criminals are changing the way they operate. As regulators and policymakers, we must change too — responding to new threats and opportunities to ensure we protect citizens and maintain the integrity of the financial system.
The EU is stepping up, in line with the U.S. Together, we are making it harder for criminals to launder money. We are giving supervisors and law enforcement better tools to help detect financial crime, put together solid cases and enforce the law. We are going after dirty money.
Mairead McGuinness is the commissioner for financial services, financial stability and capital markets union at the European Commission.