European Parliament condemns Council opposition to money-laundering blacklist

The European Parliament has condemned the Council for caving to lobbying and diplomatic pressure on the composition of the anti-money laundering blacklist (the list of high-risk third countries with strategic deficiencies in their anti money-laundering and countering terrorist financing frameworks). MEPs adopted a resolution at the plenary session of the Parliament in Strasbourg on Thursday 14 March 2018, defending the independence of the listing process and criticising the Council’s decision to block the addition of new states to the list, including Saudi Arabia and

Under the fourth Anti Money Laundering Directive, the Commission was tasked with developing a list of high-risk third countries with strategic deficiencies in their anti-money laundering frameworks, through a delegated act. For transactions involving the jurisdictions on the list, EU obliged entities (eg, banks, real estate agents, casinos) will be required to apply enhanced due diligence measures – additional checks on the sources of funds, ‘know your customer’ checks etc.

Addressing the Parliament during a debate on the resolution, GUE/NGL Irish MEP Matt Carthy said: “This is one of the starkest examples I’ve seen of the impact of lobbying on the Council harming the people of the EU.

“The new process for compiling the anti-money laundering blacklist is far from perfect. It ignores the fact that the majority of international money-laundering scandals in recent years have involved European banks. But I welcome the increased autonomy in the process.

“The Council’s objections are politically motivated interference in a process that is supposed to be independent.”

“I’m particularly concerned that the defence of Saudi Arabia and the US by EU governments is a direct result of their close financial and trading ties, and of lobbying by the US and Saudi Arabia.”

He concluded by saying: “We don’t just urgently need an anti-money laundering blacklist. We urgently need mechanisms to prevent the lobbying by corporations and countries from harming the public interest, and to ensure full public transparency over the lobbying process.”

GUE/NGL had initiated parliamentary objections to the Commission’s proposed delegated act on two occasions since 2016, which were supported by the majority of MEPs, on the basis that the Commission’s methodology for the listing process was not sufficiently autonomous. The Commission was initially planning to rely only on the assessments of external organisations, particularly the Financial Action Task Force (FATF) and the OECD.

Finally, last year the Commission brought forward a substantially revised methodology, which required the Commission to use various sources of EU internal information in compiling the list, instead of relying only on the FATF and OECD, which it would use for screening Priority 1 and then Priority 2 countries.

At this stage, the majority of GUE/NGLMEPs  supported the revised methodology although we had concerns over the long timeframe for screening the Priority 2 countries. We also opposed the exclusion of EU states from the list as the majority of international money-laundering scandals over the past several years have involved EU banks.

Commission’s new proposed delegated act

On 13 February 2019 the Commission adopted its new delegated act, including a list of 23 countries and territories: Afghanistan, American Samoa, Bahamas, Botswana, Democratic People’s Republic of Korea, Ethiopia, Ghana, Guam, Iran, Iraq, Libya, Nigeria, Panama, Pakistan, Puerto Rico, Samoa, Saudi Arabia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, US Virgin Islands and Yemen.

The Council, in its statement of 7 March 2019, stated that it objected to the delegated act, arguing that the proposal was not established in a transparent and resilient process actively incentivising affected countries to take decisive action while also respecting their right to be heard.

However, it has been widely reported in the media that the reason behind the Council’s objection was intense lobbying by Saudi Arabia of EU Member States at the Arab League/EU summit in Sharm el-Sheikh on February 26, to remove Saudi Arabia from the list. Additionally, the US is widely believed to have lobbied Member States intensively for the removal of its overseas territories from the list.

Resolution

This resolution is the Parliament’s response to the Council objection, regretting the objection and arguing in favour of maintaining the independence of the listing process instead of politicising it. The joint motion for resolution is supported by EPP, S&D, ALDE, ECR, GUE/NGL, Greens/EFA and EFDD, and there are no counter resolutions being tabled.

The resolution:

  • Considers that in order to safeguard the integrity of the list of high-risk countries, the screening and decision-making process should be carried out on the basis of the methodology alone, and must not be affected by considerations that go beyond the area of AML/CTF deficiencies;
  • Calls on the Commission to publish its assessments of the listed countries so as to ensure public scrutiny in such a way that they cannot be abused; and
  • Calls on the Commission to ensure a transparent process with clear and concrete benchmarks for countries which commit to undergo reforms so as to avoid being listed.

The resolution also “notes that lobbying and diplomatic pressure by the listed countries have been and will be part of the process of identifying high-risk countries; underlines that such pressure should not undermine the EU institutions’ ability to tackle money laundering and to counter terrorism financing linked to the EU in an effective and autonomous manner.”