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Commission steps up fight against money laundering and terrorist financing

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The European Commission has today put forward a comprehensive approach to further strengthen the EU’s fight against money laundering and terrorist financing.

The Commission has published an ambitious and multifaceted Action Plan, which sets out concrete measures that the Commission will take over the next 12 months to better enforce, supervise and coordinate the EU’s rules on combating money laundering and terrorist financing. The aim of this new, comprehensive approach is to shut down any remaining loopholes and remove any weak links in the EU’s rules.

Executive Vice-President Valdis Dombrovskis said: “We need to put an end to dirty money infiltrating our financial system. Today we are further bolstering our defences to fight money laundering and terrorist financing, with a comprehensive and far-reaching Action Plan. There should be no weak links in our rules and their implementation. We are committed to delivering on all these actions – swiftly and consistently – over the next 12 months. We are also strengthening the EU’s global role in terms of shaping international standards on fighting money laundering and terrorism financing.”

The Commission has also published today a more transparent, refined methodology to identify high-risk third countries that have strategic deficiencies in their anti-money laundering and countering terrorist financing regimes that pose significant threats to the EU’s financial system. This will enhance our engagement with third countries and ensure greater cooperation with the Financial Action Task Force (FATF).

Finally, the Commission has also adopted a new list of third countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks.

Action Plan for a Comprehensive EU policy on Preventing Money Laundering and Terrorist Financing

Today’s Action Plan is built on six pillars, each of which is aimed at improving the EU’s overall fight against money laundering and terrorist financing, as well as strengthening the EU’s global role in this area. When combined, these six pillars will ensure that EU rules are more harmonised and therefore more effective. The rules will be better supervised and there will be better coordination between Member State authorities.

The six pillars are as follows:

Effective application of EU rules: the Commission will continue to monitor closely the implementation of EU rules by Member States to ensure that national rules are in line with the highest possible standards. In parallel, today’s Action Plan encourages the European Banking Authority (EBA) to make full use of its new powers to tackle money laundering and terrorist financing.

A single EU rulebook: while current EU rules are far-reaching and effective, Member States tend to apply them in a wide variety of different manners. Diverging interpretations of the rules therefore lead to loopholes in our system, which can be exploited by criminals. To combat this, the Commission will propose a more harmonised set of rules in the first quarter of 2021.

EU-level supervision: currently it is up to each Member State to individually supervise EU rules in this area and as a result, gaps can develop in how the rules are supervised. In the first quarter of 2021, the Commission will propose to set up an EU-level supervisor.

A coordination and support mechanism for Member State Financial Intelligence Units: Financial Intelligence Units in Member States play a critical role in identifying transactions and activities that could be linked to criminal activities. In the first quarter of 2021, the Commission will propose to establish an EU mechanism to help further coordinate and support the work of these bodies.

Enforcing EU-level criminal law provisions and information exchange: Judicial and police cooperation, on the basis of EU instruments and institutional arrangements, is essential to ensure the proper exchange of information.The private sector can also play a role in fighting money laundering and terrorist financing. The Commission will issue guidance on the role of public-private partnerships to clarify and enhance data sharing.

The EU’s global role: the EU is actively involved within the Financial Action Task Force and on the world stage in shaping international standards in the fight against money laundering and terrorist financing. We are determined to step up our efforts so that we are a single global actor in this area. In particular, the EU will need to adjust its approach to third countries with deficiencies in their regime regarding anti-money laundering and countering terrorist financing that put our Single Market at risk. The new methodology issued alongside this Action Plan today provides the EU with the necessary tools to do so. Pending the application of the revised methodology, today’s updated EU list ensures better alignment with the latest FATF (Financial Action Task Force) list.

To ensure inclusive discussions on the development of these policies, the Commission launched a public consultation today on the Action Plan. Authorities, stakeholders and citizens will have until 29 July to provide their feedback.

Refined methodology

The Commission has today published a new methodology to identify high-risk third countries that have strategic deficiencies in their national anti-money laundering and countering terrorist financing regimes, which pose significant threats to the EU’s financial system. The aim of this new methodology is to provide more clarity and transparency in the process of identifying these third countries. The key new elements concern: (i) the interaction between the EU and FATF listing process; (ii) an enhanced engagement with third countries; and (iii) reinforced consultation of Member States experts.The European Parliament and the Council will have access to all relevant information at the different stages of the procedures, subject to appropriate handling requirements.

Updated List

Under the Anti-Money Laundering Directive (AMLD), the Commission has a legal obligation to identify high-risk third countries with strategic deficiencies in their regime regarding anti-money laundering and countering terrorist financing. Pending the application of the above-mentioned refined methodology, the Commission has today revised its list, taking into account developments at international level since 2018. The new list is now better aligned with the lists published by the FATF.

Countries which have been listed: The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.

Countries which have been delisted: Bosnia-Herzegovina, Ethiopia, Guyana, Lao People’s Democratic Republic, Sri Lanka and Tunisia.

The Commission amended the list in the form of a Delegated Regulation. It will now be submitted to the European Parliament and Council for approval within one month (with a possible one-month extension).Given the Coronavirus crisis, the date of application of today’s Regulation listing third countries – and therefore applying new protective measures – only applies as of 1 October 2020. This is to ensure that all stakeholders have time to prepare appropriately. The delisting of countries, however, is not affected by this and will enter into force 20 days after publication in the Official Journal.

Background

The Commission’s Anti-Money Laundering Package of July 2019 highlighted a number of weaknesses in the EU’s anti-money laundering / countering the financing of terrorism framework. While the transposition and entry into force of recent legislation will address some of these issues, other problems remain. In response to this package, the European Parliament and the Council invited the Commission to investigate what steps could be taken to achieve a more harmonised set of rules, better supervision, including at EU level, as well as improved coordination among Financial Intelligence Units. Today’s Action Plan is the Commission’s reply to this call for action, and the first step to achieve the Commission’s priority to deliver a new, comprehensive framework to fight money laundering and terrorist financing. The new methodology to identify and mitigate threats that strategic deficiencies in the anti-money laundering and countering terrorist financing of third countries pose to the integrity of the EU’s financial system, also issued today, will further equip the EU to deal with external risks.

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Why social fairness and solidarity are more important than ever

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EU Commission’s services have published the 2020 edition of the Employment and Social Developments in Europe (ESDE) review dedicated to the theme of social fairness and solidarity. The review provides evidence-based analysis on how to achieve greater fairness across the EU in the face of crises such as the COVID-19 pandemic as well as structural changes due to demographic ageing, and the green and digital transitions.

Commissioner for Jobs and Social Rights Nicolas Schmit said: “The ESDE report shows that strengthening social fairness is key to overcoming the crisis. This requires putting people front and centre. To ensure resilience, solidarity and cohesion, the EU’s response has to prioritise employment, reduce inequalities and ensure equal opportunities. The effective implementation of the European Pillar of Social Rights will serve as our guide.”

The review notes that the COVID-19 pandemic is having profound health, economic, employment and social effects, threatening much of the progress that the EU had achieved previously. All Member States are experiencing a greater economic shock than in 2008-2009. Economic output has contracted sharply and unemployment is on the rise. The most vulnerable persons, including Europe’s youth, are hit particularly hard.

Against this background, the ESDE report points to the following findings:

Adequate minimum wages and minimum income can have a beneficial effect on the social mobility of Europeans.

Strengthening social fairness, including through investments in people, pays off. Closing gender-related gaps brings particularly high returns, while extending working lives, and raising educational attainment also have positive effects.

Structural change, such as the green transition, has to be accompanied by social measures to be successful. Notably, this transition requires social investment in the form of re-skilling programmes and/or unemployment benefits. According to ESDE, this social investment could amount to €20 billion or more until 2030.

Short-time work schemes are protecting jobs effectively. The EU is helping Member States to provide such support through solidarity mechanisms like the instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE).

Social dialogue and collective bargaining influence fairness and its perception at the workplace by promoting more equitable wages, better working conditions and more inclusive labour markets.

More generally, to repair the damage done by COVID-19 and prepare an economy and society for a future of faster structural changes, the EU and Member States need to embrace fully the opportunities offered by the transition to a greener, digitalised economy and build inclusiveness, solidarity and resilience into the design of all policies. Ensuring a broad-based recovery is a key policy objective of our policy action, which will help strengthen social resilience in the longer run.

Background

The annual Employment and Social Developments in Europe review prepared by the Directorate-General of Employment, Social Affairs and Inclusion, provides up-to-date economic analysis of employment and social trends in Europe and discusses related policy options. It is the European Commission’s analytical flagship report in the area of employment and social affairs, mandated by Articles 151, 159 and 161 of the Treaty on the Functioning of the European Union (TFEU).

There are many examples in which the Commission focuses on addressing the challenges raised in the yearly ESDE reports. In April 2020, the Commission proposed the SURE instrument, which will provide €100 billion in financial support to help protect jobs and workers affected by the coronavirus pandemic. In May 2020, the Commission put forward a powerful, modern and revamped long-term EU budget boosted by NextGenerationEU, an emergency temporary recovery instrument, to help repair the economic and social damage brought by the coronavirus pandemic, kickstart the recovery and prepare for a better future for the next generation. The Recovery and Resilience Facility will be one of EU’s main recovery tools, providing an unprecedented €672.5 billion of loans and grants in frontloaded financial support for the crucial first years of the recovery. The European Social Fund Plus (ESF+) will continue to invest in people, while an improved European Globalisation Adjustment Fund (EGF) will be able to intervene even more effectively to support workers who have lost their jobs. The European Pillar of Social Rights and its upcoming Action Plan, as well as initiatives and tools such as the European Skills Agenda, the Youth Employment Support initiative or the Digital Europe Programme will all contribute to address challenges identified in the ESDE.

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EU-China Leaders’ Meeting: Upholding EU values and interests

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The European Union and China held a Leaders’ Meeting via videoconference on 14 September 2020. An EU-China Leaders’ meeting with the participation of leaders of all EU member states was initially scheduled to take place on this date. President of the European Council, Charles Michel, President of the European Commission, Ursula von der Leyen, and the Federal Chancellor of Germany, Angela Merkel, for the Council Presidency, conducted the videoconference with Chinese President Xi Jinping. The meeting provided an opportunity to follow up on discussions at the 22nd EU-China Summit (22 June). The meeting was important to maintain the momentum of EU-China high-level exchanges in order to achieve concrete results in line with EU interests and values.

The comprehensive agenda of the Leaders’ meeting covered trade and investment, climate change and biodiversity, the response to the COVID-19 pandemic, as well as international affairs and other issues.

With regard to the negotiations for an ambitious EU-China Comprehensive Investment Agreement (CAI), while both sides registered progress on the rules regulating the behaviour of State-owned-enterprises, on forced technology transfer and on transparency of subsidies, the EU emphasised that more work was urgently needed on the issues of rebalancing market access and on sustainable development. The EU called on China to step up its ambition on these issues. The two sides reaffirmed their objective of closing the remaining gaps before the end of the year. The EU side emphasised that high-level political engagement would be required within the Chinese system to achieve a meaningful agreement.

On other trade and economic issues, the EU reiterated its call on China to engage in future negotiations on industrial subsidies in the WTO. The EU stressed that, in line with China’s stated commitment to open up and ensure that EU producers are fairly treated on the Chinese market, more needed to be done to improve market access in the agri-food trade, financial services and the digital sector. The EU also again made clear its concerns on overcapacity, both in traditional sectors such as steel and aluminium as well as in high tech.

The two sides welcomed the signature of the EU-China Agreement on Geographical Indications which will improve access to the Chinese market especially for high-quality European agricultural products.

The EU underlined the need for reciprocity and a level playing field in the area of science and technology, underpinned by high ethical and integrity standards. Leaders welcomed and agreed to continue the high level digital dialogue. They looked forward to concrete progress on ICT standards, product safety and research and innovation.

On climate change and biodiversity, the EU encouraged China to strengthen its climate commitments in terms of peaking carbon dioxide emissions and setting the goal of climate neutrality domestically. The EU also stressed the importance of a moratorium in China of building coal-fired power plants and financing their construction abroad, at least as part of a global initiative. The EU also encouraged China to launch its national emission trading system soon. The two sides agreed to establish a High-Level Environment and Climate Dialogue to pursue ambitious joint commitments on these issues.

The EU noted that joint commitments by both sides on biodiversity could be a game-changer at global level and China has a key role to play as host of the Conference of the Parties next year. An ambitious global agreement would be a major achievement.

On the COVID-19 response, the EU emphasised the shared responsibility to participate in global efforts to stop the spread of the virus, boost research on treatments and vaccines, and strengthen the role of the World Health Organisation, including through the full implementation of the World Health Assembly resolution of May 2020. The EU also underlined that the recovery measures should support the transition to a greener and more sustainable economy. China’s full engagement in G20 efforts to support low-income countries and effectively implement the G20 – Paris Club Debt Service Suspension Initiative will also be essential.

With regard to Hong Kong, EU Leaders voiced their grave concerns about the erosion of the fundamental rights and freedoms following the imposition of the national security law on Hong Kong on 30 June, which is contrary to China’s international commitments. They also reiterated the EU’s concerns at the postponement of the Legislative Council election and the disqualification of candidates.

The EU reiterated its serious concerns about the treatment of ethnic and religious minorities, the situation of human rights defenders, as well as the limitations to freedom of expression and access to information. The two sides agreed that the Human Rights Dialogue will take place as a physical meeting in China later this year.

On regional and international issues, the EU referred to the escalating tensions in the South China Sea, urging for self-restraint and a peaceful resolution of disputes in accordance with international law. Leaders welcomed the start of the intra-Afghan negotiations in Doha. They also confirmed their commitment to upholding the Joint Comprehensive Plan of Action (the Iran nuclear deal).

The EU also expressed readiness to continue to discuss the Strategic Agenda for Cooperation 2025, which can only be concluded once significant progress has been made in the negotiations on the Comprehensive Investment Agreement.

An EU-China Leaders’ Meeting with the participation of the Heads of State and Government of the EU member states and President Xi is foreseen to be held in 2021.

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Commission adopts proposal to make EU-U.S. agreement on tariffs effective

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The European Commission today published a proposal for a Council and European Parliament regulation to scrap duties on certain imports to the EU. In return, the United States will reduce its duties on certain EU exports to the U.S. market. This will put into effect the agreement announced by the EU and the U.S. on 21 August 2020. These tariff reductions between the EU and the U.S. will increase access to both EU and U.S. markets by around €200 million per year.

Executive Vice-President Valdis Dombrovskis said: “The EU and the U.S. share the most important economic partnership in the world, with trade in goods and services worth over €1.3 trillion annually. This deal provides both sides with a true win-win outcome, helping us to strengthen our partnership even further. Lowering tariffs on both sides improves access for our exporters and reduces the cost of imported goods. Those are both critically important factors in this time of coronavirus-related economic crisis. From the EU side, we view this agreement as an important step towards improving our relationship and resolving outstanding disputes. We remain eager to deepen transatlantic cooperation wherever possible as we firmly believe that, when it comes to truly global challenges, the chances of achieving successful global outcomes are improved if the European Union and United States work together.”

Once approved in line with the relevant procedures on either side of the Atlantic, the agreement will entail the reduction of U.S. tariffs on EU exports worth some $160 million a year. This includes prepared meals, crystal glassware, surface preparations, propellant powders, lighters and lighter parts. On its side, the EU will eliminate tariffs on imports of U.S. live and frozen lobster products. U.S. exports of these products to the EU are worth some $111 million.

Both sides will eliminate those tariffs on a most-favored nation (MFN) basis, i.e. for any partner, in line with the existing multilateral commitments. The measures will apply with retroactive effect as of 1 August 2020.

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