A significant row has developed between the USA’s Treasury Department and The European Union following the implementation of stricter anti-money laundering (AML) processes that has seen a number of US overseas territories blacklisted by the EU for perceived weakened anti-money laundering approaches and laws.
Following the amendments to the EU Fifth Anti-Money Laundering Directive, the list of weak AML countries and territories blacklisted by the European Commission increased from 16 to 23 countries.
However, the Financial Action Tax Force (FATF), considered the pinnacle and influential body regarding standards involving AML protocol and approaches only recognises 12 of the European Commission’s 23 countries as displaying significant AML deficiencies.
A US Treasury Department spokesperson said they had: “significant concerns about the substance of the list and the flawed process by which it was developed, producing a list that diverges from the FATF list without reasonable support.”
In particular, the amendments to the AML directive has increased the transparency on beneficial ownership of companies. The regulations require businesses to make their owners clear, avoiding complicated trails of subsidiary owners that may be put in place to evade tax. Omissions the European Commission have found in the AML approaches of the 23 countries it has blacklisted.
These practices have also been widely used by criminals laundering their money through property by using property mules to hold the deed in their name. Whilst it may not please the US Treasury Department, the European Commission worry that by overlooking these practices, more corrupt dealings could enhance the financing of crime, terrorism and human trafficking.
The European Commission has listed the countries in breach of adequate AML procedures as: Afghanistan, American Samoa, the Bahamas, Botswana, North Korea, Ethiopia, Ghana, Guam, Iran, Iraq, Libya, Nigeria, Pakistan, Panama, Puerto Rico, Samoa, Saudi Arabia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, the US Virgin Islands, and Yemen.
The US has staunchly opposed the European Commission’s inclusion of US overseas territories including American Samoa, Guam, Puerto Rico, and the US Virgin Islands.
The US have further claimed that the process in which these countries were added to the blacklist was extremely unreasonable, alleging that limited notice was given before publication and very little time to oppose and challenge the decision was offered to the countries in question.
The US has also encouraged US financial institutions to ignore the list that could have a detrimental impact on the overseas territories’ economies.
In contrast, Vera Jourava, EU Justice Commissioner has emphasised the importance of cyber security and having robust processes in place to avoid unscrupulous businesses or criminal outfits from exploiting EU countries.
Vera Jourava, EU Justice Commissioner, commented on the amended systems by claiming they: “established the strongest anti-money laundering standards in the world.”
When so much sensitive information and huge sums of money are at stake, will these increased AML approaches within the EU improve our protection against dishonest companies? Will they decrease the EU’s exposure to potential AML threats?
