Anti-Money Laundering Newsletter - January 2021 | Legislation and publications of official bodies

The EBA publishes an opinion on how to strengthen the connection between the EU legal frameworks for the prevention of money laundering and terrorist financing and deposit protection

The European Banking Authority (EBA) has identified how to mitigate the risks of money laundering and terrorist financing during bank failures. In this respect, it has used the results of its evaluations to establish how the EU legal framework should be strengthened so as to permit and improve the effective cooperation between the relevant authorities in relation to Anti-Money Laundering and the Counter Terrorist Financing (AML/CTF) and the Deposit Guarantee Schemes (DGS), in the period before and during bank failures, where there are concerns about money laundering. The opinion also establishes what the relevant authorities must do to minimize the risk of reimbursing money launderers in the course of DGS payments, including the requirement to guarantee the traceability of funds in such payments. For the moment, until the EU legal framework is changed, the opinion also indicates the kind of information which national authorities must receive from failing credit institutions, and how such authorities must communicate with depositors in such cases.

In its opinion, the EBA assessed how the information regarding the possible risks of money laundering or terrorist financing of depositors is identified and transmitted to DGSs before the latter reimburse depositors. In particular, the EBA assessed how the authorities have cooperated in such cases and how effective such information exchange and cooperation mechanisms have been in real life cases. The EBA also analyzed how depositors, whose payment has been suspended or deferred, or who have been excluded from payment, have been informed of their situation.

More information, here.

The Presidency of the European Union Council and the European Parliament reach a provisional agreement regarding online terrorist contents

On December 10, the Presidency of the EU Council and the European Parliament reached a provisional agreement on a draft regulation on the dissemination of terrorist content online. In this regard, the EU is working to prevent terrorists from using the Internet to radicalize, recruit and incite violence.

The objective of the legislation is to rapidly eliminate online terrorist content and establish a common instrument for all Member States for such purpose. The proposed rules will apply to hosting service providers that offer services in the EU, whether or not they have their principal establishment in the Member States.

Hosting service providers exposed to terrorist content will be required to adopt specific measures to address the misuse of their services and protect their services from the dissemination of terrorist content. Service providers will have to eliminate or deactivate access to the content within one hour.

The draft legislation establishes a clear uniform definition of ‘terrorist content’ for the purpose of fully respecting the fundamental rights protected in the EU legal order and, in particular, those guaranteed in the EU Charter of Fundamental Rights.

The competent authorities of the Member States will have the power to issue expulsion orders against service providers, eliminate terrorist content or bar access to it in all the Member States.

The Member States will be responsible for establishing the rules on penalties in the event of infringement of the legislation.

More information, here.

The European Union Council adopts new rules to improve the fight against fraud

In an effort to protect its financial interests, the EU is strengthening the Community legal framework for such purposes. In this respect, the Council adopted on December 4 last, its position regarding the amendments to the regulation relating to investigations conducted by the European Anti-Fraud Office (OLAF). The objective of the new rules is to ensure fluid cooperation between the OLAF and the European Public Prosecutor’s Office, which is expected to come into operation at the beginning of 2021. The agreement reached in the negotiations must be approved by the Parliament.

More information, here.

The EU interior ministers issue a joint declaration on the recent terrorist attacks in Europe

The EU interior ministers issued a joint declaration on the recent terrorist attacks in Europe (Paris, Dresden, Conflans-Saint-Honorine, Nice, Vienna and elsewhere), reaffirming unwavering unity and solidarity in the fight against all forms of terrorism and conveying messages of condolence to the victims’ relatives and friends. They also declared that they will continue to make determined joint efforts against terrorism and their shared belief in human dignity, tolerance, democracy, justice and freedom, including freedom of expression, will not be jeopardized in any way.

More information, here.

The Spanish Council of Ministers approves the Draft Law to combat Tax Fraud, which must continue its course through Parliament

The Council of Ministers approved, on October 13 last, the Draft Law on Measures to Prevent and Combat Tax Fraud, seeking to combat the new means and formulas of tax fraud, mainly related to new technologies. It will allow the pursuit of misconduct of large multinational companies and the prevention of abusive tax planning.

The draft law also includes new developments which have an impact on the area of prevention of money laundering.

Among the main new developments introduced by said draft, we highlight the following:

• The limit on cash payments for certain business transactions is reduced from 2,500 to 1,000 euros, in relation to transactions in which one of the parties is a business. The 2,500 euro limit is maintained for payments made by private individuals. The cash payment limit is also reduced from 15,000 to 10,000 euros for private individuals that have their tax residence outside Spain.
• A provision is made for the prohibition by law of tax amnesties, which will affect large fortunes and estates. Reference is thereby made to the possible prohibition of any extraordinary tax regularization mechanism involving the reduction of the amount of the tax debt.
• The concept of tax haven is enlarged and updated, which is now known as non cooperative jurisdictions. The draft provides for the inclusion in the list of tax havens those territories which facilitate the existence of overseas companies to attract profits without any real economic activity, those where there is opaqueness and lack of transparency, or territories with which there is no effective exchange of information regarding the beneficial owner of the property or rights, or where there is low or no taxation.
• It aims at greater tax control over cryptocurrencies, the obligation being included to inform of the holding of and operation with virtual currencies, both situated in Spain and abroad if it affects Spanish taxpayers. For this purpose, information will be required regarding balances and holders of currencies in custody. The obligation is also established to supply information regarding transactions of acquisition, transmission, exchange, transfer, collections and payments, with cryptocurrencies. The obligation is also introduced to report on form 720 declaring property and rights abroad, the holding of virtual currencies abroad.
• Council Directive (EU) 2016/1164, of July 12, 2016, laying down rules against tax avoidance practices that directly affect the functioning of the internal market, is transposed. The objective of this legislation is to ensure that companies that move to another country do not cease to pay tax on the tax bases which must be legally taxed in Spain.

After its approval in the Council of Ministers, the Draft Law must follow the usual parliamentary procedure in the Congress and the Senate, where the draft could undergo changes. Therefore, if approved by the majority of both chambers, it will take several months to come into force.

More information, here.

The EBA publishes the report on risk assessment and the 2020 EU-wide transparency exercise

The European Banking Authority (EBA) published its 2020 Risk Assessment Report of the European banking system on Friday, December 11, 2020.

The report is accompanied by the publication of the 2020 EU-wide transparency exercise, which provides detailed information, in a comparable and accessible format, for 129 banks in 26 countries in the European Economic Area and the EU and for six UK banks.

By way of summary and despite the shock of COVID-19, the banks have maintained solid capital and liquidity indexes and have increased their loans to the real economy. However, economic uncertainty persists, profitability is at record low levels and there are several early signs of deterioration in asset quality.

More information, here.

The EBA publishes an opinion on how prudential supervisors should consider the risks of money laundering and terrorist financing

In the context of the supervisory review and evaluation process (SREP), the banking authority has published an opinion, which forms part of the work in progress of the EBA to strengthen the fight against money laundering and the financing of terrorism in Europe.

The EBA expects prudential supervisors to cooperate in an effective and appropriate manner with supervisors engaged in prevention of money laundering and terrorist financing (PML/TF) to exchange information regarding the risks arising from this area and to evaluate their effects on the security and solidity of the institution which they supervise. This applies to prudential and PML/TF supervisors which form part of the same competent authority, in the same way as to prudential and PML/TF supervisors of different competent authorities and in cross border situations.

The EBA will include a more detailed guide regarding how prudential supervisors should consider these risks as part of their general SREP assessment in the revised version of the SREP Guidelines which is planned to be published by the end of December 2021.

This opinion is part of the broader work of the EBA to strengthen the link between prudential supervision and PML/FT, and to lead, coordinate and monitor the fight of the EU financial sector in this area.

The EBA has issued this opinion in accordance with Article 29 1 a) of Regulation (EU) no. 1093/2010, which obliges the authority to play an active role in building a common Union supervisory culture and consistent supervisory practices, as well as in ensuring uniform procedures and consistent approaches throughout the Union.

More information, here.