EU Money laundering: a public hearing on Russian “dirty money”

ABBL Published 01.02.2019

On the 29th of January 2019 the European Parliament’s TAX3 Committee held a public hearing on the Russian money laundering activities in the EU and the possible actions that the European Union could take in order to tackle the flow of “dirty money” coming from Moscow.

The experts present in the TAX3 Committee estimated that, since 1990, the Russian net outflows amounts at 8 hundreds billion dollars. More specifically, the way the money has flowed out of Russia into the EU has traditionally been considered to go through Cyprus, based on the agreement that the two parties have signed in 1992. It is alleged that the money was then transferred to the Virgin Islands, Britain and the US and a considerable amount is thought to have ended up in real estate, equity funds, and hedge funds.

The heard experts also opined that the money coming from Moscow entered in the European Union through different channels such as some banks operating in the 1990s, the procedures of transfer pricing by private and state owned companies, practices of tax evasion and, finally, the spare Russian cash present abroad.

Following the presented reasoning, the best cure to Russian money laundering in the EU is the transparency criteria which, in the EU framework, can be provided, if fully implemented, by the 5th Anti-Money Laundering Directive of June 2018.

The transparency criteria could be pursued by the European and national institutions through several measure. In order to achieve higher transparency criteria, the experts suggested to the EU countries to request the ultimate beneficiary ownership of all assets within the EU to be made public, in line with AML directive. Moreover, from the actions foreseen, the public officials role was considered as essential in compelling to declare assets, incomes or resources on an annual bases. Finally, the experts present recommended implementing a more aggressive criminal prosecution procedure, despite the difficulties in setting it given the nature for financial crimes.

On the EU deterrent level, the said experts argued that its implementation depended on both the political will and the actual capability to carry out and enforce comprehensive and sound strategies against money-laundering. In fact it was claimed that, on the one hand, for governments it was politically damaging to raise the deterrent level, given that it implies the recognition of money laundering activities in certain sectors. On the other hand, it was very difficult and time-consuming for law enforcement authorities as well to prosecute money-laundering cases. Therefore, governments need to build in the value of deterrent and their strategy to deal with money laundering, and supervision should be enforced in order to have the instruments for a more effective prosecution.

Finally, the protection of whistle blowers was also mentioned by the above mentioned experts as a significant and powerful tool against money laundering activities. More specifically, the experts argued that facilitating whistleblowers’ denunciation of money laundering sensitizes the public opinion and allows the prosecutor to rely on more detailed information. Nevertheless, the EU will incentivize whistleblowers to speak only if there are strong incentives and rewards.

By Elona Morina, European Affairs, ABBL

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