The fight against money laundering (ML) has been at the core of the global policy agenda for many years, with a growing number of initiatives and efforts by different international actors and institutions to address this threat and protect the integrity of the financial system. However, the battle against financial crime in its multiple manifestations – cash transactions, trade-based money laundering, the use of crypto-assets, etc. – continues to represent a major challenge for financial regulators, supervisors and prosecutors around the world.
At a seminar held at the EUI in late September, Dr Markus Pleyer, shared his reflections and experience as former head of the Financial Action Task Force (FATF), highlighting some of the main challenges and threats facing current money laundering fighters. The latter are mainly related to processes such as globalisation, which has favoured criminals to take advantage of regulatory gaps in the global financial system, and digital transformation, facilitating in turn illegal transactions and the opening of windows to new criminal activities in the digital space. A clear example of the latter is the attractiveness of crypto-assets for moving illicit money. On this point, Pleyer highlighted that criminal activity has increasingly shifted out of the traditional financial system towards decentralised finance, which represents a major blind-spot which needs to be addressed.
In this line, apart from recognising the key role played by the FAFT in establishing global standards and principles for tackling ML and financial terrorism, he critically discussed the deficiencies and weaknesses of the current AML frameworks, especially the lack of transparency of beneficial ownership registers. He stressed that, besides being a huge platform for research, standard setting, mutual evaluation and listing, there is still much room for countries to build their beneficial ownership registers. Information sharing across nations is often poor, which makes it difficult to identify and effectively combat global ML networks.
Pleyer also referred to the European approach, underlining the increasing efforts made by the EU to build a stronger legal framework to combat ML, in particular with its recent Anti-money laundering and countering the financing (AML/CFT) legislative package and the proposal for the creation of a new EU authority to fight ML: the European Anti-Money Laundering Authority (AMLA). Money laundering and terrorist financing constitute a serious threat to the integrity of the EU economy and financial union, and with this proposal, among other things, the EU aims to modernise the current AML/CFT framework by establishing a rulebook, improving supranational supervision in this area, and strengthening cooperation between Financial Intelligence Units.
The former president of the FAFT commented that, besides the significant efforts made by the EU with these proposals, there are some weaknesses that need to be considered. In his view, once AMLA is established, it should follow a risk-based approach to identify the institutions it will directly supervise. There is also one particular aspect that, according to Pleyer, has not been sufficiently addressed and that relates to information sharing among entities such as banks: ’There is a lot of legal uncertainty of the kind of data entities can share (…) if banks could exchange their AML data on a particular basis, they could be real game changers in tackling financial crime’. He stressed that there is a sort of tension between AML and data protection rules in the EU that requires a delicate approach. On this, he mentioned that clearer rules regarding the exchange of information between banking institutions could easily be made within the current GDPR framework, which is open to such solutions, and that digital technologies, such as artificial intelligence and machine learning techniques, could help to abolish this tension and strengthen supervision without harming compliance with data protection rules. The identification of risky entities could also contribute to effective supervision and digital tools can make this task more effective.
In his concluding remarks, Pleyer stated that AML requires a more cooperative, cross-sectoral, and multidisciplinary approach to effectively tackle financial crime, as the law alone ‘cannot itself approach and tackle money laundering’. Specific targeted AML education and training also appear to be key to address the gaps and weaknesses in the current frameworks to effectively combat money launderers and protect the integrity of the economic and financial system: ‘We need skilled people that work with investigators who are trained and who have practical experience (…)’.