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EU Action Plan to fighting money-laundering is opposed by member states with laissez-fair regulatory regimes

EU plans to fight money-laundering

The European Commission plans to establish tighter rules to enforce a unified regulatory approach among member states to tackle money laundering and terrorist financing. It has presented an ambitious Action Plan, which sets out concrete measures that will be taken over the next 12 months. The six pillars of the Action Plan are:

  1. Effective application of EU rules
  2. A single EU Regulatory Rulebook
  3. EU-level supervision
  4. A coordination and support mechanism for Member State Financial Intelligence Units (FIU)
  5. Enforcing EU-level criminal law provisions and information exchange
  6. Step up the EU’s global role

The aim of the Action Plan is to shut down any remaining loopholes and remove any weak links in the EU’s rules.

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.

Executive Vice-President Valdis Dombrovskis

Under the plan, Europe would also align itself more closely to the criteria used by the Financial Action Task Force (FATF), a global, inter-governmental watchdog, to assess governance in countries outside of the bloc.

Critics and Opposition

The EU Action Plan does not go into enough detail for Transparency International and would, therefore, “lack bite.” The organization’s senior policy officer, Laure Brillaud, said recent investigations revealing the extent of money laundering in the European banking sector required more specific measures.

The anti-money laundering action plan presented by the European Commission today is high on generalities but low on specifics, according to Transparency International EU, the Brussels office of the global movement against corruption.  

Transparency International EU statement on the EU Action Plan

Despite these weaknesses in detail and the lack of bite, the Action Plan still goes too far for some Member States and is, therefore, being opposed. Estonia, Hungary and the Czech Republic evidently oppose the plans according to Reuters report.

The Estonian Threat

In recent years, the EU member state Estonia has established itself as the stronghold of the financial cybercriminals around the booming crypto FinTechs. The reason for this is the easy-to-buy licenses to operate crypto-related financial services along with super-relaxed supervision of the responsible Estonian Financial Intelligence Unit (FIU).

Dozens of non-EU citizens and legal entities have obtained such licenses in order to use them to launder money for their scams and illegal business. These so-called “OÜ FinTechs” are indeed a direct and present threat to the security of the financial markets and consumers in the EU. We think that many regulators and law enforcement agencies – especially the Estonian ones – have not yet realized this.

The crypto-license business is an important source of income for Estonian lawyers, tax advisors, and professionals. It is therefore not surprising that Estonia, along with Hungary and the Czech Republic, is among those countries that oppose the EU Action Plan to combat money-laundering and terrorist financing. This was reported by Reuters earlier this week.

Estonia has gained a sad fame as a money laundering centre in Europe due to its inefficient financial market supervision:

Estonia has been at the centre of Europe’s worst money-laundering scandal since media reports in 2017 triggered investigations into 200 billion euros ($220 billion) in suspicious payments made through Danske Bank’s (DANSKE.CO) tiny Estonian branch between 2007 and 2015. That amounted to around 10 times Estonia’s annual economic output. A government official said Estonia has not yet decided whether to support an EU supervisory body.

Reuters report published 20 May 2020

Those familiar with the international cybercrime scene know that Hungarians and Czechs have massive problems with scammers and this is probably due in no small part to the laissez-faire style of local supervisory authorities and law enforcement. In both countries numerous illegal payment processors are operated for scammers and cybercrime schemes. At this point we would like to refer to the gigantic “Zoo Broker Scam Network“, which is operated via Estonia, the Czech Republic, and Hungary.

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