EU Supranational Measures in MONEYVAL 5th Round
Mutual Evaluation Reports
I EXECUTIVE SUMMARY
- The European Union (EU) is a supra-national organisation with international legal
personality where various initiatives have been taken to enact common rules and
standards to counteract money laundering (ML) and the financing of terrorism
(FT), in a bid to ensure that the EU’s internal market and financial system are not
misused for criminal purposes. These initiatives have contributed to the
harmonisation of national anti-money laundering and countering financing of
terrorism (AML/CFT) laws and regimes, and the creation of specific EU
mechanisms (supranational measures) for facilitating EU-wide cooperation in
detecting and combatting crime. EU legal and institutional framework is constantly
evolving, and it is to be expected that in the near future, there will be more directly
applicable EU regulations which no longer require national transposition. - The Financial Action Task Force (FATF), as the standard setting body, is
responsible for the interpretation of the FATF standards. The revised FATF
Methodology and procedures for the next round of mutual evaluations, adopted in
March 2022, define how supra-nationality should be treated in evaluations.
Universal Procedures for the next round of FATF and FATF-style regional bodies
(FSRB) reviews will complete the framework, setting out how supranational
mechanisms should be considered in the Global Network. - More than a third of The Committee of Experts on the Evaluation of Anti-Money
Laundering Measures and the Financing of Terrorism (MONEYVAL) member
countries are EU member states (EU-MONEYVAL member states) and, as such,
subject to the EU’s legal order, while a number of other MONEYVAL members
committed to harmonize their legislation with the EU’s AML/CFT acquis1. - During MONEYVAL’s 5th round of mutual evaluations, discussions have often
raised the question of how EU supranational measures should be interpreted and
weighted when evaluating EU member states (EU MS). For this reason,
MONEYVAL’s Strategy 2023 – 2027, adopted in April 2023, includes the
Development Objective 2.2. aimed at developing a consistent understanding for
the assessment of supranational mechanisms. - To implement the Development Objective, MONEYVAL decided to conduct a
‘Supranationality analysis project‘ (horizontal study) based on the scope and
methodology agreed in the concept note, adopted by the 65th MONEYVAL plenary
in May 2023 (Concept Note). - The study aims to analyse how EU supra-national legislation, mechanisms and
other initiatives have been considered and weighted in MONEYVAL’s 5th round
assessments. The review is limited to EU-MONEYVAL member states only (see part
III). It should be noted that the current horizontal study is not intended to analyse
any legislative and operational developments resulting from the new EU’s
AML/CFT package that may impact evaluations throughout MONEYVAL’s 6th
round of assessments. - As a main finding of this study, it can be summarized that some ambiguities have
been identified in 5th round MERs of EU-MONEYVAL member states with respect
to EU supranational mechanisms sometimes being described in diverse or
inconsistent manner (see part II – Key Findings).
II KEY FINDINGS
The current horizontal study has identified the following key findings:
Immediate Outcome 1; Recommendation 1
- The majority of mutual evaluation reports (MERs) analysed do not give much
weight to the EU supranational risk assessment (SNRA) when evaluating national
efforts to understand and analyse ML/TF national risks. The focus is almost
exclusively confined to national initiatives. - With respect to exemptions from AML/CFT obligations and application of
enhanced due diligence and simplified due diligence (EDD/SDD) measures,
MONEYVAL MERs have been consistent in expecting these measures to be
aligned with the national ML/TF risks, even when concessions or requirements
originate from EU AML Directives.
Immediate Outcome 2
- EU legal instruments and EU-wide cooperation channels, fora and networks lead
to stronger cooperation between EU member states. This is clearly recognised
under all MERs. Reference and appreciation of the various EU-wide legislative
and other measures are however not consistent. This analysis sought to map out
all the mentioned EU-wide instruments as such a consolidation would be a useful
tool for future evaluations, to ensure more consistency.
Immediate Outcome 5
- In many of the reviewed MERs, the establishment of beneficial ownership (BO)
registers (BO Registers) was at an incipient stage and thus did not yet yield
results in terms of effectiveness under Immediate Outcome (IO) 5. - On the other hand, the MER where EU-MONEYVAL member states had
implemented measures to ensure that the data held is accurate, adequate and upto-date, showed that BO registers are a key feature of ensuring transparency of
legal entities and arrangements.
Immediate Outcome 7
- Assessors consider and give credit under IO.7 to the cases with the involvement
of EUROPOL/ EUROJUST. Such cases have been described in the reports as
positive examples of identifying, investigating, and prosecuting complex ML
cases. At the same time, some reports noted that such cooperation is used in ML
cases only to a limited extent. - It is possible that not all EU-MONEYVAL member states have put forward cases
of cooperation with relevant EU authorities, and instead have relied on
presenting mostly domestic cases because some reports are silent on such
examples. - While the MERs analysed did not cover the cooperation with EPPO, it remains to
be seen how much weight would be given to EPPO cases in future evaluations.
Immediate Outcome 8; Recommendation 32
- The majority of EU member states evaluated by MONEYVAL applied cross-border cash controls, only at EU external borders. MERs have been clear in the expectation that countries should apply border controls for all cash movements and not only for movements in or out of the EU. Regulation EU 2018/1672 addressed the deficiencies of the precursor Regulation (EC) No. 1889/2005.
- Nonetheless, the Regulation on its own does not suffice to ensure compliance with R.32. This is because a number of aspects need to be implemented or complemented at the national level. These aspects are identified and discussed in MERs.
- EU instruments or information exchange channels are useful to ensure
effectiveness in tracing, seizing, and confiscating foreign proceeds of crime or
proceeds of crime generated in an EU MS that have been moved abroad. Those
instruments featured in the MERs are identified and their usefulness is explained.
Immediate Outcome 9
- Some reports mentioned cases where terrorism suspicions were investigated
with the help of EUROPOL, which later led to a TF investigation.
Immediate Outcome 3; Recommendations 15 and 26
- A range of EU instruments address FATF recommendations. Aside from binding
legislation, guidelines are also commonly applied, but cause issues when they are
relied upon as standalone proof of compliance due to their non-binding nature. - In many instances, the references to EU instruments under IO.3 are informative
and contextual in nature, not having a clear weight on the assessment of the level
of effectiveness. This notwithstanding, some reports highlight cases that have a
positive impact, such as cooperation between domestic authorities and the
European Central Bank (ECB) or other member state’s authorities in relation to
the authorisation of operations of credit institutions. - From a technical standpoint, while the references under R.26 are similar in
nature to those in IO.3, compliance with R.15 very often presents issues arising
from a more limited VASP definition under EU legislation than that of the FATF,
with the current EU framework (Regulation (EU) 2023/1114) not having been
yet assessed.
Immediate Outcome 4; Recommendations 13, 16 and 19
- The EU legal framework is highly significant when assessing compliance with the
requirements of R.13, 16 and 19 (having an impact on IO.4). - Regulation (EU) 2015/847 is broadly in line with R.16. Therefore, EU member
states whose assessment took place with the Regulation already in force achieved
a level of compliance of at least largely compliant, deficiencies being noted only
in relation to other aspects not covered by the EU legislation (MVTS obligations). - Regarding R.13, the application of enhanced measures only to respondent
institutions based on third countries (non-EU/EEA members), unless increased
risks are identified, is stated as a deficiency in most reports. In a few instances, In a few instances, materiality of correspondent relationships was considered when weighing the deficiency. - The approach adopted in relation to R.19 is more inconsistent. Some reports consider the ‘EU list of high-risk third countries with strategic deficiencies’ (which does not include EU member states) and additional requirements to consider relevant evaluations by international organisations as sufficient to reach a largely compliant level, while others require a more direct reference in the legislation to the FATF list of high-risk and other monitored jurisdictions.
Immediate Outcome 10 and 11; Recommendations 6 and 7
- EU member states mainly rely on the EU legal framework implementing targeted financial sanctions (TFS), supplemented by national measures. The EU supranational mechanisms are described in a diverse and inconsistent manner, including references used incoherently.
- Not all MERs list every possible supranational instrument that helps to meet the
FATF criteria under R.6/7. Some reports include an overall assessment of a given
recommendation, while some include an assessment of each sub-criterion,
indicating the level of compliance at the EU and national levels.