In his State of the Union Address 2018, Commission President Jean-Claude Juncker put special emphasis on money laundering and financial crime. The Commission plans to increase the role of the European Banking Authority (EBA) to make it easier to tackle money laundering. The Economic and Financial Affairs Council (ECOFIN) welcomed this step and pledged its support on 2 October. This week, the Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3) too debated in Strasbourg the relationship with Switzerland in matters of money laundering.
The European Commission regards money laundering and financial crime as one of the European Union's most urgent problems. Following some current cases of money laundering, among others concerning the Pilatus Bank in Malta and the Estonian branch of Danske Bank, one would now intend to strengthen the role of the EBA and to give it a new supervisory function to monitor the financial sector. In doing so, the Commission wants to ensure that violations against the regulations to prevent money laundering are systematically pursued. One wanted to include targeted amendments in the ongoing discussion on the Proposal to amend the Regulation establishing the European Banking Authority (EBA). Furthermore, the Commission intends to call on the European Central Bank (ECB) to conclude a multilateral agreement on the exchange of information with supervisory authorities, which are concerned with combating money laundering, by 10 January 2019. The EBA shall be given new powers, which means that in case of Member State authorities being inactive, it may direct its resolutions directly to companies of the financial sector. The quality of the work involved shall be improved by common standards and a regular review of the national supervisory authorities. Apart from a risk assessment, the exchange of information on trends and risks between national authorities shall be promoted. A new Permanent Committee shall be established, which gathers the national supervisory authorities. Apart from that, the cross-border cooperation with third countries shall be made easier.
The problems of the EU with a third country - in this case Switzerland - were also the issue debated in the TAX 3 Special Committee on 1 October 2018. Subject matters included both the lack of minimum protection of so-called whistleblowers in the private sector and the tax competition between Switzerland and the EU. Whilst reforms of corporate taxation, which would be problematic from an EU point of view, were accepted by the Swiss Parliament, the majority of the Swiss population voted against these reforms in a referendum. A revised version of the corporate tax reform was adopted by the Swiss Parliament on 28 September 2018. The Commission let it be known that it would wait for further information by Switzerland. Should Switzerland not keep her promises made to the EU in the course of a Code of Conduct Group, the Union will list her as a so-called “non-cooperative tax jurisdiction“.
As Andreas Frank, a money laundering expert from Germany, told the TAX3 Committee, in Switzerland, money laundering was supported by a range of non-transparent systems of secrecy. Lawyers and trusts that would operate money laundering models were rarely criminalised. The “Self-regulatory organisation” (SRO), which is operating under the auspices of the Swiss Financial Market Supervisory Authority (FINMA), would be financed by banks, as these were also members of the former. Hence, confidential information of the SRO would be shared with its members and would therefore often lead to the prosecution of whistleblowers for example. Cryptocurrency models would also be used for money laundering in Switzerland. This was one of the reasons why Andreas Frank referred to Switzerland as the “Mother of all tax havens”.
Last Tuesday, the ECOFIN announced its support for the proposal of the Commission to increase the role of the EBA. In view of the money laundering scandals in various Member States, the Austrian Finance Minister Hartwig Löger said that more steps were needed to reform the EU’s legal framework. According to Commission Vice President Vladis Dombrovskis, after initial discussions, ECOFIN members had signalled broad support for the Commission proposal.
The AK generally welcomes any engagement by the Commission against money laundering and tax evasion. However, one will have to keep a critical eye on the realisation of the EU’ plans.