The European Commission has launched a consultation on
amendments to the third money laundering directive (third
directive) to address changes required by the updated Financial
Action Taskforce (FATF) Standards. The consultation runs until 13
June 2012 .
In a report from the Commission to the European Parliament and
Council, the Commission expressed the view that the existing
framework for the prevention, detection and prosecution of money
laundering and terrorist financing works relatively well and that
no fundamental shortcomings have been identified.
The report suggests that the main focus for amendments will be
updating existing requirements in line with the new FATF standards,
while considering the optimal level of harmonisation of measures
across Europe and how the application of the requirements can be
more effective.
The report seeks input from the private sector on a number of
areas including:
- the inclusion of tax evasion as a predicate offence for money
laundering
- the extension of the risk based approach
- possible changes to simplified and enhanced due diligence
provisions
- harmonisation of standard due diligence requirements
- facilitation of greater transparency in legal entities and
arrangements
- the possibility of further sectoral guidance being issued at
European level, in addition to that issued by FATF and
nationally
- enhanced compatibility between data protection and anti-money
laundering requirements
In relation to the legal sector, the Commission again raises the
concern of possible under-reporting. However they do so without an
explanation for why they believe that the reports within the
European legal sector are less than the level of suspicion within
that sector, or an assessment of whether those reporting levels are
consistent with other designated non financial businesses in the
relevant countries.
The Commission also points to concerns about the application of
the reporting exemption to the legal sector, but only addresses the
application of privilege or secrecy within a litigation
context.
The failure by some member states to clearly protect privilege
or secrecy with respect to the provision of legal advice,
irrespective of whether legal proceedings are contemplated, has
been the main cause of concern for the legal profession.
Despite the already extensive consultation, research and
dialogue which have taken place on the implementation of the third
directive and areas for improvement, this 18 page report seeks
views on a number of widely drafted questions.
The Commission has indicated that it will be adopting
legislative proposals in Autumn 2012 thereby allowing only three to
four months to analyse responses to this consultation, undertake
drafting and consult on the actual proposals.
It is therefore perhaps surprising that the Commission has not
given a clearer steer as to its preferences for implementation of
the FATF standards within this report, especially given the recent
trend to legislate at least partially by way of regulation.
A representative from the Commission will be speaking at the Law
Society's financial crime symposium on 15 May 2012 . This symposium
will provide representatives from businesses across the regulated
sector and across Europe with the opportunity to understand more
about the areas that the Commission are considering for reform and
to share their suggestions for improvement.
Read the Commission's report