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Article
Publication date: 2 January 2018

Norman Mugarura

The purpose of this paper is to explore the law relating to European Union (EU) Anti-Money Laundering (AML) Directives and the effect of Brexit on money laundering regulation in…

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Abstract

Purpose

The purpose of this paper is to explore the law relating to European Union (EU) Anti-Money Laundering (AML) Directives and the effect of Brexit on money laundering regulation in the UK and the EU. The first part of the paper involves a review of AML Directives and how they are transposed into the UK. The question whether the fourth AML directive or other directives due to become law in the UK will be implemented or culled will largely depend on the relationship between the UK and the EU going forward. The UK will have the full autonomy in terms of making decisions as to which laws to implement or which laws to scrap or to cull, as it sees fit. The UK having relinquished its membership of the EU notwithstanding could still be bound by EU anti-money directives particularly if it chooses to remain in the EU single market. The UK could also forge alliances with EU member states and in which case it will be expected to apply the same EU market rules as its other EU counterparts. The fourth AML directive that was due to become law in all EU member countries in June 2017. This directive was introduced to streamline the third AML directive (2005/60/EC) largely with regard to beneficial ownership of nominee accounts and politically exposed persons (PEPs). The paper scoped current EU AML directives, and how they have been used in the fight against money laundering both in the UK and beyond. Brexit is likely to have far-reaching implications on many regulatory areas, including in prevention of money laundering and its predicate offences in the UK and the EU. The fourth AML directive was due to become law in the UK on 26 June 2017, and whether the UK Government will go ahead and implement it or bin remains to be seen.

Design/methodology/approach

The paper has evaluated the potential effect of BREXIT on EU AML Directives in the UK, drawing examples in non-EU countries. It articulates the raft of EU AML Directives to assess whether the fourth AML directive (which was due to become law in June 2017) will become law in the UK or be culled. It draws on experiences of non-EU countries like Switzerland and Norway, which despite not being members of the EU, have full access to the EU single market. The first part of the paper provides a review of AML Directives in Europe and how they are internalised into member countries. Data were evaluated often alluding to existing mechanisms for harnessing EU AML Directives in member countries. The last part of the paper proposes the measures that are ought to be done to minimise or forestall the threat of money laundering and its predicate offences in the post-Brexit regulatory environment.

Findings

The BREXIT has already unravelled markets both in the UK and in the EU with far-reaching implications on money laundering regulation in multiple ways. The paper has articulated the mechanisms for internalisation of EU AML directives in all Member countries and countries that want to exit the EU. It is now clear that, as the UK voted to relinquish its membership of the EU, it will not be under any obligations to apply EU AML regimes or any other EU laws for that matter. The findings of the paper were not conclusive, as the UK government has not yet triggered Article 50 of Treaty of Lisbon on the functioning of the EU. The fourth AML directive, which was due to become law in the UK on 26 June 2016, could still be adopted or culled depending on the model the UK decides to adopt in its relationship with the EU going forward. There is a possibility for the UK to remain a member of the EU single market and to retain some of the regulatory rules it has operated in relation to money laundering regulation and its predicate offences. It could adopt the Norway, Switzerland or the Canadian model, each of which will have different implications for the UK and the EU in terms of their varied AML obligations. It will be in the commercial interests of the UK Government to not cull the fourth AML directive (which was due to become law in June 2017) but to transpose it into law.

Research limitations/implications

There were not so many papers written on the issue of Brexit in the context of this topic. It was therefore not possible to carry out a comparative review of Brexit and its effect on money laundering regulation in the UK, drawing on experiences of other countries that have exited.

Practical implications

Brexit is likely to have far-reaching implications on many regulatory areas, including prevention of money laundering and its predicate offences in the UK and the EU.

Social implications

The Brexit has elicited debates and policy discussions on many regulatory issues and not the least money laundering counter-measures in the post-Brexit environment. Brexit will have far-reaching implications for markets, people and national governments both in the EU and beyond. It has already unravelled social and economic life both in the UK and in the EU. The significance of paper is that it could enhance future research studies on money laundering regulation within countries delinking from regional market initiatives to address attendant changes.

Originality/value

This paper proffers insights into the Brexit and its implication on AML regulation in the UK and the EU during and post-Brexit era. To curtail the social-economic effect of Brexit on financial markets regulation, the UK should remain a member of the European single market not only to minimise the potential of losing more ground and leverage as a financial capital of the world but also to protect financial markets tumbling downhill!

Details

Journal of Money Laundering Control, vol. 21 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 22 July 2021

Marius Laurinaitis, Darius Štitilis and Egidijus Verenius

The purpose of this paper is to assess such processing of personal data for identification purposes from the point of view of the principle of data minimisation, as set out in the…

Abstract

Purpose

The purpose of this paper is to assess such processing of personal data for identification purposes from the point of view of the principle of data minimisation, as set out in the EU’s General Data Protection Regulation (GDPR) and examine whether the processing of personal data for these purposes can be considered proportionate, i.e. whether it is performed for the purposes defined and only as much as is necessary.

Design/methodology/approach

In this paper, the authors discuss and present the relevant legal regulation and examine the goals and implementation of such regulation in Lithuania. This paper also examines the conditions for the lawful processing of personal data and their application for the above-mentioned purposes.

Findings

This paper addresses the problem that, on the one hand, financial institutions must comply with the objectives of collecting as much personal data as possible under the AML Directive (this practice is supported by the supervisory authority, the Bank of Lithuania), and, on the other hand, they must comply with the principle of data minimisation established by the GDPR.

Originality/value

Financial institutions process large amounts of personal data. These data are processed for different purposes. One of the purposes of processing personal data is (or may be) related to the prevention of money laundering and terrorist financing. In implementing the Know Your Customer principle and the relevant legal framework derived from the EU AML Directive, financial institutions collect various data, including projected account turnovers, account holders' relatives involved in politics, etc.

Details

Journal of Money Laundering Control, vol. 24 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 28 November 2023

Tomasz Michał Matras

The implementation of the Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of…

Abstract

Purpose

The implementation of the Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing resulted in the enactment by the Polish Parliament of the Act of March 1, 2018, on the prevention of money laundering and terrorist financing. One of the most important issues identified in the Act was the establishment of the Central Register of Beneficial Owners. The purpose of this paper is to critically analyze the functioning of the Register in Poland from the perspective of three years since its establishment. The text presents the most important problems faced by reporting institutions and obliged entities due to discrepancies in the interpretation of the Act’s provisions – especially in terms of the definition of a beneficial owner.

Design/methodology/approach

The basic research approach was a comparative content analysis method. The objects of analysis included Polish Laws, Directive of the European Parliament and the Council (EU) 2015/849 and the judgment of the Court of Justice of the European Union. The theoretical legislative assumptions contained in the Acts were compared with reports, studies and communications prepared by public and private institutions. This made it possible to draw conclusions regarding the causes of problems with the functioning of the Register in Poland.

Findings

The results of the research showed that the ambiguity of the definition of the beneficial owner leads to a number of problems on the part of reporting institutions, such as companies, foundations and associations. On the other hand, a large part of the data entered in the Register is questioned by obliged entities. The lack of personal data protection is also a problem. Consequently, this reduces the value of the Register as a tool that effectively mitigates the risk of money laundering.

Research limitations/implications

The research focused only on the functioning of the Central Register of Beneficial Owners in Poland. The subject of the analysis addressed problems with the definition of beneficial owner, issues of data quality and openness and the process of verifying the Register’s data. The technical aspects of the Register operation and the financial penalties imposed by public oversight institutions were not reviewed. Also, no comparison was made with other European Union (EU) member states that have implemented Directive of the European Parliament and of the Council (EU) 2015/849.

Originality/value

This study discusses the important issue of regulatory requirements introduced under EU regulations for private companies. Familiarization of companies, NGOs and obliged entities with the conclusions of the study can positively influence the consolidation of the correct interpretative path. In addition, to the best of the author’s knowledge, this is the first scientific text that identifies and systematizes the most important problems of the Register’s functioning in Poland.

Article
Publication date: 2 July 2018

Francesco Falco

The purpose of this paper is to provide guidelines and inputs for the implementation of policies and procedures governing transactions and business relationships with politically…

217

Abstract

Purpose

The purpose of this paper is to provide guidelines and inputs for the implementation of policies and procedures governing transactions and business relationships with politically exposed persons (PEPs) under the anti-money laundering (AML) legal framework.

Design/methodology/approach

This paper reviews AML PEPs’ regime in the perspective of the European Union Directive (EU) 2015/849 of May 20, 2015; the Italian Legislative Decree no. 231 of November 21, 2007; and the “good practice” recommendations issued by the Bank of Italy. In particular, it provides an overview of EU and Italian legislation in connection with PEPs and describes “good practice” recommendations provided by the Bank of Italy to implement policies and procedures to properly perform transactions with PEPs and comply with AML legislation.

Findings

Bank of Italy’s “good practice” recommendations are an important tool for credit and financial institutions managing transactions and business relationships with high-risk counterparties such as PEPs. They shall help determine how to properly implement policies and procedures for an enhanced identification and verification of PEPs.

Originality/value

This paper provides useful information on how to draft policies and procedures in order to be compliant with AML legislation related to PEPs.

Open Access
Article
Publication date: 23 June 2020

Umut Turksen and Adam Abukari

This paper aims to investigate and provide pathways for leveraging the Organisation for Economic Cooperation and Development (OECD’s) Ten Global Principles (TGPs) for countering…

3227

Abstract

Purpose

This paper aims to investigate and provide pathways for leveraging the Organisation for Economic Cooperation and Development (OECD’s) Ten Global Principles (TGPs) for countering tax crimes in the EU.

Design/methodology/approach

The study is guided by the combination of traditional and innovative research methods drawn from criminal law and justice, public regulatory theory and tax law, based on socio-legal and comparative methodologies.

Findings

The research shows that EU has achieved considerable amount of progress when it comes to meeting the TGPs. However, law and practice in EU Member States indicate that there are different legal, human and organisational approaches to fighting tax crimes. The TGPs could be strategically applied to complementing the EU’s Fifth Anti-Money Laundering Directive (AMLD) and other initiatives on Administrative Cooperation.

Research limitations/implications

Although the TGPs appear encompassing, there are opportunities to harness the potency of these principles and to provide more tailored principles that can help engineer sustainable remedies for countering tax crimes in the EU.

Practical implications

The paper critically analyses, through a multidisciplinary approach, the main legal, human and organisational factors influencing the prosecution of tax crimes in the EU Member States.

Social implications

Realignment and harmonisation of tax enforcement paractices in the EU Member States thus help in the reduction of tax gap resulting from tax offences.

Originality/value

The paper provides novel approaches and findings based on empirical info obtained from face-to-face focus groups with end users and law enforcement agencies in tax enforcement eco-system in ten different EU Member States.

Details

Journal of Financial Crime, vol. 28 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

Open Access
Article
Publication date: 1 November 2021

Paulina Ledwoń

By implementing Directive (EU) 2015/849 of the European Parliament and of the Council of May 20, 2015, the Polish legislator decided to pass the Act of 1 March 2018 on…

Abstract

Purpose

By implementing Directive (EU) 2015/849 of the European Parliament and of the Council of May 20, 2015, the Polish legislator decided to pass the Act of 1 March 2018 on counteracting money laundering and financing of terrorism (AML). In connection with it, many interpretative doubts have arisen. The purpose of this paper is to explain one of them, namely, to indicate whether the provision by a company of a registered office for economic activity to another company from the same capital group means that the company granting its headquarters has achieved the status of an obligated institution pursuant to Article 2 section 1 point 16 letter c) of AML.

Design/methodology/approach

This study is based on a grammatical, systemic and functional interpretation. It is enriched with national and supranational regulations, doctrinal considerations and current jurisprudence.

Findings

On the basis of the conducted analysis, the author concludes that providing a headquarters to another company from the same capital group may mean meeting the conditions of an obligated institution within the meaning of Article 2 section 1 point 16 letter c) of AML and obtaining by the company providing the registered office the status of an obliged entity.

Originality/value

This paper contributes to the clarification of the AML interpretation problem. Adopting a similar approach when analysing other obligated institutions may positively influence the consolidation of the correct interpretation path of AML regulations.

Details

Journal of Money Laundering Control, vol. 25 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 7 January 2019

Meta Ahtik, Ozren Pilipovic and Miran Marelja

This paper aims to focus on the role of reporting entities, e.g. banks, other financial institutions, legal professionals, in the prevention of criminal offenses connected with…

Abstract

Purpose

This paper aims to focus on the role of reporting entities, e.g. banks, other financial institutions, legal professionals, in the prevention of criminal offenses connected with money laundering in Croatia and Slovenia.

Design/methodology/approach

The methodology of the economic analysis of law is used to analyze the effectiveness of laws in Croatia and Slovenia regarding the definition and the role of reporting entities in money laundering prevention in these two countries. A comparative approach is also used as the authors compare the effectiveness of Slovenian and Croatian legal systems and their compatibility with EC Directive (2015/849).

Findings

The authors find that banks have long clinged to the guaranteed confidentiality of deposits, which means that money laundering has undoubtedly brought them some benefits in the short term. The prevention of money laundering for banks is not free. The measures imposed on the bank by legislation (encouraging these banks to a higher level of demand for preventive behavior) entail costs that go beyond the direct, visible benefits of the implemented measures. However, a functioning and stable financial system has a number of externalities, of course, which are also enjoyed by banks.

Originality/value

The paper focuses on economic analysis of Croatian and Slovenian legal systems with regards of the regulation of role of reporting entities in the prevention of money laundering which produce certain costs and benefits for the financial system and reporting entities as whole. The paper also uses the comparative approach to address the problem of compatibility of Croatian and Slovenian legal system with the EC Directive (2015/849).

Details

Journal of Money Laundering Control, vol. 22 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 3 May 2022

Elissavet-Anna Valvi

The aim of the present study is to shed light on the role of legal practitioners, namely, lawyers and notaries, in the fight against money laundering: Are they considered as…

3066

Abstract

Purpose

The aim of the present study is to shed light on the role of legal practitioners, namely, lawyers and notaries, in the fight against money laundering: Are they considered as facilitators or obstacles against money laundering? How does the global and the EU legal framework deal with the legal professionals?

Design/methodology/approach

The research follows a deductive approach attempting to respond to questions such as: How do the lawyers’ and notaries’ societies react in front of the anti-money laundering measures that concern them and why? What are the discrepancies between the lawyers’ professional secrecy and the obligations that EU anti-money laundering legislation assigns them?

Findings

This study disclosures the response of the European union and international legal and regulatory framework as well as the reflexes of the international and European legal professionals’ associations to this danger. It also demonstrates the reaction of lawyers against European union anti-money laundering legislation, to the point that it limits not only the confidentiality principle but also the position of the European judicial systems to the contradiction between this principle and the lawyers’ obligation to report their suspicions to the authorities.

Research limitations/implications

To fulfil the study goals, it was necessary to overcome some obstacles, like the limitation of existing sources. Indeed, transnational empirical research considering the professionals who facilitate money laundering is narrow. Besides, policymakers and academics only recently expressed more interest in money laundering and its facilitators.

Originality/value

This paper fulfils an identified need to study the legal professionals’ role not only in money laundering practices but also in anti-money laundering policies.

Open Access
Article
Publication date: 17 March 2020

Harold Koster

On 24 July 2019, the European Commission adopted a Communication to the European Parliament and the Council towards better implementation of the European Union’s (EU) anti-money…

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Abstract

Purpose

On 24 July 2019, the European Commission adopted a Communication to the European Parliament and the Council towards better implementation of the European Union’s (EU) anti-money laundering (AML) and countering the financing of terrorism (CFT) framework. This Communication was accompanied by four reports. This papers aims to investigate these reports.

Design/methodology/approach

Review of EU developments and reports.

Findings

The European Commission continues to work on eliminating the vulnerabilities of the current AML and CFT system. As the reports show, there are still many issues regarding the EU’s AML and CFT framework. The reports offer useful insights into weaknesses and failures and provide a good basis for further discussions with relevant stakeholders, for certain amendments to the current rulebook and enforcement as well as for stronger mechanisms regarding supervision and supporting cross-border cooperation.

Originality/value

This article discusses important relevant EU developments.

Details

Journal of Money Laundering Control, vol. 23 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 1 October 2020

Kalle Johannes Rose

Recent research and market effects within the European Union (EU) show a rising concern toward the de-risking of certain sectors/actors owing to the increased anti-money…

Abstract

Purpose

Recent research and market effects within the European Union (EU) show a rising concern toward the de-risking of certain sectors/actors owing to the increased anti-money laundering regulation. Because of the enhanced due diligence and monitoring costs related to anti-money laundering and counter-terrorist financing regulation by the AMLD4 and AMLD5, several financial institutions now turn to de-risking their corporate client base to minimize not only costs from monitoring and onboarding but also the risks of sanctions and reputation. The purpose of this paper is to analyze the incentives behind de-risking and the relevant solution models to the de-risking “crisis.” Overall, to find, to what extend de-risking is efficient and when it is not and how to mitigate the concept.

Design/methodology/approach

This paper applies a functional approach to law and economics with the aim of reaching a higher level of efficiency in combatting money laundering through analyzing present regulatory and economic conditions.

Findings

It is found that de-risking within the EU opposes the aim of the present regulatory scheme regarding anti-money laundering. The paper finds that it is needed to divide the analysis of de-risking to a national and regional/union level. In addition, this paper establishes that the present strategy of de-risking at national level eventually will result in enhanced regulation to fulfill the aim of the present regulatory framework, which is why a proactive approach by recontracting the client base is recommended. At a regional level, it is found that de-risking is valid, why a solution needs to come from the EU enhancing control, monitoring and sanctions to establish trust and the possibility for financial inclusion.

Originality/value

Most of the recent research within the field highlights the problem of de-risking and therefore presents a range of initiatives to regulators and financial institutions at a global level. This paper solely focuses on the EU and shows that the de-risking dilemma demands financial institutions to take a proactive approach to contracting if unnecessary regulation is to be hindered. Furthermore, this paper shows that the concept of de-risking cannot be analyzed nor mitigated as one singular concept, but it needs to be addressed according to different levels of activity and geography.

Details

The Journal of Risk Finance, vol. 21 no. 4
Type: Research Article
ISSN: 1526-5943

Keywords

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