The EU declares war on money laundering

Huge sums of money of illegal origin are channeled into the regular economy every year. The EU has now prepared a comprehensive reform in order to crack down on money laundering. Bernd Riegert reports from Brussels.

"The rules we have in place to prevent money laundering are among the toughest in the world," said the vice president of the European Commission, Valdis Dombrovskis, "but they must also now be systematically applied."

There hasn't been enough of this in recent years. In practice, many EU member states don't actually implement the rules or are simply too lax in supervising and scrutinizing suspicious financial transactions. This is why the European Commission has now officially proposed something Brussels has been

working on for months: It wants to create a new EU supervisory authority that will keep

a close eye on financial activity in member states and will monitor and audit large transnational financial institutions that are a potential risk.

However, this powerful authority is not expected to start its operations for another three years, and it will be five years before it takes full effect. The EU member states have in principle agreed to the establishment of this central supervisory authority, similar to the one that already exists for banks, but are arguing over where its physical headquarters should be.

Significant 'dirty' turnover

As Mairead McGuinness, the EU commissioner for financial services, acknowledged when presenting the new legislative proposals: "Money laundering poses a clear and present threat to citizens, democratic institutions and the financial system." Transactions involving "dirty" money account for about 1.5% of gross domestic product in the EU — that's €133 billion ($157 billion). "The scale of the problem cannot be underestimated, and the loopholes that criminals can exploit need to be closed," McGuinness said.

In order to achieve this, the Commission wants to standardize the rules on combating money laundering — i.e., bringing "dirty" money from criminal activities into normal, "clean" monetary circulation — right across Europe. All member states would have to be transparent about who actually owns which companies, financial service providers and real estate. It would no longer be possible in the EU for these to be held in the name of anonymous companies, trustees and representatives. Registers of bank accounts and their account holders would be merged across the EU.

Directive number six

The Commission states that the repeated division of assets into smaller units, the nesting of companies and electronic transactions through a series of foreign accounts all make it very difficult to follow the trail of money obtained through drug trafficking, illegal prostitution, illegal gambling, human trafficking and other crimes of this nature.

A new directive to combat money laundering — this is version number six — aims to make it harder for organized crime and those who finance terrorism to do business. The rules have been tightened up further compared to the fifth directive, which is currently in force. Cryptocurrencies — privately created electronic currencies such as Bitcoin, which the EU believes are particularly well-suited to anonymous transactions — are also being targeted. In future, cryptocurrency providers will have to disclose the identity of the account holder.

Cash transaction limits

A proposal also tabled today by Dombrovskis is proving controversial among member states. He wants to limit cash payments to a maximum of €10,000. He points out that cash is an easy gateway for the laundering of money. Cash proceeds from drug deals, for example, may be put into circulation by inflating the sales of a pizzeria owned by the criminals. Real estate is bought and paid for with suitcases full of cash.

Some EU member states have already imposed an upper limit on cash payments. In Greece, for example, it is just €500. In other countries, though, such as Germany or Austria, there is no limit at all. Around 70% of all end consumer payments in the EU are made in cash.

The Austrian finance minister, Gernot Blümel, supports the fight against money laundering, but says it's an illusion to think that criminals only use cash. "We see that white-collar criminals are increasingly switching to the digital realm, and we need to intensify our efforts here in future," Blümel said in Vienna last week. "I think this is more effective than arbitrary caps, which reinforce the current tendency to do away with cash." He explained that cash must be retained as a means of payment that does not require technical assistance.

Dombrovskis is primarily concerned about the EU's reputation and stability as a financial center. "Every money laundering scandal is one too many," he said.

Last September, thanks to the so-called FinCEN Files, it became clear that even renowned major European banks have been circumventing EU rules on money laundering. In 2018, a Danish bank was found to have been laundering money through a small branch in Estonia for years – up to €200 billion. The Danske Bank scandal provided the impetus for the Commission's new anti-money laundering initiatives. These still have to be approved by the European Parliament and the 27 EU member states.

more concerned, appears to be deploying more resources and more energy on secessionists than on these bandits and kidnappers," he added.

Ubale Musa and Shehu Salmanu

socio-economic condition of the subcontinent that has given birth to such a situation. The political parties use this issue for their own short-term gain," she said.

Allauddin (name changed) came to India from the Bangladeshi district of Khulna, close to India's West Bengal, a few years ago.

"Since India is a big country, unskilled job options are much greater here than in Bangladesh," Allauddin told DW. He possesses an Indian ID — Aadhar card — and owns two vans in India. Some of his family also lives with him.

Chhobi Sikdar (name changed) came from the same area to India in the 1980s. She escaped domestic violence and crossed the border to search for a different life. She received her legal documents in India a decade later.

"People do earn good wages in Dhaka. But it is easier to come to Kolkata than Dhaka because of the distance. And doing odd jobs in Kolkata is easier for her because nobody knows her here," Chhobi told DW.

The political campaign over illegal immigration

The debate over border crossings continues to stoke interest while Indian police and security forces continue to capture illegal migrants. The arrest of three members of the Bangladeshbased terrorist group Jamaatul-Mujahideen (JMB), caused a particularly big stir.

"This issue is never seriously discussed when the authorities of the two concerned governments meet," India-based human rights activist Ashish Gupta told DW.

"The lack of discussion itself indicates that the issue of Bangladeshi migrants is completely political. Had it not been so, then the case would have been dealt with differently."

During the last joint meeting between border guard officials from the two countries, the Bangladeshi side claimed that there is no major economic migration into India.

"The GDP growth rate of Bangladesh is now on an upward trend and the per capita income is close to $2,300 (€1,955). So, there is no reason really for

Bangladeshis to cross the border to seek jobs or for any other reasons," Shafeenul Islam, director-general of Border Guards Bangladesh (BGB), told a joint press conference.

He also claimed that border guards on both sides are now being more vigilant.

Migrants facing new challenges

Refugee policy expert Ghatak also believes that things have become more difficult for migrants.

"Previously the situation was different. The borders were not that strict. There were many who would cross the border in the morning, entering India for work and going back to Bangladesh in the evening. Now such things are not possible. So people find other ways," Ghatak said.

"Now there is evidence that Bangladeshis enter with a visa valid for one year. Then they start working in the unorganized sector and never go back. But can you call this infiltration? They did not cross the border illegally," she added.

India-based border activist Kiriti Ray told DW that the problem has to be solved differently.

"This crisis cannot be solved politically. Bangladeshi workers should be treated like migrants from Nepal and Bhutan in India. If the state-authorized their job in India, then the problem might be solved. One cannot forget the history of unplanned partitions. And the ethos of the people from both sides of the border," Ray said.

Free speech activists and privacy advocates maintain that the Personal Data Protection Bill, in its current form, is not a solution to government surveillance as it exempts the Indian government from accountability.

"Our intelligence agencies need to be held accountable. Usage of such software against parliamentarians and Indian citizens needs to require judicial sanction and future declassification," Bhandari said.

Founded in 2010, the NSO Group is best known for having created Pegasus, which allows those operating it to remotely hack into smartphones and gain access to their contents and functions.

Cyber experts say most powerful spyware currently available — and almost impossible to detect.

Dombrovskis: Every money laundering scandal is one too many