EU adopts plan on bank money laundering, may delay reforms

Finance ministers fail to break digital tax deadlock

BRUSSELS, Dec 4, (RTRS): European Union finance ministers on Tuesday adopted a plan to enhance the bloc’s defences against money laundering at banks, but the move could slow a legislative reform on banking supervision.

The action plan is meant to be the EU response to high-profile cases of alleged money laundering at banks in several EU states, including Denmark, Estonia, Latvia, Luxembourg, Malta, Spain, the Netherlands, Britain and Cyprus.

Ministers agreed there was a “need to strengthen the effectiveness of the current framework” to counter money laundering, and proposed some non-legislative actions to implement in coming months.

But the plan did not include any recommendation for legislative changes. Nor did it address calls from the European Central Bank to set up an EU-wide agency to counter money laundering.

The plan could also delay proposed reforms of money-laundering supervision from the European Commission in September, because ministers first want to assess the recent cases of financial crime, the document said, confirming a Reuters report last week.

The Commission’s proposal would have given the European Banking Authority more power to oversee money laundering and would have increased from one to 12 the agency’s staff in charge of monitoring financial crime at thousands of banks in the EU.

The review of past cases is expected to last until June. That would be after EU elections due in May, which makes it likely the new European Parliament will shelve the proposed legislative changes.

The action plan lists measures that would need to be carried out until 2020 and tries to reduce the discretion of national supervisors in applying anti-money laundering rules, which in some states have been executed too leniently.

Under the plan, supervisors will have to clarify existing rules for assessing whether bank managers are fit for their job and on revoking banking licences for serious breaches of anti-money-laundering rules. National authorities are also requested to cooperate more closely, but

European Central Bank President Mario Draghi (front center left), and Portuguese Economy Minister Mario Centeno (front center right), hold giant euro

coins during a group photo of EU finance ministers in Brussels on Dec 3. The euro celebrates 20 years of being in use in January of 2019. (AP)

without new binding requirements on exchanging information.

The European Commission is invited to make proposals for other possible changes in the second half of next year, but no indication is given on which longterm reforms should be considered.

European Union finance ministers failed to agree a tax on digital revenues on Tuesday, despite a last minute Franco-German plan to salvage the proposal by narrowing its focus to firms like Google and Facebook .

The European Union’s executive arm proposed a 3 percent tax on big digital firms’ online revenues in March, alleging they funnelled profit through states with the lowest tax rates.

The tax requires the support of all 28 EU states, including small, low-tax countries like Ireland which have benefited by allowing multinationals to book profits there on digital sales to customers elsewhere in the European Union.

The setback is a blow to French President Emmanuel Macron, as his government had invested considerable political capital in the tax. It is also seen in Paris as a useful example of joint European action before EU parliament elections next year.

In the original European Commission proposal, the tax was intended to be a temporary “quick fix” until a broader solution could be found among OECD members. But this was opposed by Ireland and some Nordic countries, leading French and German finance ministers to focus solely on online advertising revenues instead.

While this met with misgivings and outright opposition from at least four other ministers at a meeting in Brussels, they agreed to keep talking, Austrian Finance Minister Hartwig Loeger, whose country holds the rotating EU presidency, said. A broader turnover tax on firms with significant digital revenues in Europe would have hit companies such as Apple and Amazon harder, but the Franco-German proposal would not cover data sales and online marketplaces.

“I continue to have strong principled concerns about this policy direction,” Irish Finance Minister Paschal Donohoe told his EU counterparts in a debate on the tax.

Companies with big online advertising operations like Google and Facebook would be most affected by the Franco-German proposal as they make up the majority of the market in Europe.

Under this proposal, the tax would not come into force until January, 2021 and only if no international solution has been found. Paris and Berlin also proposed that it expire by 2025 in a move aimed at appeasing concerns that it may become permanent.

The Austrian presidency has been trying to reach a deal on the tax by the end of the year, while the Franco-German proposal calls for a deal by March.

“Don’t expect us to solve the challenge of a generation in a couple weeks or months,” French Finance Minister Le Maire said, adding the Franco-German proposal could still yield a deal.

German Finance Minister Olaf Scholz said tax receipts generate by the proposed Franco-German tax would be small, noting a similar tax planned by Britain was expected to raise around 500 million pounds ($641 million).