Policing is Europe's remaining gap; Berrigan on AMLA; Elon Musk and AMLA

The President of the FATF has stated that differences in policing and law enforcement across the EU are affecting the bloc's systematic approach to anti-money laundering.

Europe's policing differences, according to Dr. Marcus Pleyer, are "the remaining gap" in a clear strategy to combat financial crime in Europe.

Pleyer, a top official in Germany's finance ministry, said that while police forces across the EU need more resources to combat financial crime, they also need to adopt a risk-based approach.

The FATF president argued at a conference on Friday that banks, their supervisors, and FIUs were already using a risk-based approach to AML/CFT. However, FATF mutual evaluations revealed that there were still significant differences in how law enforcement approached financial crime across Member States.

He told the International Bankers' Forum Global AML/CFT conference, "I know this is difficult in the EU area because this is in the area of criminal law, which is not harmonised at an EU level."

He told delegates that European police agencies needed to "exchange best practices and encourage countries to  step this part up."

Overall, Dr. Pleyer believes the European Commission's plan to create a new central anti-money laundering authority (AMLA) that would serve as a supervisory body and coordinate FIUs "strikes the right balance."

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The AMLA is a "hub and spokes" model, according to John Berrigan, the European Commission's top finance official.

AMLA would coordinate the efforts of national supervisors and FIUs, serving as a "catalyser that will not replace national level but add value to what is in national level."

Because "we need the national level, you need a lot of local level; a lot of local knowledge," he said, a centralized authority in charge of everything would never work.

The riskiest obliged entities that operate across borders, however, will be directly supervised by AMLA.

However, he did not believe that institutions should be under constant supervision.

"As they are risky they would come in and de-risked as they would go out," he told delegates.

However, he admits that AMLA "may end up with a set of banks who may not be there permanently but for a very long time."

The authority will also be expected to take on a large number of smaller, potentially risky obliged entities.

The consequences of this could result in the authority requiring additional personnel and budgetary resources.

Moreover, AMLA will be in charge of establishing Europe's risk-based culture. He believed that the various perspectives on risk-based approaches would be settled collectively in AMLA alongside direct supervision.

He believes that the authority will be a mix of harmonisation and flexibility in detecting risk.

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SANCTIONS are currently keeping a lot of Compliance and AFC departments awake at night.

Given that DG FISMA, which he oversees, is in charge of this area, it was interesting to hear John Berrigan speak about how the Commission was approaching the implementation of sanctions.

He noted "uncomfortable similarities between what we see here [in sanctions] and AML" – referring to the implementation and harmonisation gaps that have plagued Europe's fincrime response for years.

There were some issues with sanctions implementation; while Europe had passed the laws, it was up to national governments to carry them out.

It was clear that the approaches taken by the various Member States differed significantly.

Sanctions violations were a criminal offense in some countries and an administrative offense in others.

That is why, just last week, the Commission published legislation making sanctions violations a crime across the EU.

The sanctions were coordinated by DG FISMA, which had formed working groups of Member States to formalize the exchange of information and best practices. It was not, however, a sanction-enforcement authority.

Peer pressure, according to Mr Berrigan, also played a role in the process.

Furthermore, while DG FISMA was in charge of sectoral sanctions – banks and companies – the EEAS, the EU's foreign policy director, was in charge of individual sanctions.

All of this demonstrates that the DG's analogy of what is happening in sanctions accurately reflects the current situation in the AML field.

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Where AMLA headquarters is based will go down to the wire.

It appears that the legislation governing the authority will be agreed upon long before the authority's location is determined.

Latvia, Germany, Italy, Austria, and France appear to be the five countries that will have to compete – and it will all come down to last-minute horse-trading.

Given how teams worked remotely during the pandemic, Markus Schulz of ING told the conference that location was not as important.

This prompted moderator Nicolas Veron to remark that this might not align with Elon Musk's recent worldview, in which he has ordered all employees back to work.

Schulz's response was far more important: he chose a location where AMLA could work effectively with the various skillsets available.

By fLEXI tEAM