On 2 February 2016, the European Commission (EC) presented an Action Plan to strengthen the fight against terrorist financing. As the European Commission outlined in its announcement, “the European Agenda on Security, adopted in 2015, underlined the need for more effective and comprehensive measures to address terrorist financing”. The EC is also calling on national governments to take action earlier than planned to implement the Fourth Anti-Money Laundering Directive (MLD4) by the end of 2016 rather than June 2017.
The EC will publish a legislative proposal in the second quarter of 2016, providing amendments in the following key areas:
- Enhanced due diligence measures to address risks coming from high-risk third countries. The EC’s proposal will include a list identifying third countries with strategic deficiencies in the area of money laundering and counter-terrorist financing. The EC will also propose to amend MLD4 to include a list of compulsory enhanced due diligence measures and counter-measures that should be applied by financial institutions towards such high risk third countries.
- Virtual currency exchange platforms will be brought under the scope of MLD4, in order to help identify the users who trade in virtual currencies and tighten their control. The EC is also proposing to apply the licensing and supervision rules of the Payment Services Directive to virtual currency platforms and wallet providers, in order to improve control of the market and prevent money laundering and terrorist financing.
- Enhance control on prepaid cards and ensure that customer due diligence is carried out by the time the card is activated. The EC identifies that payment methods that may be used anonymously – such as pre-paid cards, money remittances and bitcoin – are often used by terrorist organisations to finance attacks. Tightened checks must be applied in order to ensure an effective freezing of terrorist assets throughout the EU.
- Enhance the powers of EU Financial Intelligence Units (FIUs) and facilitate their cooperation. The EC plans to establish centralised bank and payment account registers so that FIUs have access to information on holders of bank and payment accounts at national level. Rules for FIUs will also be aligned with international standards to improve their access to information, enhance their powers and facilitate their cooperation.
Furthermore, the EC is considering whether to produce an EU framework to freeze terrorist assets in addition to UN asset freezing measures. The EC will also carry out an assessment in the last quarter of 2016, to consider whether there is a need for an EU Terrorist Finance Tracking System. This system will operate in addition to the EU-US Terrorist Financing Tracking Programme, which detects the movement of funds by terrorists through financial transactions and the identification of terrorist networks and affiliates.
The EC also proposes some non-legislative actions against terrorist financing. These include conducting a supranational risk assessment of money laundering and terrorist financing risks and harmonizing the criminalisation of money laundering. The EC highlights that while EU Member States have criminalised money laundering, there are differences in the definition of money laundering and the sanctions applied, which create obstacles in cross-border judicial and police cooperation. Therefore, the EC will propose minimum rules regarding the definition of the criminal offence of money laundering and appropriate sanctions. Furthermore, the non-legislative actions include operational support to FIUs and a planned mapping exercise among FIUs to identify practical obstacles to access to and exchange of information, so that exchange of information between FIUs is enhanced.