On 2nd February 2016 the European Commission in Strasbourg presented an Action Plan to step up the fight against the financing of terrorism. The objective of said plan is to achieve a rapid and tough reaction to the challenges that terrorism poses today. On the one part, based upon the current European regulations in force, the aim is to locate terrorists via financial movements and to prevent them from transferring funds and/or assets, and on the other hand, to dismantle the income sources of terrorist organisations, with emphasis on their capacity to obtain funds.
Last week, on 5th July 2016 the European Commission adopted a proposal which shall become the first initiative to put into practice the aforementioned Action Plan, reinforcing the transparency rules for the fight against money laundering.
The main objective of said proposal is to combat the financing of terrorism and to increase transparency regarding the beneficial owner of companies and trust funds.
According to the first vice-president of the EC, Frans Timmermans, the measures “will help national authorities to locate persons who cover up their finances in order to commit crimes such as terrorism” and “the member states may obtain and share vital information regarding the beneficial owner of companies and trust funds, and those who trade foreign currency on line and who use prepaid cards”.
Apart from the effects in the fight against the financing of terrorism, the proposal brings with it, because of the publication of information of who is behind companies and trust funds, an important dissuasive effect for possible tax evaders.
In order to achieve the goal of preventing the use of the financial system for terrorist activities, a series of changes has been proposed.
First of all the competences of the financial information units of the EU have been broadened and cooperation has been facilitated. Furthermore, the risk of terrorism being financed through virtual money has been dealt with and control of the use of anonymous prepayment instruments, such as prepaid cards, has been implemented.
Finally, the reinforcement of the controls of high risk third countries has been established, obliging the banks to carry out additional controls in accordance with the due diligence regarding financial flows proceeding from these countries. For this a list of high risk countries shall be formally approved on 14th July of this year. Said list has been prepared taking into account the investigations of the Financial Action Task Force. The determining criteria for the inclusion of a country on said list is the existence of strategic deficiencies in the fight against money laundering and the financing of terrorism. In accordance with the fourth Directive, adopted on 20th May 2015, the Commission has been entrusted with the updating of said list three times a year.
Transparency rules shall reinforce the measures introduced by the aforementioned fourth Directive regarding money laundering. Through said rules, full public access to the registers of beneficial ownership shall be activated, as well as the interconnection of said registries, likewise, more information shall be made available to the authorities. Said transparency regulations shall bring with them greater control over companies and passive trust funds.
In conclusion, increased transparency to combat money laundering shall help to reinforce the fight against the use of new methods for financing terrorism, as well as to tackle tax evasion.
Pina Pohl
Vilá Abogados
For more information, please contact:
15th July 2016
