EU Parliament: Follow the fraudulent money and confiscate it

European Parliament. Committee on Civil Liberties, Justice and Home Affairs (LIBE) and Committee on Economic and Monetary Affairs (ECON) joint meeting. Vote by a show of hands. (EP Audiovisual Services, 20/02/2014).

In two parallel actions the European Parliament approved, with stormy majorities, two draft laws; one against money laundering and one more to facilitate the confiscation of fraudulently acquired assets. In the first case, the Economic Affairs and the Justice and Home Affairs committees amended a Commission proposal to list in public registers the ultimate owners of companies and trusts. In the second case, the full Parliament agreed with the Commission and approved a draft directive text to facilitate the freezing and confiscation of convicted crooks’ assets across the EU. The complementarity of the two new laws is obvious. It will be more difficult for crooks and criminals to hide illegally acquired assets, while it will be easier for the national authorities to confiscate them.

Starting from the ending of anonymity for the owners of companies and trusts, the new directive demands that the member states should create public registers, where “The ultimate owners of companies and trusts would have to be listed”. To this effect last Thursday, the MEPs of the Economic Affairs and the Justice and Home Affairs committees approved the final update of the draft anti-money laundering rules. Casinos are included in the scope of the draft rules, but decisions to exclude other gambling services posing a low risk are left to member states.

45 yes, 1 no

The text that the two Committees approved with 45 votes to 1 and 1 abstention will be put to a vote by the full Parliament in March. The new Parliament to be elected in May will begin negotiations with the European Commission and the Council of Ministers (the member states). This procedure may take a long time to be accomplished, but the Parliament believes that the Italian Presidency in the second half of this year will promote the issue very actively in the Council.

“The outcome of this vote is a big step forward in the fight against tax evasion and a clear call for more transparency. With this vote Parliament has shown, from left to right, that it is in favour of public beneficial ownership registers, and thus sends a strong signal to the Council for forthcoming negotiations on the file. By approving the establishment of beneficial ownership registers, the committees have shown that they are serious in their demand to finally break with the tradition of hidden company ownership”, said Civil Liberties Committee rapporteur Judith Sargentini (Greens/EFA, NL).

The problem is that within the EU territory and in the neighboring jurisdictions there are innumerable opportunities to hide financial assets in full anonymity. To mention a few, what about the English Channel Islands, the strong bank secrecy laws in Luxembourg, Lichtenstein, Austria, Malta and elsewhere, the London City with its direct connections with offshore paradises all over the world, the Swiss bank accounts and the many more not widely known opportunities to hide assets?

Will all those governments and authorities be ready to close the holes? It’s very doubtful, but the new directive is a step in the right direction. Lawmakers owe that to the hard-working and heavily taxed hundreds of millions of EU citizens. In any case, the discussion and the negotiations between the three EU institutions over the text of this directive will be very difficult and long.

Confiscate the crooks’ money

The second draft law requires member states to enable the confiscation of criminal assets following a final conviction. It will also enable the authorities to confiscate assets even if the suspect or accused person is ill or having disappeared, e.g. through in absentia proceedings. Extended confiscation would be possible where a court, “on the basis of the circumstances of the case (…) is satisfied that the property in question is derived from criminal conduct”.

This draft directive, by introducing new rules which make it easier to confiscate crooks’ assets across the EU, is much more mature from the point of view of procedures than the money laundering law. In this case, there is already agreement between the three EU decision-making bodies, the Parliament, the Council and the Commission. After it was voted yesterday in the full house with 631 in favour, 19 against, 25 abstentions, it is expected to be formally approved by the Council in the coming weeks. Member states will have 30 months to transpose the directive into their national laws. Ireland will take part in these arrangements, while the UK and Denmark will not.