Histoire des directives de lutte anti-blanchiment ( LCB )

Over the past twelve months, the European Union (EU) has considered how to renew its fight against money laundering (AML) following a wave of failures in anti-money laundering controls at banks across Europe of the North and the associated scandals about possible illicit flows via these same establishments.

Discussions so far have focused on the possibility of creating an anti-money laundering agency at EU level which would have powers of direct intervention at state level as well as the use of “ regulations », i.e. rules created by the EU that have a direct influence on Member States and as opposed to « directives » which allow governments to transpose their requirements into national laws at will and within a longer period of time.

This would be a major shift in strategy for the EU, which over the past thirty years has relied on a succession of directives known as Anti-Money Laundering (AML) Directives to drive its strategy. of combating money laundering. But let’s take a closer look at these LCB directives.

The origins of the first AML Directive

Published in 1991, the first Anti-Money Laundering (AML) Directive predates the transformation of the original « European Community » into the European Union in 1993. It can even be said that the first AML Directive was one of the main political fruits of this pivotal period because the European Commission, the bureaucratic body of the Community, sought to extend its areas of political competence. AML had already been the subject of specific intergovernmental actions by European governments in the 1980s, but the Commission saw it as a major area for creating added value by adopting a multilateral approach.

At the same time, broader European political news was also encouraging international cooperation and action in the fight against AML due to growing political concerns about drug trafficking. The European Parliament has thus adopted numerous resolutions and called for « the establishment of a world-wide Community program to combat drug trafficking and including provisions on the prevention of money laundering », echoing the concerns governments and legislatures of member states.

The scale of the problem and the need for action have also been recognized globally. The United Nations adopted its « Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances » (« Vienna Convention ») in December 1988, while in July 1989 the G7 of major industrialized nations, joined by the President of the Commission , created the Financial Action Task Force (FATF), an international standard-setting body in the fight against money laundering.

The first Directive

The first AML Directive (1AMLD) was approved by the Council of Ministers of the European Union on June 10, 1991, the deadline for its transposition into the national laws of the Member States being set for April 1, 1994. Common to all “ Directives”, this transposition process has enabled national governments to consider how to transpose the requirements of the Directive into their national law by setting up consultation periods with the parties concerned. On arrival, the national laws and regulations had a « family resemblance » insofar as, beyond the minimum standards required, a certain flexibility was provided for, in particular to tighten national regulations if the Member State demanded.

The first AML Directive (1AMLD) was therefore as much a rhetorical tool as a political directive enjoining Member States to take the fight against money laundering seriously. It recognized and emphasized the need for an international approach to money laundering and that while nation states had obvious responsibilities, a purely national approach that disregarded international coordination and cooperation would not would only have very limited effects. »

The FATF had published its first series of 40 recommendations in April 1990 which had a significant influence on the content of the first AML directives and also of the following ones. The fundamental aspect of the 1st AML Directive (1AMLD) concerned the obligation for Member States to criminalize money laundering while initiating a process of imposing specific AML obligations on private sector actors. considered to be the best placed to play the role of « guardians » of the financial system. Like the 40 recommendations, the first AML Directive (1AMLD) targeted banks as the main “obligated entities” of the private sector and referred to as “financial and credit institutions” in the Anti-Money Laundering Directive.

This Directive required member states to legislate to ensure that these obligated entities put in place consistent customer due diligence (CDD) and know-your-customer (KYC) procedures when integration, as well as at regular intervals thereafter, and also, importantly, that they retain traces of the relationship for up to five years after its end.

It also required these obligated entities to monitor the activity of their customers to ensure that their transactions complied with CDD due diligence obligations, as well as to identify « suspicious » transactions and report them to national authorities, a requirement that finds itself originated in the United States Bank Secrecy Act (BSA) of 1970.

While not specifically requiring a technological response, these two obligations effectively created what we know today as the “  transaction oversight  ” requirement. Although many obligated entities initially sought to respond to this with manual controls, it soon became clear that the volume of transactions flowing through retail and commercial banks required an automated response. However, these platforms were then extremely rudimentary and relied on primary rules to detect suspicious cases.

A directive that has its limits

The 1st AML Directive (1AMLD) proved to be a positive first step in identifying and mitigating a problem that had been largely ignored as a major and coherent policy issue in Europe until the late 1980s. However, its limits are quickly became evident.

As professionals gained a better understanding of money laundering, it became apparent that the Directive’s focus on banks was too specific. Indeed, launderers relied on a wide range of industries and businesses outside of the financial sector to place, deposit, and smuggle illicit funds into the legitimate financial system. Other forms of ‘underlying’ crime, namely crimes generating money to be laundered, notably arms smuggling in the Balkan conflicts of the 1990s, have also taken on increasing political importance.

The more the European authorities were interested in the activities of organized criminal groups (OCGs), the more they saw how these groups were involved in many types of crimes including that of drug trafficking, all these activities generating significant income.

2nd AML Directive (2AMLD): adapting to the new recommendations

EU authorities ratified the 2nd AML Directive in December 2001, approximately three months after the September 11 terrorist attacks in the United States. However, the content of this Directive, which had been agreed some time before, was dictated more by the need to fill the gaps in the first Directive identified over the previous decade, than by the terrible events which then occurred across the Atlantic. .

Following the revision of the FATF 40 Recommendations in 1996, this directive expanded and defined the range of predicate offenses related to money laundering and specified that suspicious transaction reports should be reported to a « financial intelligence unit ». specialized national. Recognizing also that money launderers were not only using banks to move illicit funds, the Directive therefore extended the scope of the obligation to non-banking institutions.

Also affected were funds transfer businesses collectively known as “non-banking financial institutions” (MSBs) and designated non-financial businesses and professions (DNFBPs) that may be involved in financial transactions. Lawyers are a particularly notable addition, their right to professional secrecy no longer being a protection if they directly participate in money laundering or provide information on how to launder money.

3rd AML Directive (3AMLD): responding to terrorism

The EU began to address terrorist financing issues under the next directive, namely the 3rd AML Directive (3AMLD) which came into force in 2005. It came into force much faster than the second Directive LCB (2AMLD), mainly due to the need to react quickly (by European standards) to the new « war on terrorism. » »

Some EU Member States had already taken national legislative action in this area before and after 9/11, notably the UK Terrorism Act 2000 , while in 2003 the FATF revised its recommendations to take account of its new responsibilities as an international standard-setting body for combating the financing of terrorism (TF) and anti-money laundering by creating nine « special recommendations » on the financing of terrorism. These new recommendations shaped the relevant FT content of the 3rd AML Directive (3AMLD), including due diligence measures to ensure that obligated entities were not providing services to terrorists or designated terrorist groups.

In parallel with terrorism, the 3rd AML Directive also continued the evolution initiated during the transition from the first to the second Directive by extending the obligations in the fight against money laundering to other sectors, in particular accountants and casinos. This new version also saw the introduction of the risk-based approach (RBA) for anti-money laundering procedures, which allowed some variation in the application of the obligation to Customer Due Diligence (CDD) depending on the risk profile of the customer, the product and several other factors.

The CDD obligation was therefore rather on a spectrum ranging from the simplified due diligence obligation (SDD) to the enhanced due diligence obligation (EDD) which was more concerned with the sources of wealth and income of a risky client. .

Recognizing the need to ‘motivate’ obligated entities, the 3rd AML Directive (3AMLD) also introduced penalties for breaches of anti-money laundering legislation. In 2005, Mariano Salas of the Commission’s Directorate-General for the Internal Market and Services noted that such penalties would be “effective, proportionate and dissuasive. »

However, the Directive remained silent on the calculation of these penalties, leaving the matter to national legislation. The sanctions were the subject of future controversies which the EU eventually had to return to and which we will examine in more detail in the second part of this blog post.

If you would like to read the second part of this article and learn more about the 4th, 5th and 6th AML Directives (4AMLD, 5AMLD and 6AMLD), we invite you to click on the link below.