Actualidad European Union

Money laundering and cooperation between States

Directive and Regulations of the European Parliament and Council

The Official Journal of the European Union published two new regulations in November that add to the existing body of legislation on anti-money laundering and the financing of terrorism.

EU Directive 2018/1673

EU Directive 2018/1673 of the European Parliament and of the Council, 23 October 2018, combating money laundering using criminal law, sets out the minimum regulations defining felonies and legal sanctions for money laundering. It will not apply to the laundering of money from the proceeds of felonies affecting the financial interest of the Union, since these are already covered in specific regulations contained in EU Directive 2017/1371.

The preamble explains that the Directive is a response to the lack of consistency around the European Union in the current definitions of money laundering, as well as the lacunae and obstacles existing between cooperating authorities. Thus, its purpose is that all Member States should write the felony of money laundering into their statute books and impose effective criminal sanctions that are proportionate and dissuasive.

Among other issues, Directive 2018/1673:

  • Contains definitions of up to twenty-two categories of criminal activities, making fiscal felonies relating to direct and indirect taxes, as well as "self-laundering" (laundering carried out by the author of the criminal activity that has generated the financial gain) punishable offenses.
  • It refers to the fact that Member States should ensure that the risks and challenges created by using cryptocurrencies should be tackled from the anti-money laundering perspective.
  • It provides for the possibility of Member States creating more severe sanctions against those holding public office who commit money laundering offenses.
  • It establishes that Member States should provide mutual help that is as wide-ranging as possible, further guaranteeing an efficient and timely exchange of information.
  • It stipulates that Member States should ensure that money laundering is punishable by a maximum sentence of loss of liberty for at least 4 years.

Member States have until 3 December 2020 to adapt their legal, regulatory and administrative provisos to comply with the Directive's stipulations, and must inform the Commission immediately when they do so.

EU Regulation 2018/1672

EU Regulation 2018/1673 of the European Parliament and of the Council, 23 October 2018*, establishes a series of controls over the European Union's cash inflows and outflows. It completes the anti-money laundering and financing of terrorism legislation contained in EU Directive 2015/849, also known as the Fourth Directive, as discussed in Progreso 4 .

The Regulation covers the following issues in this control system:

  • Definition of cash. The definition of cash includes coins and notes, bearer-negotiable instruments, commodities used as highly liquid stores of value and prepaid cards.
  • Accompanied and unaccompanied cash. Carriers transporting EUR 10,000 or more in cash should declare this to the competent authorities of the Member State through which they are entering or leaving the Union. When a sum of unaccompanied cash (cash in a shipment without a carrier) equal to or more than EUR 10,000 enters or leaves the Union, the authorities of the Member State through which the cash is entering or leaving the EU may require the sender or recipient of the cash to make a disclosure declaration.
  • Competent authorities. The regulation establishes the powers of the competent authorities (customs authorities of the Member States and any other authority empowered to enforce this regulation); it covers information exchange between competent authorities, Financial Intelligence Units (FIU), the European Commission (which will be helped by a Cash Controls Committee), as well as with third countries; and lays out the duties of competent authorities as regards professional secrecy and confidentiality, data security, and personal data protection and conservation.

This regulation will come into force on 3 June 2021. Nevertheless, clause 16, covering measuring to be adopted by the European Commission in order to ensure the consistent execution of controls by the competent authorities, has been in force since 2 December 2018.

By 4 December 2021 at the latest, Member States must have sent the following information to the Commission:

  • The list of competent authorities
  • Detailed information on the sanctions that will be imposed in the event of non-compliance with the obligation to declare accompanied cash and the obligation to report unaccompanied cash
  • Anonymized statistical information on declarations, controls and breaches

In turn, the Commission will submit, by 3 December 2021 and subsequently every five years, to the Parliament and Council of the European Union a report on how this regulation has been applied, based on the information received regularly from the Member States.

*Repeals Regulation (EC) 1889/2005 of the European Parliament and of the Council, 26 October 2005, on controls of cash entering or leaving the European Community