More coordination of anti-money laundering and terrorism financing efforts: what does it mean for the philanthropy sector?
Following a discussion of economics and finance ministers on 4 November 2020, the Council adopted conclusions on anti-money laundering and terrorism financing efforts.
These provide the Commission with guidance in advance of its legislative proposals in 2021. Specifically, for setting up:
- a single rule book harmonising EU rules
- an EU-level supervisor with direct supervisory powers
- a coordination and support mechanism for national financial intelligence units
The NPO and philanthropy sector considers that tighter EU policy efforts on the matter have to follow a risk-based approach. More co-ordination and a single rule book would be welcome if this can provide some clarification of certain concepts: for example, if and how the policy on ‘beneficial ownership’ should be applied to the NPO sector (including foundations), or the fact that NPOs and foundations are generally not ‘obliged entities’. Member States have implemented the current AML Directive in different ways and some have introduced clear ‘over-regulation’ by, for example, considering all foundations as obliged entities and putting significant additional reporting requirements on them, or by requiring public benefit foundations to report on all their beneficiaries, which is clearly not required by the Directive.
The Council conclusions are following work done both by the European Commission and the Parliament in increasing co-ordination of AML/CFT rules. The Council´s approach further proves that AML remains very high on the agenda of the EU institutions. The European Commission considers the adoption of anti-money laundering legislative package as one of their priorities for 2021.
Earlier this year, Philanthropy Advocacy contributed together with NPO allies to public consultations on a Roadmap and Action Plan: Towards a new comprehensive approach to preventing and combating money laundering and terrorism financing published by the Commission. In both consultations we strongly supported the important fight against money laundering and terrorism financing, however stressing that policy must not unduly restrict our sectors’ public benefit activities. Existing AML/CFT policy has already had an unintended limiting effect on legitimate non-profit organisations. We hence underlined that any EU level policy must follow a risk-based and proportionate approach, taking into account the latest findings from the EU supranational risk assessment (SNRA), fundamental rights and the principle of subsidiarity.
Currently, PA is also contributing to the biannual Supranational Risk Assessment (SNRA), an exercise conducted by the Commission in order to assess the vulnerability of financial products and services to risks of money laundering and terrorist financing, to be published in 2021. The PA Secretariat was approached by the European Commission to provide feedback on the levels of threat and vulnerability of the philanthropic sector to money laundering and terrorism financing, and to provide more input to the current risk assessment. The PA Legal Affairs Committee created a small Task Force on the matter and is liaising with a wider civil society coalition to provide input into the process. Given the current terrorist threat scenario, it is still hoped that EU Policy makers will carefully craft its new policy efforts taking into account fundamental rights and a risk-based approach.