European Parliament Fights Back on Dirty Money

Ana Maria Gomes (Wikimedia Commons)

by Eldar Mamedov

This week, the European Parliament adopted, by an overwhelming majority, a resolution regretting the Council’s decision to reject the list of countries with high risk for Europe’s financial system proposed by the European Commission. That list was established, on the basis of the EU Anti-Money Laundering directive, to prevent money-laundering and terrorist-financing risks coming from third countries. The inclusion of countries with “strategic deficiencies’” in these areas does not imply immediate diplomatic or economic sanctions against them, but it imposes much tougher due-diligence obligations on all EU banks dealing with them.

In completing the list, the Commission, under pressure from the European Parliament, used its own autonomous methodology rather than merely copy and pasting the list of jurisdictions established by the Financial Action Task Force (FATF), an international watchdog. As a result, an additional 11 jurisdictions were included in the Commission’s list, among them Saudi Arabia and a number of U.S. territories such as Puerto Rico, the Virgin Islands, and Samoa.

At this point, all hell broke loose. For the Commission’s list to enter into force, both EU member states and the Parliament have to endorse it by making clear, within a month of notification, that they have no objections. However, a number of countries concerned, primarily Saudi Arabia and the United States, launched an intense lobbying campaign to convince the EU member states to strike down the Commission’s proposal.

Saudi Crown Prince Mohammad bin Salman has reportedly sent a letter to the EU governments warning them of serious consequences for EU-Saudi relations if the list is adopted. In a similar vein, the U.S. envoy in Brussels warned the EU against creating “more problems” in relations with the United States and “a number of other friendly nations,” a not-so-veiled reference to Saudi Arabia. Some member states with close ties to both Americans and Saudis, such as the United Kingdom, undertook to lobby against the list within the EU.

This lobbying campaign proved to be highly successful, as the Council unanimously rejected the Commission’s proposal, which is extremely rare. Initially only one state—Belgium—parted ways with the other 27, but it soon fell in line, too.

However, the Parliament’s intervention means that the game may not be quite over yet. This is mainly because the arguments used against the Commission’s proposal failed to convince.

The Council’s main formal objection seems to be that the list was compiled in a manner that “lacked transparency” and “did not respect the right of the countries concerned to be heard.” Yet, the Commission unveiled its methodology to both the Parliament and the Council in its “working document” of June 22, 2018. No member state objected. And to this day, the member states did not come up with specific guidelines on how the Commission is supposed to remove the alleged shortcomings that led the Council to reject its list in the first place.

The argument that the affected countries were “not heard” sufficiently on their efforts to combat money laundering and terrorist financing does not hold water either. The Commission did engage in bilateral dialogue with them, setting out specific reforms and deadlines to enact them. However, it is entirely unreasonable to confer with the countries concerned about veto power over the Commission’s assessment of their performance and decision to include them on a “black list.” This would defeat the whole point of the exercise, which is to establish a list based on objective criteria, free from political interference.

Finally, objections were raised that the Commission’s proposal goes far beyond the list established by the FATF. But there is no hierarchical relationship between the FATF and the EU. The FATF does not have overarching authority over the EU. The EU—or any international organization or individual state—has a sovereign right to introduce its own, more rigorous standards, using its own methodology. This is the purpose of the EU Anti-Money Laundering directive in the first place.

That leaves the member states’ pandering to Saudi and American lobbying as the only plausible reason for their failure to endorse the Commission’s list. Although their diplomatic and strategic reasons for doing so are understandable, the rejection may have been counter-productive. They could have, for example, opted for issuing reservations on the Commission’s list without blocking it, while quietly urging the countries concerned to deliver on their commitments.

Now the process is thrown into uncertainty. And the Council’s veto triggered media reports that extensively named and shamed countries like Saudi Arabia. Removing it from the list fueled suspicions of the politicization of the process. This, ultimately, undermined the credibility of the EU’s overall efforts to combat money laundering and terrorist financing.

Recognizing that risk, a group of Euro MPs led by Ana Maria Gomes, a Portuguese Socialist, sent an open letter to the commissioner responsible, Vera Jourova, and EU foreign policy chief Federica Mogherini urging the Commission to stand its ground against “political interference” in its work. This week, the whole EP joined them in throwing its weight behind the Commission and criticizing the member states.

Now the Commission will have to prepare a new list, taking into account the Council’s objections. However, in doing so, it will have to perform a careful balancing act, as not only the Council, but also the Parliament, can reject the Commission’s proposal by voting it down with a simple majority. So, the Commission will have to satisfy both the Council and the Parliament. The resolution adopted by the Parliament suggests that it does not intend to leave the Council alone to decide which countries pose a high risk to the EU financial system. This means that it cannot be ruled out that if Saudi Arabia, for example, is excluded from the new list, it will now be the Parliament’s turn to block it.


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Eldar Mamedov



One Comment

  1. Saudi is concerned a ‘Normal country’ in US definition despite all the continued autocracy, global assassinations, worldwide support for extremism from Pakistan, Afghanistan Syria and … and of course the aggression on neighbors.
    If EU is going to adopt the same US definitions and to follow the US lobby system in which each rule finds a price tag, it is better to be done transparently and out of unnecessary verbal complications and reasoning. So if EU is going this way it is advisable to create a commission directive in which the price tag for breach of common European is precisely calculated and presented preferably in Euro currency! Like the EU tax system it is advisable for the price to be based on GDP so this way maybe the Saudi Prince rethink before ordering of abroad journalists elimination or start of new aggression or to pay in advance!

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