Council of Europe calls for urgent action to improve FIUs across continent

The CoE’s Parliamentary Assembly this week published details of a new resolution it has adopted aimed at persuading nations to step up their efforts to tackle financial crime.

The resolution said: “Numerous scandals, including the recent United States Treasury Department’s FinCEN (Financial Crimes Enforcement Network) leaks have shown that national and international efforts aimed at combating money-laundering and terrorist financing have fallen far short of declared objectives. “

“Urgent action to step up the tracking and confiscation of the proceeds of crime is therefore both necessary and potentially highly rewarding.”

The Council of Europe, a membership body to promote the rule of law and human rights which is entirely separate from the European Union, said that FIUs must be given “independence, competences and the human and material resources to fulfil their role effectively.”

It outlined several issues facing FIUs, identified in national assessments conduced by the CoE’s Moneyval monitoring body and the Financial Action Task Force.

These include the “uneven and large quantity’ if reports filed by banks and other reporting bodies, the release of assets by reporting entities before they have had feedback from the FIU, a lack of knowledge of typologies and a “lack of effective feedback, guidance and training for reporting entities.”

The resolution also flags the lack of autonomy of certain FIUs, understaffing, insufficient resources, inadequate technical capacities and the inadequate use of suspension powers.

Law enforcement authorities are often also unable to take prompt action to follow up on FIU intelligence to ensure assets are frozen or seized and are unable to provide timely feedback on the quality of information provided by the FIU, it said.

The resolution also takes aim at the ‘golden passports’ programmes, involving the grant of citizenship in return for large sum of money, and said that Designated Non Financial Businesses and Persons are often the weakest link in AML.

The CoE has called on its member states to take the following actions:

• strengthen their FIUs in line with the recommendations by FATF and Moneyval, in particular by providing them with sufficient powers, human resources, IT tools, and training opportunities to enable them to cope with new challenges and the increasing complexity of money-laundering paths.
• respect their FIUs’ autonomy and refrain from any political interference in their work.
• grant all FIUs the power to temporarily suspend suspicious transactions, including on the request of a foreign counterpart, as foreseen in Articles 14 and 47 of the Warsaw Convention).
• strengthen the capacity of their law enforcement bodies (police, prosecution and courts) to take timely action following the transmission of financial intelligence by FIUs by creating specialised, well-trained and sufficiently resourced task forces working in close co-operation with the FIUs; keeping and publishing statistics permitting to evaluate the “rate of translation” of Suspicious Transaction Reports into effective investigations, confiscations and prosecutions.
• strengthen international co-operation between FIUs, by making relevant legislation and institutional set-ups interoperable, allowing for unbureaucratic exchange of financial intelligence and promoting informal exchanges of experience through bodies such as the Egmont Group of FIUs.
• encourage their competent authorities to engage in a constructive dialogue with the private sector (reporting entities) in order to ensure the highest possible quality rather than quantity of STRs and other reports; consider offering mandatory or optional education to reporting entities.
• allocate sufficient resources to FIUs to ensure effective supervision of DNFBPs, focusing on those with transnational operations.
• sign and ratify the Warsaw Convention, if they have not already done so.
• reverse the burden of proof regarding the legality of assets by requiring the persons concerned to establish the legitimate origin of suspect assets they hold.
• end any citizenship-for-investment programmes they may still have on offer.

Register for the latest financial crime news and analysis straight to your inbox