The Economic and Legal Effectiveness of Anti-Money Laundering Policy in 27 EU Member States

Saturday, 4 July 2015: 8:30 AM-10:00 AM
TW1.1.02 (Tower One)
Brigitte Unger, Utrecht University School of Economics, Utrecht, Netherlands
Joras Ferwerda, Utrecht University School of Economics, Utrecht, Netherlands
This paper examines the anti-money laundering (AML) policy of 27 EU Member States in connection to the threat of money laundering they face. We analysed the policies of each Member State in-depth by traveling to all 27 EU countries to interview over a hundred people involved in the fight against money laundering and terrorist financing, surveying over a hundred institutions with an online survey and an extensive desktop research. The analysis includes a study on the legal implementation of the Third EU Directive,  a comparison of the definitions of money laundering used in practice, and a breakdown of the role of Financial Intelligence Units (FIUs) as buffer of information flowing from reporting entities to law enforcement agencies. 

We find that Member States differ in the degree to which they are threatened by money laundering - some with big financial centres are, by their very nature, gateways for laundering money, whereas others, like the southern Member States have large cash economies. We conclude that conflicting standards between the hard law of the EU and the soft law of the Financial Action Task Force can mean painful economic sanctions by the latter. We identify numerous significant differences in the definitions of money laundering, which, in practice, could pose problems in international cooperation. In terms of criminal procedures, there are large differences among the EU Member States. For example, in some countries the public prosecutor can investigate money laundering cases, while in others they cannot. The type and severity of punishment that can be expected for money laundering also differs significantly among states. The probability that criminal behaviour will be punished in each Member State cannot be found in the statistics, but an examination of the information flows concerning money laundering cases in each EU Member State suggests that the probability of conviction is higher in Western Europe than in Southern and Eastern Europe. Some Member States have not signed, ratified, or fully implemented the relevant international Conventions, which may negatively impact the legal effectiveness of their AML policies. Only Belgium, Portugal and Spain have signed and ratified all relevant international conventions and there are no deficiencies in their implementation. We find that existing statistics cannot be used as good indicators for anti-money laundering policy at the moment. For instance what constitutes a report differs so much between countries that the statistics on the number of reports on suspicious transactions cannot be compared with each other yet. We suggest therefore that we should now focus more on measuring effort instead of outcomes. Statistics on the amount of FIU personnel per million inhabitants and how much the FIU costs for each inhabitant on average per year indicate that FIUs have economies of scale, which means that the more inhabitants a country has, the lower the costs per inhabitant are. In this sense, having an FIU is relatively costly for the smaller countries.