Commission sets out further steps against tax avoidance, money laundering and terrorism financing

The European Commission is today putting forward new proposals to tackle terrorist financing, combat money laundering and help stamp out tax avoidance.

An updated Anti-Money Laundering Package in May 2015 already set high standards. The Commission is now asking Member States and the European Parliament to adopt detailed proposals to further reinforce EU law in this area.

Commission First Vice-President Frans Timmermans said: “Today’s proposals will help national authorities to track down people who hide their finances in order to commit crimes such as terrorism.”

In parallel to the money laundering proposals, the Commission is presenting a policy document setting out further steps to tackle tax avoidance.

Tackling terrorist finance

tax-avoidanceThe Commission is now proposing:

– enhancing the powers of Financial Intelligence Units – public authorities that exist in every Member State – so that they have access to information in national bank and payment account registers and central data retrieval systems. This will ensure the relevant authorities are able identify holders of bank and payment accounts;

– making virtual currency exchange platforms and custodian wallet providers apply customer due diligence controls when exchanging virtual for real currencies;

– minimising anonymous payments through pre-paid cards, by lowering thresholds for identification from €250 to €150 and widening customer verification requirements;

– that banks be required to carry out additional checks (‘due diligence measures’) on financial flows from “risky” third countries. A list of countries, mirroring the global Financial Action Task Force list, will be formally adopted on 14 July.

Stricter transparency rules

Today’s proposals, if agreed by the Member States and the European Parliament would:

– ensure Member States make public certain information from beneficial ownership registers on companies and business-related trusts. Information on all other trusts would be available to parties who can show a legitimate interest. Beneficial owners who have 10% ownership in certain companies that present a risk of being used for money laundering and tax evasion would be included in the registers. The threshold remains at 25% for all other companies;

– link up national registers to facilitate cooperation between Member States;

– require that existing, as well as new, accounts should be subject to due diligence controls.

– subject passive companies and trusts, such as those highlighted in the Panama Papers, to greater scrutiny and tighter rules.

Further steps on tax avoidance

In its tax avoidance policy document, the Commission announces that it will examine how Member States could automatically exchange their national information on beneficial owners of companies and trusts with a potential tax impact.

It will also look at how to shed more light on tax advisors’ activities and create effective disincentives for those that promote aggressive tax planning.

Member States have already endorsed establishing an EU list of third countries that do not respect tax good governance standards (“Uncooperative tax jurisdictions”). Preparatory work on the list is expected to have a strong dissuasive effect. The Commission is now working with Member States to have a first EU list ready in 2017.

Current EU law protects whistle-blowers in sectoral legislation, for example on market abuse. The Commission will assess the need for additional measures.

EU economic and financial affairs Commissioner Pierre Moscovici said: “Recent leaks [the Panama papers scandal] exposed loopholes that still allow tax evaders to hide funds offshore. These loopholes must be closed and our measures to stamp out tax abuse must be intensified. The Commission is determined to inject more openness and more trust into taxation.”

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