European AML Regulations and the Hero We Need​


They sat in a dark truck.  Nakia gazed over the thirteen other women, finally fixating her eyes at the guard who held a machine gun in his hand. Her heart was racing. She knew what was about to happen. The women sat quietly. Scared of their faith.

They must have been driving for ages: their military truck and five other army vehicles. But the men that had captured them weren’t soldiers. They were human traffickers. Nakia knew that they were supposed to be sold as sex slaves. But unlike the other women, she wasn’t afraid. She was waiting… 

All of a sudden, the vehicles were brought to a halt. By some strange force, they became inoperative. The men, alarmed, jumped out of their cars. With a flashlight they tried to see into the pitch-black darkness of the night. Their dog barked at something up in a tree. They looked up; a man was kneeling on the branches of the tree. He was dressed in black, unrecognizable behind his masked face.  

The man jumped out of the tree. A fight ensued. The human traffickers fired their machine guns, but the man’s suit was impermeable. This was the moment Nakia had been waiting for. She jumped up and got out of the truck. She took down a few of the men. When she saw who the black panther was approaching next, she stopped him. “This one is just a boy. He was kidnapped as well,” she exclaimed.

Yes, we did just describe a scene out of the 2018 movie Black Panther 

Based on a comic book, this fictional tale narrates the story of King T’Challa of Wakanda. In the story, Wakanda is the most technologically advanced nation in the world. This scene, where the Black Panther takes on human traffickers, is just one of many instances in which he uses superior technology to take on wrongdoers. In the end, it takes a potion to gain superhuman abilities — and a partnership with a hostile neighbouring clan — to defeat the intruder who stole T’Challa’s throne to install himself as an evil dictator.

Unfortunately, human trafficking is far from fiction. Women and kids abducted by human traffickers are rarely ever saved. Instead, they remain slaves until they die or are killed. In real life, many parties are involved in stopping the extreme cruelty of human trafficking crimes, like federal and local government, police, NGOs, and banks. Anti-money laundering regulations are put in place to make it more difficult for human traffickers to use the black money they earn from their inhumane business. The ultimate goal of these rules is to prevent crime.

Who’s going to step up as the hero to save the real people affected by human trafficking, terrorism, illegal wildlife trade, illegal drug and arms trade, and gang violence?  The financial crime-fighting community.

European AML Regulations

The 2020 Basel AML index indicates that the European Union and Western Europe combined is the Wakanda of money laundering and terrorist financing risks. The region has the lowest risk score in the world. Better developed than every other region in the world, the EU and Western Europe have the lowest risk score on every point of assessment. But that doesn’t mean that there isn’t any room for improvement.

Although the European AML/CFT framework is the best in the world, Basel is concerned about the prioritization of anti-money laundering compared to the other accountability and transparency factors captured in their index.

And indeed, in several European countries, the AML/CFT framework is still undermined by high levels of financial secrecy. This is the case in Switzerland, Luxembourg, the Netherlands, and the UK. On top of that, the United States listed six European countries as major money laundering destinations. These are Belgium, Cyprus, Malta, the Netherlands, Spain, and the UK.

But we can’t exactly say that Europe isn’t trying. In the last twenty years, the European Union has installed around 1,300 binding pieces of legislation to fight crime, with about 228 directives and 1100 regulations. Today, around 186 directives and 800 regulations are in effect. The latest of these rules are issued under the Fifth Anti-Money Laundering Directive. These are the seven key principles of the 5 AMLD as explained by LexisNexis:

New Obligated Entities

The types of businesses that have shown to have been used for financial crime are now obligated to be registered and monitored by member states. These are companies typically used in every phase of money laundering and the financing of terrorism. One major area of concern are virtual currency exchanges and custodian wallet providers.

New Risk Factors

Risk assessments need to include transactions related to oil, arms, precious metals, tobacco products, cultural artifacts, and other items of archaeological, historical, cultural, and religious importance, or of rare scientific value, as well as ivory and protected species.

Increased Transparency on Trusts, member states Cooperation, and Data Centralization

The beneficial owners of trusts should be registered to increase transparency, and member states need to cooperate more on monitoring these trusts.

Public Registers of Beneficial Owners 

To ensure more transparency of beneficial owners, EU citizens will get access to beneficial ownership records. These records include general data such as name, month and year of birth, country of residence, and nationality of the beneficial owner.

Enhanced Due Diligence (EDD) on High-Risk Countries

The treatment of high-risk countries throughout the EU is standardized. This includes standardized checks and predefined risks.

Pre-Paid Cards Thresholds

The threshold of transactions with pre-paid cards is set to €150 per month.

Enhanced Powers of Financial Intelligence Units (FIUs)

FIUs will have access to more information through centralized bank systems and payment account registers or data retrieval systems.

These rules are fairly well thought out. Basel doesn’t criticize them too much. What they do scrutinize is the supervision of compliance with these rules. Is Basel right about their criticism?

Soft Supervision

Looking at the implementation of the European Union’s fifth anti-money laundering directive, we can definitely see where Basel is coming from. The EU’s enforcement of rules is perhaps a little too soft, at least they are when it comes to making sure 5AMLD is implemented across the Union.

The directive went into effect on January 10th this year. This was the ultimate deadline for member states to implement the new regulations. In May, the EU sent eight member states–Austria, Belgium, the Czech Republic, Estonia, Greece, Ireland, Luxembourg, and Poland–a formal notice because they only partially implemented the new law. Another eight countries have also been put on notice because they didn’t implement any 5AMLD measures. These are Cyprus, Hungary, the Netherlands, Portugal, Romania, Slovakia, Slovenia, and Spain.

Sixteen countries have been negligent in implementing the 5AMLD. Why is that and what does it tell us about the European Union’s supervision? We get the impression that the EU has insufficient control over its member states. Also, what about these individual countries? They don’t seem to be very serious about implementing rules to fight financial crime–we’re looking at you, the Netherlands!

The Hero We Need

Looking at the supervision of individual European countries, and the banks within each country, there is a persistent desire for increased alignment and consistency.

To enforce ethical behavior, clarity is key. Clear rules, clear boundaries, and clear enforcement.

In the news, we hear about banks receiving fines. All too often, banks seem to get lost in the chaos of piles of alerts, newly implemented regulations, and the debilitating fear of fines. It’s often not clear how the authorities will react to mistakes. Will they decide to set an example, or will they be lenient and give nothing more than a warning? What if supervisors chose to act with consistency? Maybe that would incentivize banks more to invest in their compliance.

There’s a need for structural reform, even in Europe, the Wakanda of AML compliance.

While banks want to avoid fines and desperately attempt to keep up with compliance, we must never forget the real purpose of AML regulations. There is no black panther to save the day.  We are all T’Challa.  We prevent organized crime through a joint, community effort of which our participation is critical. Regardless of supervisory competence, it is our moral duty.  

So, what can banks do to step up as the hero in this story?


Team BusinessForensics

The team at BusinessForensics consists of hard-working financial crime fighting professionals. Based in The Hague, The Netherlands, BusinessForensics is on a mission to help banks and insurance companies combat and prevent financial crime.