20-11-2022

Authorities all throughout the world are dealing with the persistent difficulties of organised crime and terrorism. One of the most efficient ways to counteract such actions is to seize criminals’ assets, depriving them of the financial wherewithal to fund further terrorist or unlawful activity.

The European Union has traditionally been staunchly opposed to organised crime and terrorism. The introduction of Regulation (EU) 2018/1805, aimed at further protecting financial systems from exploitation, is the most recent move in its plan.

Since the EU implemented the first anti-money laundering regulation in 1990, businesses such as banks have been required to verify their clients’ identities, monitor transactions, and report suspicious behaviour that they feel may suggest money laundering or terrorist funding.

While this has helped to protect financial systems from such activity, more safeguards are judged essential to further protect member states.

According to a Europol analysis, 2.2% of illicit assets were seized or blocked in one year, with 50% eventually forfeited. These rates are projected to improve with the implementation of new legislation in December 2020.

WHAT ARE CRIMINAL ASSETS AND HOW ARE THEY SEIZED?

The proceeds of illicit activities are referred to as criminal assets. In its fight against terrorism and other illegal behavior, the European Union prioritises the confiscation and freezing of illegally obtained property.

Depriving felons of their wealth serves as both a punishment for crimes already committed and a deterrent to others from engaging in illegal schemes.

Offenders are denied access to their fortunes in two ways:

  • Freezing order: this prevents the destruction, transformation, transfer or removal of assets which the authorities wish to confiscate.
  • Confiscation order: the final removal of property gained illegally by an individual or company.

EXAMPLES OF ASSET SEIZURE IN EUROPEAN COUNTRIES

  • Belgium 2020: tens of millions of euros were confiscated in the case of a Belgian convict who stashed illegally obtained money in accounts and offshore companies, suspicious transfers were detected to Singapore, Dubai, and Monaco.
  • Northern Ireland 2020: an international money laundering operation was broken up, 140 accounts were identified in an investigation involving Europol and Interpol.
  • Spain 2019: in one case the value of property seized totaled €70 million, money had been laundered through a Cypriot company.
  • The Netherlands 2019: over 260 million euros worth of assets seized in total. A large proportion of this, around 184 million euros, came from a settlement dealing involving a Swedish telecommunications company.

KEY FEATURES OF THE NEW ASSET FREEZING AND CONFISCATION REGULATION

Regulation (EU) 2018/1805 of the European Parliament lays out the rules that EU countries must follow before 2021 when carrying out freezing or confiscation orders issued by another EU country.

The following are the main characteristics:

  • Single regulation: one set of guidelines covering both freezing orders will be applied throughout the EU. This will avoid issues caused by the existence of multiple legal instruments.
  • Mutual recognition: decisions of a legal nature made in one European Union country will be automatically upheld and enforced in another in the vast majority of cases.
  • Standardized certificates and procedures: speeding up the process of freezing and confiscating assets.
  • Deadlines: confiscation orders must be recognized within 45 days. For urgent matters, recognition should occur within 48 hours with an additional 48 hours for the freezing order to be carried out.
  • Compensation: the right of the victim to reimbursement will be upheld in cross-border cases.

The focus of Regulation (EU) 2018/1805 is thus on developing a single policy that all EU countries will follow, thereby eliminating conflicting and contrasting legal frameworks.

OTHER EU MEASURES FOR COMBATING TERRORISM

The new restrictions are designed to support ETIAS (European Travel Information and Authorization System), a scheme set to debut in November 2023 to supplement the Schengen Area’s visa liberalisation initiative.

One of the primary goals of ETIAS is to aid in the battle against terrorism in Europe. According to Article 4 of the legislation, the implementation of a necessary travel authorisation must:

“Aid in the prevention, detection, and investigation of terrorist or other serious criminal offenses.”

While ETIAS monitors potentially risky individuals’ movements and prevents terrorists from entering ETIAS countries legally, the updated regulation for freezing and confiscating assets targets their financial means.

CRIMINAL ASSETS: IDENTIFYING HIGH-RISK COUNTRIES

The identification of third countries that represent the highest danger to EU members is critical to reducing the issue of money laundering and terrorism funding in Europe.

In 2016, the European Commission published the first list of high-risk third countries, which has since been reviewed and updated.

Nations are checked against a set of criteria, and if they do not meet the requirements, they may be added to the list.

Banks and financial institutions must conduct additional checks on transactions involving any of the countries on the list.

PREVENTING MONEY LAUNDERING USING BITCOIN AND OTHER CRYPTOCURRENCIES

In recent years, the fast rise of cryptocurrencies has prompted calls for greater regulation of bitcoin and other crypto-assets.

The Fifth Anti-Money Laundering Directive (AMLD5) specifically targets this issue, implementing additional laws to prevent digital currencies from being used for money laundering and illegal funding.

According to the European Commission, as of January 10th, 2020:

“According to Directive (EU) 2015/849 (AMLD4), credit institutions and other financial institutions are required to implement CDD (Customer Due Diligence) measures.”

WHAT DOES THIS MEAN FOR THE REGULATION OF CRYPTOCURRENCIES IN THE EU?

By expanding the directive to include Bitcoin and other cryptocurrencies, service providers who are in charge of keeping, storing, and moving virtual currency are now considered obligated organisations.

Cryptocurrency service providers, like banks and other financial institutions, must report any suspicious behaviour to Financial Intelligence Units.

By removing this loophole, wrongdoers will find it far more difficult to use crypto-assets to support terrorist action or financial crimes.