State of the €Union
Hamad Alhelal, CAMS

This week, the European Union announced the establishment of a new unit to combat financial crime amid an economy hampered by the pandemic. Working alongside Europol, the EU’s top law enforcement agency, the newly established European Financial and Economic Crime Center aims to ensure that criminal actors don’t exploit the unprecedented scale of government bailouts occurring across the bloc. The announcement comes as the EU prepares to meet next week to discuss the record 750-billion-euro coronavirus stimulus plan. Yet, the move is hard to square with the resistance faced last month, from its member states, to a plan to boost EU powers to curb the flow of dirty money through the bloc.

So, what gives?

The pandemic, which has managed to unleash a level of devastation unseen in our time, appears to have done more to strengthen governments’ resolve to tackle financial crime. With criminal proceeds accounting for 3.6% of global GDP, Europol estimates that only “0.7-1.28% of annual EU GDP is detected as being involved in suspect financial activity,” an amount that represents a fraction of the 750-billion-euro coronavirus stimulus plan. Compounding the issue, according to the ICIJ, “now that governments are facing an economic meltdown, they are confronted with a reality that many economists and tax justice advocates have been warning about for a long time: more than $800 billion in lost tax revenues, annually.”

While several governments appear to heed the warning, as France, Denmark and Poland barred companies that base their headquarters or subsidiaries in offshore tax havens from receiving coronavirus aid, the immediate rebuke that followed from the EU Commission, further highlighted the challenges posed by the unique nature of the bloc. Responding to the restrictions, the EU Commission announced that member states “cannot ban Covid-19 bailouts to companies based in tax havens within the EU, such as the Netherlands or Luxembourg” and that they “must comply” with freedoms guaranteed by the EU Treaty, including on the free movement of capital and people. With the freedom of movement restricted by the Covid border closures, the pandemic appears to demonstrate that the EU’s old rules, “fragmented along national lines, [resulting] in loopholes that are easily exploited by criminals”, are no longer appropriate in these unprecedented times.

Join us on Monday June 15th as we extend our Virtual Global Roundtable series to Europe for another insightful, important discussion about the impact on business and society post COVID-19. For this series, we are joined by an incredible group of panelists who are at the forefront of regulatory reform and the fight against financial crime. As spots are limited, be sure to register here.

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