Why is the EU anti-money laundering list so short?

And the new EU Dirty Money Blacklist has revealed more for its omissions than for its inclusions.

The 20 countries that presented a "high risk" of injecting criminal or terrorist funds into the single market were named and embarrassed by the European Commission on May 8.

They included Afghanistan, a major exporter of heroin.

The EU has also stigmatized Panama, revealed in the 2016 Panama Papers leak as the global clearinghouse for suspicious funds.

The other 18 fishermen were the Bahamas, Barbados, Botswana, Cambodia, Ghana, Iraq, Jamaica, Mauritius, Mongolia, Myanmar / Burma, Nicaragua, Pakistan, Syria, Trinidad- and Tobago, Uganda, Vanuatu, Yemen and Zimbabwe.

This meant that EU banks should exercise enhanced due diligence on transactions.

The list automatically excludes the 27 EU states, as well as Iceland, Liechtenstein and Norway, under EU law governing the process.

The blacklist was based on a purely technical 59-page commission methodology, the authorities said.

It was also based on the decisions and methodology of the Financial Action Task Force on Money Laundering (FATF), an intergovernmental institution for combating money laundering in Paris.

But the claim that the EU list was purely forensic was misled by the exclusion of Saudi Arabia last year.

The commission, in February of last year, declared that the petro-kingdom had fulfilled the criteria for registration, on the basis of a detailed and confidential document.

But EU states vetoed the measure a few weeks later to protect the western geopolitical ally.

They also vetoed the list of the four protectorates of Europe’s main ally on the world stage, the United States – American Samoa, Guam, Puerto Rico and the United States Virgin Islands.

And the history of political interference goes back further.

In 2018, the commission said that 54 countries deserve a risk assessment.

This long list included China and the Chinese protectorates Hong Kong and Macao, Russia and the United States themselves, where the state of Delaware is a tax haven.

He has appointed protectorates in the UK, such as the British Virgin Islands (BVI) and the Cayman Islands, as well as some of the closest friends to the EU: Andorra, Monaco, San Marino and Switzerland.

He also appointed the oil supplier to the EU, Azerbaijan and the American ally Singapore.

In the end, none of these elements were listed, according to the European Commission, for technical reasons.

But they are all known as critical points for money laundering by subject matter experts.

"Almost all of the recent money laundering scandals in the EU come from Russia or the former Soviet region," Panicos Demetriades, former president of the Central Bank, told EUobserver. from Cyprus, who now teaches economics at the University of Leicester in the UK. United.

The city of London in the UK and Liechtenstein have also been critical points, said Michel Koutouzis, a former FATF inspector, who writes books on money laundering.

"If the goal is to clean up the financial system, the (EU) list is weak and unnecessary," said Bill Browder, CEO of the British hedge fund Hermitage Capital, which investigated money laundering. Russian money since the Russian gangsters attacked your business in 2008, also said.

"Who is not on the (EU) list is more important than who is on it," said Browder.

Twisted history

The fact that EU states are automatically blacklisted is also telling, experts say.

Austria, Cyprus, Estonia, Germany, Latvia, Lithuania, Luxembourg, the Netherlands and Malta also had banking sectors known for their money laundering fiascos silver.

"Cyprus and the Baltic states have been the main transit countries in the majority of Russian money laundering," said Browder, after following a 200 million euro thread diverted from Russian funds in various jurisdictions , which led to the 200 billion euro Dankse Bank case in 2018, the biggest money laundering scandal in EU history.

One of the reasons the EU or FATF lists were "weak" was that they lacked ambition, said Koutouzis, the former FATF inspector.

The lists were designed "to put pressure on small countries to close" mafia money, not "to clean up the financial system," he said.

"We offer you a choice of tax havens like the British Virgin Islands:" If you make a little effort to control drug money and prostitution, we will turn a blind eye to major tax evasion, "he said. -he declares.

"We are giving them the opportunity to launder the money of big companies instead of small traffickers. Some play the game and others do not," he added.

"Russia could never be on the (EU) list. It is too big a bite to eat and Russian banks are present in all regions of the world," said Koutouzis.

"Why not name Hong Kong? It's the same, because we don't want to fight China."

But the main reasons why the EU and FATF blacklists were so weak were systemic, said the French expert.

He noted that it was impossible to track or stop using lists of very big criminals due to the bond markets.

And EU countries, such as China, Russia and the United States, need tax havens to allow the free flow of capital to their economies, he added.

The bond market scam operates when a bank in China, for example, buys corporate or sovereign bonds using a few million dollars of legitimate money mixed, for example, with opium influx from gangster clients.

"The bank is creating a new pot, and with the creation of the pot, the identity of the constituent funds is lost," said Koutouzis.

Money is even more difficult to track after the bank has swapped the pot / mixed bond for other financial instruments in the Asian markets.

These instruments are traded again when the Middle East markets wake up and once again when the sun rises in the city of London, the preferred final destination for mob funds.

The main tax havens were also too important for the functioning of the global economy to stop, said Koutouzis.

"You have to remember that offshore banking centers were created by the states, not the mafia or the money launderers. They were created so that the billions of dollars flowing through them could be reintroduced into normal economies ", told me.

"We cannot condemn what we invent, simply because the crowd also uses it," he added.

"If we had a real blacklist (money laundering), half of the countries in the world would be there," he said.

The system has created a culture in some EU states where money laundering is so routine and profitable that banks simply set aside part of their annual budget to pay fines, while the general public don't care, even if they're caught in red. He delivered.

"In most places we turn a blind eye, the banks pay fines and everyone is happy. Do you think the Dutch really care that a bank is fined for money laundering? money, "said Koutouzis.

For his part, Demetriades, the former head of the Cypriot bank, agreed with Koutouzis' twisted tale of how things worked.

Demetriades saw first-hand, one day in 2013, how the Russians injected questionable money into the EU when it opposed suspicious events in a Cypriot bank and received a phone call from Cypriot President Nicos Anastasiades.

Anastasiades "pressured" his central banker to abandon his objections, using "colorful language and explicit threats", Demetriades had previously told EUobserver.

"The real problem (regarding money laundering) is at the level of the Member States (of the EU)," he said.

Be personal

But for the British academic, who recently wrote an article on EU financial governance, things could be a little cleaner if more people were held accountable despite the political and systemic complexities.

"We must use the law to impose sanctions on people," he said, referring to the main bankers caught in the act.

"What is the point of imposing fines on large financial institutions, if they only reserve more money in their budget for this and continue to do what they do?", A he added.

"During the financial crisis (in 2008), not enough people were charged. We would have fewer problems if we had more personal responsibilities," said Demetriades.

The EU should take a more specific approach "by tracking (criminal) money, not tax havens," said Koutouzis.

It should also impose visa bans and an asset freeze on foreigners guilty of heinous corruption, said Browder.

For its part, the committee said it "was aware that there are still weak links in the EU anti-money laundering regimes, despite the great progress made … especially in the Nordic-Baltic region ".

Last week, the anti-money laundering blacklist and other reforms were unveiled by Latvian EU Commissioner Valdis Dombrovskis, who was pressuring "personally" to a change is happening, the commission said.

But amid Demetriades 'call for responsible leadership, Dombrovskis' track record made him look less like an EU knight in shiny armor.

The 48-year-old man was Prime Minister of Latvia between 2009 and 2014.

He oversaw the controversial rescue of a Russian mafia lender called Parex Bank.

Subsequent allegations were made that the head of the Latvian central bank was receiving bribes from the Russians while Dombrovskis was in power.

And at least 200 million euros of Russian criminal money entered the EU via Latvia between 2008 and 2014, according to bank documents seen by Browder.