De-risking or recontracting – the risk dilemma of EU money laundering regulation

2020 ◽  
Vol 21 (4) ◽  
pp. 445-458
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
National Level ◽  
The European Union ◽  
Content Type ◽  
Market Effects ◽  
Proactive Approach ◽  
To Come ◽  
The Eu

Purpose Recent research and market effects within the European Union (EU) show a rising concern toward the de-risking of certain sectors/actors owing to the increased anti-money laundering regulation. Because of the enhanced due diligence and monitoring costs related to anti-money laundering and counter-terrorist financing regulation by the AMLD4 and AMLD5, several financial institutions now turn to de-risking their corporate client base to minimize not only costs from monitoring and onboarding but also the risks of sanctions and reputation. The purpose of this paper is to analyze the incentives behind de-risking and the relevant solution models to the de-risking “crisis.” Overall, to find, to what extend de-risking is efficient and when it is not and how to mitigate the concept. Design/methodology/approach This paper applies a functional approach to law and economics with the aim of reaching a higher level of efficiency in combatting money laundering through analyzing present regulatory and economic conditions. Findings It is found that de-risking within the EU opposes the aim of the present regulatory scheme regarding anti-money laundering. The paper finds that it is needed to divide the analysis of de-risking to a national and regional/union level. In addition, this paper establishes that the present strategy of de-risking at national level eventually will result in enhanced regulation to fulfill the aim of the present regulatory framework, which is why a proactive approach by recontracting the client base is recommended. At a regional level, it is found that de-risking is valid, why a solution needs to come from the EU enhancing control, monitoring and sanctions to establish trust and the possibility for financial inclusion. Originality/value Most of the recent research within the field highlights the problem of de-risking and therefore presents a range of initiatives to regulators and financial institutions at a global level. This paper solely focuses on the EU and shows that the de-risking dilemma demands financial institutions to take a proactive approach to contracting if unnecessary regulation is to be hindered. Furthermore, this paper shows that the concept of de-risking cannot be analyzed nor mitigated as one singular concept, but it needs to be addressed according to different levels of activity and geography.

EU money laundering regulation limit the use of tax havens

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
Spillover Effect ◽  
Tax Avoidance ◽  
The European Union ◽  
Tax Havens ◽  
Content Type ◽  
Regulatory Approach ◽  
The Eu

Purpose Recent research shows that financial institutions in the European Union (EU) close branches, offices and correspondent connections to jurisdictions with less transparency due to possible sanctions related to the increase in EU money laundering regulation. This tendency is called de-risking and the purpose of this paper is to analyze whether the recent regulatory approach towards money laundering in the EU limits the incentive to have operations in tax havens. Design/methodology/approach This paper follows a functional approach to law and economics. Findings The paper finds that recent EU money laundering regulation increase an incentive for financial institutions to limit any connection to jurisdictions known as tax havens, where transparency is at minimum. Thereby, it can be discussed whether the spillover effect from money laundering regulation in to the fight of tax avoidance could support further regulatory interference. Originality/value The recent trend of de-risking in light of money laundering regulation is scarcely covered by present research. Furthermore, there has been no linking of this de-risking tendency and the effects or relation to the use of tax havens/low tax jurisdictions.

Non-compliance behavior of de-risking force the EU to enhance anti-money laundering regulation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
Negative Impact ◽  
Regulatory Framework ◽  
Content Type ◽  
Functional Methods ◽  
Compliance Behavior ◽  
The Relationship ◽  
The Eu

Purpose Recent research shows that because of money-laundering risks, there has been an increase in the off-boarding of certain types of corporate clients in the financial sector. This phenomenon known as “de-risking” has been argued to have a negative impact on society, because it increases the possible risk of money laundering. The purpose of this paper is to analyze whether the de-risking strategy of financial institutions results in an expansion of the regulatory framework concerning anti-money laundering focusing on off-boarding of clients and, if so, is there a way to avoid further regulation by changing present behavior. Design/methodology/approach This paper applies functional methods to law and economics to achieve higher efficiency in combating money laundering. Findings In this paper, it is found that the continuing of de-risking by financial institutions because of the avoidance strategy of money-laundering risks will inevitably result in further regulatory demands regarding the off-boarding process of clients. The legal basis for the introduction of further regulatory intervention is that some of the de-risking constitutes a direct contradiction to the aim of the present regulatory framework, making the behavior non-compliant to the regulation. Originality/value There has been very little research concerning de-risking related to money laundering. The present research has focused on the effect on society and not the relationship between the financial institutions and the regulator. This paper raises an important and present problem, as the behavior of the financial institutions constitute a response from the regulator that is contradicting the thoughts behind the behavior of the financial institutions. It is found that the paper is highly relevant if an expansion of regulation is to be hindered.

scholarly journals RISK-BASED APPROACH IN THE EUROPEAN UNION LEGISLATION TO PREVENT MONEY LAUNDERING AND FINANCING OF TERRORISM

2020 ◽  
pp. 43-52
Keyword(s):  
European Union ◽  
Money Laundering ◽  
National Level ◽  
Mitigation Measures ◽  
Specific Situation ◽  
The European Union ◽  
Member States ◽  
Financial Flows ◽  
Eu Member States ◽  
The Eu

Money laundering and terrorism financing are serious and internationally emerging issues that must be approached and confronted at European Union level. The latest terrorist attacks and periodic banking scandals highlight the necessity for additional attention in this particular direction. In regard to the internal EU market, financial flows are integrated and trans-border by nature, thus funds can circulate rapidly, from one country to another, offering the possibility to perpetrators and terrorists to transfer money across Member State avoiding detection by authorities. This specific situation generates the necessity to identify and understand the particular ML/TF risks generated by services and products offered within the EU economic and financial ecosystem. In order to ensure an efficient mechanism for identifying the ML/TF risks associated with the products and services provided on the territory of European Union, the 4AMLD provides the obligation of the EU Commission to perform once in two years the so-called European Union Money Laundering and Terrorist Financing Supranational Risk Assessment. Since 2017 two supra-national risk assessments were carried out and the final results are used by Member States to monitor the evolution of risks at Union level and to implement the necessary recommendation for ensuring a proper minimization of threats and vulnerabilities at the national level. This paper aims to analyze, understand and compare the main outcomes of the two assessments, namely the identified risks and their links with vulnerable sectors, as well as the evolution or devolution of certain risks as a result of mitigation measures applied by EU Member States. Another task of this article is to provide additional recommendations in terms of mitigating measures and efforts, which must be taken into account by Member States

The problem of regulating the easy way out – EU money laundering regulation

2019 ◽  
Vol 22 (4) ◽  
pp. 666-677 ◽  
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Regulatory Focus ◽  
Design Methodology ◽  
Law And Economics ◽  
Vital Role ◽  
Economic Conditions ◽  
Content Type ◽  
Definition Of ◽  
Combat Money Laundering

Purpose Current research within law and economics focus on money laundering as an externality problem caused by financial institutions. Thus, when existing research and legislation place the responsibility on financial institutions, it creates a void where it is neglected that clients of financial institutions may, in fact, play a vital role in the problem of externality. However, based on the definition of money laundering, this paper aims to examine and analyze the need to focus on the clients as part of the externality problem with regard to money laundering. Design/methodology/approach This paper examines how a lack of regulatory focus on the clients of financial institutions lead to inefficient anti-money laundering regulation. Through a functional approach of law and economics, it analyzes the externality problem of money laundering based on both the legal definition and the economic conditions of the problem. Findings Based on the fourth anti-money laundering directive, the paper argues that present regulation has a tendency to focus on financial institutions, thereby not considering the entire scope of the externality problem in money laundering. For regulation to efficiently combat money laundering, it is necessary to place some responsibility on the clients of financial institutions and not solely on the financial institutions. Nevertheless, the inclusion of client responsibility might lead to some legal or economic complications, which need to be subject to further research. Originality/value The paper identifies the need for a fundamental change in the perception of the externality problem of money laundering, and thus, presents the required approach to reach an efficient solution.

Disclosing anti-money launderers through CSR regulation – a new way to combat money laundering

2020 ◽  
Vol 23 (1) ◽  
pp. 11-25
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Law And Economics ◽  
Financial Sector ◽  
Economic Incentive ◽  
Regulatory Framework ◽  
Economic Effects ◽  
Regulatory Change ◽  
Content Type ◽  
Corporate Clients ◽  
The Eu

Purpose Recent research questions the innocence of companies outside the current EU money laundering regulation in terms of contributing to the externality problem of money laundering. The purpose of this paper is to examine how including anti-money laundering as an element of the EU corporate social responsibilities (CSR) directive can contribute to solving the externality problem of money laundering. Based on the principles of CSR and the economic effects of disclosure duties, this paper analyzes the implications an introduction of anti-money laundering policies and disclosure duties can have on corporate clients and the combatting against money laundering. Furthermore, it is the intention of this paper to argue how such a regulatory change can help the financial companies dividing “good” and “bad” clients to prevent money laundering from happening. Design/methodology/approach The method of this paper is a functional approach to law and economics. It seeks to enhance the efficiency of the regulatory framework combatting money laundering by including economic incentive theory. Findings Based on the regulatory framework of the fourth anti-money laundering and counter terrorist financing directive and the directive on criminalizing money laundering, this paper argues that inclusion of anti-money laundering in the EU CSR directive will contribute to solving the externality problem of money laundering in the EU. Additionally, the expansion of the regulatory framework can start a culture, where corporate clients to the financial sector will take active steps toward combatting money laundering. Originality/value The paper identifies a way to change the corporate perception of anti-money laundering prevention from having an incentive of minimal compliance/“race-to-the-bottom” to be a possible element of competition between companies through their CSR strategy. While most research focuses on the financial sector in terms of money laundering, this paper takes the next step and includes corporate clients in the financial sector.

European experience in transition to circular economy

2020 ◽  
Vol 19 (4) ◽  
pp. 598-617 ◽  
Author(s):  
S.V. Ratner
Keyword(s):  
European Union ◽  
Circular Economy ◽  
Raw Materials ◽  
Action Plan ◽  
National Level ◽  
The European Union ◽  
Scientific Methods ◽  
European Experience ◽  
General Scientific ◽  
The Eu

Subject. The article considers the concept of circular economy, which has originated relatively recently in the academic literature, and is now increasingly recognized in many countries at the national level. In the European Union, the transition to circular economy is viewed as an opportunity to improve competitiveness of the European Union, protect businesses from resource shortages and fluctuating prices for raw materials and supplies, and a way to increase employment and innovation. Objectives. The aim of the study is to analyze the incentives developed by the European Commission for moving to circular economy, and to assess their effectiveness on the basis of statistical analysis. Methods. I employ general scientific methods of research. Results. The analysis of the EU Action Plan for the Circular Economy enabled to conclude that the results of the recent research in circular economy barriers, eco-innovation, technology and infrastructure were successfully integrated into the framework of this document. Understanding the root causes holding back the circular economy development and the balanced combination of economic and administrative incentives strengthened the Action Plan, and it contributed to the circular economy development in the EU. Conclusions. The measures to stimulate the development of the circular economy proposed in the European Action Plan can be viewed as a prototype for designing similar strategies in other countries, including Russia. Meanwhile, a more detailed analysis of barriers to the circular economy at the level of individual countries and regions is needed.

Practice of the member states of the European Union in the field of anti-corruption regulation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dmytro S. Melnyk ◽  
Oleg A. Parfylo ◽  
Oleksii V. Butenko ◽  
Olena V. Tykhonova ◽  
Volodymyr O. Zarosylo
Keyword(s):  
European Union ◽  
System Analysis ◽  
The European Union ◽  
Analysis Method ◽  
Member States ◽  
Content Type ◽  
Eu Member States ◽  
Legal Method ◽  
Content Analysis Method ◽  
The Eu

Purpose The experience of most European Union (EU) Member States has demonstrated effective anti-corruption practices, making the EU one of the leaders in this field, which can be used as an example to learn from in the field of anti-corruption. The purpose of this study is to analyze and identify the main features of anti-corruption legislation and strategies to prevent corruption at the national and supranational levels of the EU. Design/methodology/approach The following methods were used in the work: discourse and content analysis, method of system analysis, method of induction and deduction, historical-legal method, formal-legal method, comparative-legal method and others. Using the historical and legal method, the evolution of the formation of anti-corruption regulation at the supranational level was revealed. The comparative law method helped to compare the practices of the Member States of the EU in the field of anti-corruption regulation. The formal-legal method is used for generalization, classification and systematization of research results, as well as for the correct presentation of these results. Findings The main results, prospects for further research and the value of the material. The paper offers a critical review of key EU legal instruments on corruption, from the first initiatives taken in the mid-1990s to recent years. Originality/value In addition, the article analyzes the relevant anti-corruption legislation in the EU member states that are in the top 10 countries with the lowest level of corruption, namely: Denmark, Finland, Sweden, the Netherlands, Germany and Luxembourg.

Polish Approach to Sharing Resources Deployable for the EU Civil Protection Mechanism

2021 ◽  
Vol 13 (1) ◽  
pp. 143-158
Author(s):  
Tomasz Zwęgliński
Keyword(s):  
Emergency Response ◽  
Forest Fires ◽  
International System ◽  
National Level ◽  
Civil Protection ◽  
The European Union ◽  
Internal Security ◽  
Protection Mechanism ◽  
European Dimension ◽  
The Eu

Poles are highly aware of the fact that Polish civil protection assets are being deployed abroad in order to assist other disaster- and crisis-stricken countries around the world. Such a type of urgent assistance provided from one country to another in an emergency response situation is regulated and organised by the European Union. Poland, as a state participating in the EU international system, is very active in sharing its civil protection assets, such as in the Beirut explosion case in Lebanon (2020), and during forest fires in Sweden (2018). Using its civil protection resources to assist other countries poses a question on the potential influence of such activities on the homeland’s internal security. Solving the problem has to be preceded by answering the following question — How is the process of international civil protection deployment organised in Poland? Responding to this question required utilising such methods as a review and analysis of literature sources on the European dimension of civil protection, EU legal regulations, statistics, reports as well as Polish standard operating procedures and internal regulations on the national level and was the key method applied in the research. Furthermore, semi-formal interviews with Polish and EU experts were done. The findings prove that operational planning in the researched area is well organised, which significantly diminishes the identified risk for internal security.

Understanding the Crisis Symptoms of Representative Democracy: The New European Economic Governance and France's ‘Political Crisis’

2018 ◽  
Vol 18 (1) ◽  
pp. 119-131
Author(s):  
Julia Lux
Keyword(s):  
National Level ◽  
Representative Democracy ◽  
Political Crisis ◽  
Economic Governance ◽  
The European Union ◽  
Left Wing ◽  
Discursive Space ◽  
New Economic Governance ◽  
Political Economic ◽  
The Eu

This article will investigate the ‘political crisis’ in France (Amable, 2017) to highlight two aspects often set aside in public and academic discussions: 1) the technocratic, neoliberal character of the European Union (EU) that limits democratic debate about political economic issues and 2) the socio-economic context the parties operate in. Using this perspective, I add to the debate on the inherent theoretical/conceptual tension between representative democracy and populism (Taggart, 2002) by showing how the ‘new economic governance’ increases the democratic problems of the EU by limiting the discursive space. Representative liberal democracy has particularly marginalised anti-capitalism at EU and national level. My analysis shows that the EU's discursive strategies are aligned to those of governing parties and the employers’ association. Left-wing actors and the Front National (FN) oppose the EU's discourse not necessarily for reasons of sovereignty but for political reasons concerning the politico-economic trajectory of France.

The integrated assessment of RES cooperation between the EU and its neighbours

2016 ◽  
Vol 10 (3) ◽  
pp. 427-447 ◽  
Author(s):  
Marijke Welisch ◽  
Gustav Resch ◽  
André Ortner
Keyword(s):  
Renewable Energy ◽  
North Africa ◽  
Renewable Energy Sources ◽  
The European Union ◽  
Western Balkans ◽  
Member States ◽  
Content Type ◽  
Eu Member States ◽  
Good Resource ◽  
The Eu

Purpose The purpose of the paper is to provide estimation results for feasibility of renewable energy source (RES) deployment in Turkey, the Western Balkans and North Africa. From these results, the potential for cooperation in renewables production between the countries and the European Union (EU) is assessed and evaluated, in a mid- (2030) and long-term (up to 2040) perspective. Design/methodology/approach The authors focus on the quantitative assessments undertaken on the extent to which RES cooperation can create mutual benefits, identifying costs and benefits for both sides, but in particular with respect to RES target achievement (2020 and 2030) at EU level. The potentials for RES generation in Turkey, North Africa and the Western Balkans are calculated under different policy pathways, taking into account different levels of economic and non-economic barriers that could occur. Findings Overall, the authors found that increasing RES deployment in the three analysed regions and initiating or intensifying cooperation with EU28 Member States leads to mutual benefits. Concretely, these benefits become apparent in terms of the EU Member States importing renewable energy sources for electricity with a good resource quality and adding on to their targets for RES deployment. At the same time, substantial savings occur for the EU, in turn leading to income and investments in the cooperating regions. Originality/value The assessment underlying this paper is the first of its kind to the authors’ knowledge that opens up the geographical spread in comparison to merely assessing cooperation between Europe and the Middle East and North Africa. Furthermore, the multitude of policy parameters analysed provides detailed and robust insights concerning a broad variety of different possible scenarios.

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