Paris brokers accord on money laundering rules

Date: 21/09/00

By Peter Chapman

PARIS has paved the way for tough new rules to combat money laundering in the Union after brokering an agreement between member states on three potential deal-breakers.

The plan to update rules approved in 1991 is designed to ensure that illegal funds are not filtered through the EU banking and finance system. But agreement on the proposal has been delayed by battles between governments over rules to govern the liability of lawyers, accountants and financial advisors who - knowingly or not - become entangled in money laundering cases. Disputes over the scope of the proposals and over Internet banking issues have also hampered efforts to get deal.

Experts claim new rules are needed because there is evidence that criminal gangs from the Italian Mafia to the Japanese Triads often use lawyers and other professionals to launder the proceeds of their illegal activities.

But Berlin was initially bitterly opposed to imposing tough new controls on professionals, arguing that this would undermine Germany's constitutionally enshrined 'lawyer-client privilege'.

German legal associations insisted it was unnecessary to introduce laws to govern the activities of their members, arguing that errant lawyers in the country already faced being stripped of their professional qualification.

The French presidency has tabled a UK-inspired compromise spelling out that professional advisors could give general legal advice to clients, but would be liable if they knowingly aided the money-laundering process. "It has been made clear that it is only a problem when the lawyer or advisor is acting as a financial intermediary," said a diplomat.

Another key stumbling block concerned the severity of offences which should be covered by the proposals. Most member states wanted the laundered proceeds of tax evasion to be included, but Paris objected strongly on the grounds that this could criminalise large portions of the French population. Under the latest proposal, countries would be allowed to draw up their own lists of offences to be classed as money laundering.

The final obstacle was a dispute over the rules governing transactions not carried out in person, such as banking and investing done online or by telephone. Some Union governments, including the UK, feared the proposals would stifle the development of new financial services by forcing companies to require too many identification documents from customers. Critics insisted it should be left to member states to lay down detailed requirements.

However, agreement on this issue is now in sight and diplomats say a deal on the package is likely at next Friday's (29 September) meeting of EU finance ministers.

Paris has paved the way for tough new rules to combat money laundering in the Union after brokering an agreement between member states on three potential deal-breakers. Diplomats say a the package is likely to be agreed at the meeting of EU finance ministers on 29.9.00.