Documents considered by the Committee on 18th November 2016 Contents

8Tax evasion and avoidance, money laundering, terrorist financing

Committee’s assessment

Legally and Politically important

Committee’s decision

Not cleared from scrutiny; conditional scrutiny waiver granted; further information requested

Document details

Proposed Directive about preventing use of the financial system for money laundering or terrorist financing

Legal base

Articles 50 and 114 TFEU; ordinary legislative procedure; QMV

Department

HM Treasury

Document Numbers

(37927), 10678/16 + ADDs 1–2, COM(16) 450

Summary and Committee’s conclusions

8.1The EU wishes to counter financing of terrorism, money laundering and tax evasion and avoidance, including by increasing transparency of financial transactions and corporate entities. Amongst Commission proposals in this regard is a Directive to amend the Fourth Anti-Money Laundering Directive, presented in July 2016. We have considered the matter twice previously and have heard that, while the Government welcomed the proposal, it had concerns on issues relating to shareholding thresholds for company registrations, registration of beneficial owners of all trusts and trust-like legal arrangements, and registers of bank and payment accounts. We also heard that the Government was considering a Justice and Home Affairs opt-in to the proposal (although the widely held legal view is that it is not possible to opt into a legislative proposal which does not have a Justice and Home Affairs legal base).

8.2The Government now tells us that it has decided to (purport to) opt into the proposed Directive. It also says that Council working party consideration of the proposal has resolved the shareholding thresholds issue, but that the other two matters of concern for the UK are still being discussed. However, the Government adds that the Presidency intends to seek agreement on a General Approach at the December 2016 ECOFIN Council.

8.3We note that the Government is purporting to opt into the proposed Directive. Our view, widely shared, is that the UK opt-in is not engaged unless the proposal has a legal base found in Title V of Part Three TFEU. However, we remind the Government that this difference of view will have no practical effect, since the whole of the proposal, once enacted, will anyway apply to the UK.

8.4As for the substance of the proposal, we note the Government’s success in relation to shareholding thresholds, but that the other two matters are outstanding. So we continue to hold this document under scrutiny pending information about satisfactory outcomes. However, if such outcomes are achieved in time for the ECOFIN Council, we grant a waiver from the Scrutiny Reserve Resolution for that Council meeting. We would, of course, expect to receive a prompt report if that situation materialises.

Full details of the document

Proposed Directive amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and amending Directive 2009/101/EC: (37927), 10678/16 + ADDs 1–2, COM(16) 450.

Background

8.5The EU wishes to counter the financing of terrorism and increase transparency of financial transactions and corporate entities. Accordingly, the Commission has proposed a Directive to amend the Fourth Anti-Money Laundering Directive. When, in September 2016, we considered this proposal we heard from the Government of its support for five amendments in the proposed Directive. But we heard also about its concerns relating to three other aspects of the proposal, which it intended to address in negotiation of the proposed Directive. The concerning issues were about proposals to:

8.6We kept the document under scrutiny and asked to hear about progress in negotiation of the proposal, particularly in relation to the concerns and reservations the Government had mentioned to us.

8.7In October 2016 the Government told us that it had discerned a Justice and Home Affairs issue relating to sharing of data from registers between Financial Intelligence Units and law enforcement authorities. It said that it was considering, if the legal base were not altered, whether the UK should opt-in to the proposal. We responded that, as the Government was very well aware, we share the widely held legal view that it is not possible to exercise the UK’s opt-in in relation to a legislative proposal which does not have a Justice and Home Affairs legal base. Nevertheless, we wished to hear what the Government’s decision was on this matter. We reminded the Government that we also wish to hear about developments in negotiation of the proposed Directive, particularly in relation to the three concerning aspects it had mentioned to us previously. Pending responses on both the Justice and Home Affairs issue and developments in negotiation the document remained under scrutiny.

The Minister’s letter of 8 November 2016

8.8The Economic Secretary to the Treasury (Simon Kirby) writes now to say that the Government has decided to (in our view, purport to) opt into the provisions relating to sharing of data from registers between Financial Intelligence Units and law enforcement authorities, which it considers falls within the scope of Article 87 TFEU.

8.9The Minister also updates us on the three concerning aspects of the proposed Directive. He tells us first that

8.10The Minister then says that:

8.11On proposals for registers of bank and payment accounts, the Minister says that:

8.12The Minister also tells us that the Presidency intends to seek agreement on a General Approach at the ECOFIN Council on 6 December 2016.

Previous Committee Reports

Fifteenth Report HC 71-xiii (2016–17) chapter 4 (26 October 2016) and Eleventh Report, HC 71–ix (2016–17), chapter 6 (14 September 2016).





21 November 2016