The European Parliament’s PANA Committee has approved draft recommendations calling for increased scrutiny and regulation of emerging technologies, including virtual currencies and FinTech. The committee also approved a report delving into the findings of an 18-month probe into breaches of EU law in relation to money laundering, tax avoidance and tax evasion.
The committee was set up following the Panama Papers revelations the LuxLeaks scandal.
As the Maltese government continues to focus on up-and-coming technologies such as crypto-currency, blockchain technology and financial technology – better known as FinTech – the European Parliament’s PANA Committee is actively calling for an in-depth analysis of the risks such technologies pose.
One particular recommendation on money laundering reads: “Calls for increased political and regulatory focus on emerging risks related to new technologies and financial products, such as derivatives, SWAPS and virtual currencies.”
In a separate recommendation, under the heading ‘Banks’, the committee “calls for a thorough analysis identifying new technologies and financial products which could potentially be used as a vehicle for money laundering; based on this analysis, calls for money laundering provisions to be included in all new proposals addressing such new technologies, including FinTech.”
Malta’s focus on emerging technologies coincides with growing frustration at an EU level with the tax imputation systems of a number of member states, including Malta, which has repeatedly come under fire for its effective five per cent corporate tax, offered to foreign businesses that register in Malta, as well as for allowing the identity of people behind such businesses to be sheltered by nominees.
In the 2018 budget, special mention was made of the creation of a blockchain hub in Malta. This could provide an opportunity for the Maltese government to liaise with the EU and help shape the EU regulatory framework such technologies would be operating under.
Lack of political will
Members of the PANA Committee remarked that “some EU member states are obstructing the fight against money laundering, tax avoidance and evasion.”
The committee expressed its regret that a number of EU member states had featured in the Panama Papers, pointing out a “lack of political will among some member states to advance on reforms and enforcement.”
In addition, the committee took aim at the EU Council’s Code of Conduct Group for its secrecy. This group is made up of tax officials from each member state and is intended to discuss tax-related issues, including the abolition of tax measures that constitute harmful tax competition and the prevention of new measures that would have a similar effect.
The PANA Committee pointed out that, within the group, “moves to counter tax evasion are often blocked by individual member states.” It called on the EU Commission to “use its authority to change the unanimity required on tax matters.”
On member state financial intelligence units (FIU), such as Malta’s Financial Intelligence Analysis Unit (FIAU), the committee recommends harmonisation of each member state’s status and functioning of its FIU in order to facilitate the exchange of information.
The committee “believes that to be more efficient, all EU FIUs should have unlimited access to information from obliged entities as this would allow all FIUs to request information from reporting entities on behalf of foreign FIUs.”
It emphasised “the need for common rules on the independency of institutions in charge of enforcing rules as regards tax fraud and money laundering, as well as the need for full independence of law enforcement bodies in the follow-up of FIU reports.”
A common definition on ‘politically exposed person’, ‘tax haven’ and ‘non-cooperative jurisdiction’ have been called for to avoid any grey areas.
The committee members also supported a proposal that any entity with an offshore structure should have to justify to authorities their need for such an account.
Recommendations focus on money laundering, intermediaries, banks, lawyers, accounting, trusts and fiduciaries, third countries, developing countries, whistle-blowers and inter-institutional cooperation.