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EVOLUTION OF BANKING SECTOR MONEY LAUNDERING REGULATIONS IN EUROPEAN UNION FROM 2010 TO 2019

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Добрый день! Уважаемые студенты, Вашему вниманию представляется дипломная работа на тему: «EVOLUTION OF BANKING SECTOR MONEY LAUNDERING REGULATIONS IN EUROPEAN UNION FROM 2010 TO 2019»

The introduction

In modern scientific literature, it is believed that money laundering is

the global issue that has a negative influence on the international financial

system. According to Chong and Lopez‐De‐Silanes (2015), money laundering is not a new phenomenon and was an international problem for recent decades. Through all this time the forms and the ways of the money laundering changed, however, the key principle of money laundering remains the same: the criminals need to transform the dirty money from the illegal activities into the “legal” money that they can use. After this transformation the laundered money

penetrate the market and the financial system, making them almost impossible

to be detected as the money with the illegal origin. As it was mentioned by Schneider and Windischbauer (2008), the term «Money Laundering» takes its roots in the USA, where Mafia used to transform the money from the criminal activities to the legal one through the washing saloons. They also mention, that the term «Money Laundering» was first introduced to the public in 1973, when the Watergate Scandal happened. The United Nations Convention on Drugs, as
well as the European Union Anti-Money Laundering Directive (AMLD), used

this term in their official documents. The most widespread origins of the dirty money are the drug dealing and the organized crime, which may include the gun trade, slavery, prostitution, and other activities that go against the legal framework.

To understand the danger that the money laundering can possess to the world, we need to refer to Campbell (2018) that argues that the United Nations
Office on Drugs and Crime declares the statistic, according to which from 2 to

5 per cent of the global GDP is laundered. In 2018 this sum of money would be from $800 billion to $2 trillion. This amount of money may be compatible with the GDP of such states as Canada or the Russian Federation.

There is a huge amount of the threats, that is caused by money laundering. Among the immediate threats, there are threats to the states’ political stability, as the possibility to fight the crime in the money-laundering
 
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schemes is extremely low. According to Ardizzi et al (2014), the main reason for modern money laundering is not the drug trafficking, that was the prior

reason in the end of the 20th century, but the tax evasion. Such actions may

lead to the loss of reliance in the state's banking sector.

Kemal (2014) argues that the corruption and the amount of the money laundered are directly correlated with each other, that leads us to the conclusion that the appropriate regulation by the government is needed to limit the money laundering in the state, and the international cooperation is crucial in some situations. With the reference to Sharman and Chaikin (2009) Kemal (2014)
states that corruption appears as the instrument that criminals use to smooth the

regulations and instruments that the system uses to prevent money laundering. Such a problem appears in the developing states, where the confiscation of the assets and the financial intelligence may perform as the elements of the control, but in the corrupted states they seem to be just the simple models that exist in order to show the international community that the regulations exist in the state. From this point of view, we may see that the corrupted government of one state
may cause the dramatic problems for the other states as the economies are

extremely interconnected nowadays and it is in the interests of the international society to regulate the money laundering processes together with the common sets of regulations and restrictions. Kemal (2014) mentions that in 2003 there was the opinion that the reasons for the money laundering are "tax evasion, corruption, theft, and insurance frauds, which results in an increase in tax rate and interest rate for those who pay them". However, Aldridge (2008) has the
concept of the money laundering that contradicts with the previous opinions.

He states that the so-called dirty money only appears from the illegal activities inside the state. Alldridge claims, that the dirty money appears outside the state, and then they move to the state and penetrate the economy. In the era of globalization, it is difficult to monitor the movement of the laundered money and a lot of criminals succeed in transferring the illegal money from their home to the other jurisdictions, where they use this dirty money in their interests.
 
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The reasons for the recent failures of the European Union AML policies can be divided into two parts. Firstly, the conduction of the money laundering

regulation in the financial sector of the European Union is a complex task, that

needs the cooperation not only between the Member States but among the whole international community. However, despite the recent success in this field, the difference in the development between states makes the task of minimizing the money laundering almost impossible to achieve. Secondly, the new approach of the European Union to prevent the appearance of the new methods of the money laundering is urgent and poorly developed.

Taking everything into consideration, I argue that the analysis the

evolution of the AML in the European Union, with highlighting the strengths and the weaknesses of their approach, would be beneficial not only for the overall understanding of the common global trends in the field of AML but also would appear as the crucial element in the creation of the counter-measures to the money laundering, that we may call, with no doubt, one of the main problems in the global financial sector.

The research question is «Are the anti-money laundering regulations in the banking sector of the European Union becoming more restraining and what determined the tightening of the anti-money laundering policies in the European Union in the 2010-2019 period??». The hypothesis of this research claims that the implementation of the European Union anti-money laundering regulations led to the optimisation of the inter-state cooperation, creation of new methods of monitoring and control and higher transparency in the banking
sector, however, it was not enough to prevent the largest money laundering

scandals in the European history due to deliberate banking policies to escape at least part of the EU regulation and the lack of the international coordination.


Table of Contents

The Introduction    3
Literature Review    6
Methodology    15
1. Trends in Money Laundering Regulations of EU in 2010    18
1.1 Theoretical Approach on the Global Regulation    18
1.2    The description of the FATF 2004 40 Recommendations    19
1.3    The implementation of the European Union 3rd AMLD of 2005    26
1.4    The key outcomes    32
2. The money laundering scandals and their outcomes between 2010    33
and 2019    
2.1    The main focus of FATF 2012 40 Recommendations    33
2.2 The changes between the 3rd and the 4th Directives    35
2.3    The trend in the money laundering regulation of EU in 2012-    38
2019 period    
2.4    The influence of the Russian and Azerbaijani Laundromats    39
2.5 The echo of the Danske Bank Scandal    41
2.6    “The Panama Papers” case    42
2.7    The consequences of the money laundering scandals    43
2.8    The key outcomes    44
3. Trends in Money Laundering Regulations of EU in 2019    45
3.1    The changes between the 4th and the 5th Directives    45
3.2    The trends mentioned in the EU reports in 2019    46
3.3 The key outcomes    52
Conclusion    53
Reference List    55

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