Europe Flags American Territories in ‘Dirty Money’ List, Deepening Rift With U.S.

Europe Flags American Territories in ‘Dirty Money’ List, Deepening Rift With U.S.


FRANKFURT — The United States assailed the European Union on Wednesday for adding American territories to its “dirty money” list, opening a new rift in a relationship that has grown increasingly fractious amid disputes over trade and Iran sanctions.

Four United States territories, including Puerto Rico, were added to a money laundering blacklist that will require European banks to apply greater scrutiny to transactions in those regions. That prompted an angry rebuke from the Trump administration, which criticized the methodology used by the bloc to add those regions and said American officials were not consulted ahead of their inclusion.

The blacklist lumped Puerto Rico, American Samoa, Guam and the United States Virgin Islands with the likes of North Korea, Libya and Yemen as havens where drug dealers, terrorists and corrupt dictators can launder ill-gotten gains.

Saudi Arabia, which leads the Riyadh-based Terrorist Financing Targeting Center with the United States, was also added to the list despite its efforts to demonstrate that it is cracking down on illicit financial activity. That decision could further complicate Europe’s relations with the kingdom, which already faces scrutiny for its role in the murder of a dissident Saudi journalist, Jamal Khashoggi. Steven Mnuchin, the Treasury secretary, has made combating illicit financial activity a priority and has twice visited the center since it opened in 2017.

European officials said the decision was made to prevent illicit financing in areas that are considered risks for such activities.

“Dirty money is the lifeblood of organized crime and terrorism,” Vera Jourova, the European commissioner for justice, said during a news conference in Strasbourg, France, on Wednesday.

“It was high time for Europe to act,” she said. “The times when we would be maybe too naïve about this are over.”

The Treasury Department appeared to have been blindsided by the announcement. Shortly after the list was released, the agency issued a statement condemning the list as flawed and saying American banks should ignore any suggestions from the European Commission to apply greater scrutiny to transactions based on its list. The European Union can apply its rules only to banks operating in Europe.

The department also suggested that the European list was unnecessary because a global body, known as the Financial Action Task Force, sets international standards for countering illicit finance. And it complained that it had not been brought into the discussion ahead of the European action.

“The Treasury Department was not provided any meaningful opportunity to discuss with the European Commission its basis for including the listed U.S. territories,” the statement said.

American officials took the absence of European countries on the list as a sign that it was more political exercise than rigorous review.

Relations between the European Union and the United States are already at a low point. The Trump administration has angered European leaders by imposing tariffs on steel and aluminum imports, questioning the value of NATO and repudiating the nuclear treaty with Iran, which Europe signed onto during the Obama administration. Mr. Trump has also repeatedly threatened to impose stiff tariffs on imports of cars from Europe unless the bloc agrees to drop some of its own tariffs and provide American companies more access to its markets.

The Europeans have annoyed Washington by imposing huge fines on American companies like Google for alleged violations of data privacy, antitrust or tax laws. And the European Union has looked for ways to help European companies bypass United States sanctions on Iran, which Mr. Trump imposed after pulling out of the nuclear treaty.

The deteriorating relationship between the longtime allies will complicate a resolution on trade. Talks between the European Commission and the White House are on the back burner while the Trump administration focuses on resolving its trade war with China. But trade talks are expected to intensify in the coming months.

Sven Giegold, a member of a special committee on money laundering and financial crimes in the European Parliament, said the blacklist was not a political lever intended to win concessions in other areas.

“This has nothing to do with Trump and negotiating strategies,” said Mr. Giegold, a member of the Green Party in Parliament. He noted that the United States has taken a hard line with European banks accused of money laundering, including Deutsche Bank.

“Internationally, the U.S. plays a strong role in money laundering. I welcome that,” Mr. Giegold said. “But it should accept that in America there are obvious deficiencies in the fight against money laundering.”

The four United States territories made the blacklist because they “are attractive for tax crimes and exposed to a higher threat of money laundering linked to tax crime,” the European Commission said in documents published Wednesday.

Some of the territories have also allowed companies to conceal their true owners, and lacked criminal penalties for lawyers or accountants that help criminals launder money, the commission said. American Samoa, Guam and the Virgin Islands are already on the European Union’s list of countries considered havens for companies and individuals trying to illegally avoid taxes.

The European Commission did not respond directly to the Treasury Department statement. As the list was being formulated, “we had a very constructive discussion with the U.S. authorities as we reached out to them about the U.S. territories that are on the list,” a European Commission spokesman said in an email.

The United States was not the only country to express frustration with the move. Panama, which was also included on the list, rejected the decision and called on Europe to clarify its concerns.

“The government of the Republic of Panama strongly rejects the proposal of the European Commission to include the country in a list of jurisdictions of high-risk third countries with strategic deficiencies in its regime in the fight against money laundering and the fight against the financing of terrorism,” said Miguel Verzbolovskis, Panama’s ambassador to the European Union.

The blacklist still faces a formal approval process in Brussels, and will not prohibit banks from doing business with clients in the countries on the list. It merely requires them to exercise more scrutiny.

“It’s not a sanction,” said Laure Brillaud, a policy officer on money laundering at Transparency International in Brussels. “It’s just requiring banks to be more vigilant whenever they have to deal with customers from these jurisdictions.”

Ms. Brillaud said she welcomed the European Commission action, which goes beyond a list compiled by the Financial Action Task Force.

But she said some obvious candidates were inexplicably left off the list, like Azerbaijan, the Cayman Islands and Russia. Danske Bank in Denmark has been embroiled in a scandal stemming from accusations that its Estonian unit helped Russian clients launder enormous sums.

“There are some notable omissions,” Ms. Brillaud said.



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