What changed

Follow up to the European Parliament non-legislative resolution on the Commission delegated regulation of 14 March 2024 amending Delegated Regulation (EU) 2016/1675 as regards adding Kenya and Namibia to the table in point I of the Annex and deleting Barbados, Gibraltar, Panama, Uganda and the United Arab Emirates from that table

B90222/2024

Resolution tabled pursuant to Rule 111(3) of the European Parliament's Rules of procedure

European Parliament resolution on the Commission delegated regulation of 14 March 2024 amending Delegated Regulation (EU) 2016/1675 as regards adding Kenya and Namibia to the table in point I of the Annex and deleting Barbados, Gibraltar, Panama, Uganda and the United Arab Emirates from that table

Reference numbers: 2024/2688 (DEA) / B9-0222/2024 / P9_TA(2024)0291

(C(2024)1754) – 2024/2688(DEA))

Date of adoption of the resolution: 23 April 2024

The European Parliament,

Competent Parliamentary Committees: Committee on Economic and Monetary Affairs (ECON); Civil Liberties, Justice and Home Affairs (LIBE)

– having regard to the Commission delegated regulation (C(2016)07495),

Brief analysis/ assessment of the resolution and requests made in it:

– having regard to Article 290 of the Treaty on the Functioning of the European Union,

The resolution recalls that the Commission should assess autonomously the Anti-Money Laundering and Countering of the Financing of Terrorism (AML/CFT) regimes of third country jurisdictions and not solely rely on the assessments of the Financial Action Task Force (FATF).

– having regard to Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, in particular Articles 9(2) and 64(5) thereof,

The resolution states that the list of criteria for identifying high risk third countries with deficiencies in their AML/CFT regime in Article 9(2) of Directive 2015/849 is non-exhaustive. It argues that predicate offences to money laundering, such as the evasion of sanctions, may fall under these criteria and should be duly taken into account in the autonomous assessment process of the Commission.

– having regard to Commission Delegated Regulation (EU) 2016/1675 of 14 July 2016 supplementing Directive (EU) 2015/849 of the European Parliament and of the Council by identifying high-risk third countries with strategic deficiencies, in particular the Annex thereto,

The resolution states that reports and evidence suggest that the United Arab Emirates (UAE), Gibraltar and Panama lack efforts in addressing or facilitate the evasion of sanctions imposed on Russia as a response to the Russian war of aggression against Ukraine, potentially serving as platforms for the circumvention of sanctions.

– having regard to the motion for a resolution by the Committee on Economic and Monetary Affairs and the Committee on Civil Liberties, Justice and Home Affairs,

The resolution focuses particularly on the case of the United Arab Emirates and its possible role in sanctions evasion, notably vis-à-vis Russia. It also states that there are credible indications that the UAE plays a significant role in cash-for-gold schemes providing Russia with millions of US dollar and EUR banknotes despite such export of banknotes being banned under Council Regulation (EU) 833/2014. The resolution also reports that entities based in the UAE have recently been found, by a United Nations (UN) Panel of Experts’ report, to play a role in laundering proceeds from conflict zones such as from Sudan’s gold mines, possibly violating EU sanctions on Sudanese entities provided under Council Regulation (EU) 2023/2147 concerning restrictive measures in view of activities undermining the stability and political transition of Sudan. The resolution states that the UN Panel of Experts’ report reveals that entities based in the UAE are involved in the supply of arms to Sudanese entities linked to the Rapid Support Forces, in violation of the UN Security Council arms embargo and Council Regulation (EU) 2024/384.

– having regard to Rule 111(3) of its Rules of Procedures,

The resolution also refers to civil society organisations that expressed concerns regarding the UAE’s continuous poor record in international cooperation and exchange of relevant information to combat transnational financial crime.

A. whereas Commission Delegated Regulation (EU) 2016/1675, its annex and the amending Commission delegated regulation of 14 March 2024 identify high-risk third countries with strategic deficiencies as regards anti-money laundering and countering terrorist financing (AML/CTF) which represent a threat for the Union financial system and for which enhanced customer due diligence measures shall be applied by Union obliged entities under Directive (EU) 2015/849;

Considering the above, the resolution considers that a delisting of the UAE from the EU list may not properly ensure the protection of the integrity of the EU’s financial system, given the high exposure of the EU’s internal market to the UAE, a financial and trading hub.

B. whereas, according to the 2020 methodology for identifying high-risk third countries under Directive (EU) 2015/849, set out in Commission Staff Working Document of 7 May 2020 (the 2020 methodology), the Commission can largely rely on the assessments of third countries carried out by international bodies, such as the Financial Action Task Force (FATF), since the assessment by the FATF follows due process based on objective criteria and the specific thresholds for being listed permit identification of countries presenting very material and profound strategic deficiencies; whereas, in principle, any third country representing a risk to the international financial system, as identified by the FATF, is presumed to represent a risk to the internal market;

The resolution calls on the Commission to carry out a more thorough assessment of the risks and the effective reforms by the UAE, before the country is delisted.

C. whereas the Commission’s assessment is, however, an autonomous process which has to be carried out in a comprehensive and unbiased manner, assessing all third countries based on the same criteria that are set out in Article 9(2) of Directive (EU) 2015/849;

The resolution also refers to the current negotiations with the United Kingdom (UK) on the agreement on Gibraltar which it states is important for the stability and good governance of a crucial, vulnerable gateway of the EU with a third country. The resolution states that Gibraltar benefits from a privileged tax situation, whereas combating tax fraud and tax havens is a European priority. It argues that the privileged situation of Gibraltar arises from the sale of products subject to European taxes on alcohol, tobacco and petroleum derivatives, online gambling, and from the activities of resident companies that are exempt from income tax on profits derived from activities conducted outside of its territory.

D. whereas Parliament expects the Commission to conduct its own assessment attending to the specific vulnerabilities of the internal market and not to rely solely on the assessments conducted by the FATF;

The resolution states that Panama is suspected of facilitating the evasion of the G7 imposed Russian oil cap, as warned by the United States of America, the United Kingdom and the Commission in a letter of December 2023.

E. whereas, under the 2020 methodology, once a third country is delisted by the FATF, that third country is retained on the Union list of high-risk third countries until it has been established that that third country meets the Union criteria for removal; whereas that autonomous process implies that the delisting by the Union entails concrete assurances that that third country no longer poses a high risk to the integrity of EU internal market specifically; whereas the thoroughness of the Commission’s assessment should be commensurate with the deficiencies identified, on the one hand, and the degree of exposure of the internal market to the third country particularly, on the other;

Finally, the Parliament calls on the Commission to submit a new delegated act which takes account of the concerns set out above.

F. whereas the United Arab Emirates (UAE) is a major global financial and trading hub which, due to its geographical position and service-based economy attracting significant trade and foreign investment, poses significant risks; whereas the UAE is an increasingly important economic partner for the Union, being the Union’s main export destination and investment partner in the Middle East and North Africa region; whereas the UAE also serves as an important regional trade and logistics hub for Union operators; whereas the volume of bilateral trade between the Union and the UAE in 2022 reached EUR 49 billion, which represents a 27 % increase on annual basis, making the Union the second-largest trade partner of the UAE after China; whereas combined bilateral foreign direct investment increased to EUR 277 billion in 2021 (latest available figure), which makes the Union the largest investor in the UAE by a significant margin;

Response to the requests and overview of the action taken, or intended to be taken, by the Commission:

G. whereas on 23 February 2024, the FATF removed the UAE from its list of countries under enhanced monitoring, citing significant progress by the UAE in improving its AML/CFT regime; whereas the FATF highlights the UAE’s increasing exchange of information, better understanding of money laundering and terror financing risks, progress in compliance with AML/CFT rules and increasing transmission of suspicion reports and investigations, among others;

As regards the autonomous assessment of the Commission (paragraphs C to E), the Commission reassures the Parliament of its commitment to assess the AML/CFT regimes of third countries in line with its legal obligation. First, in line with the EU methodology for identifying high risk third countries, once the FATF Action Plan is approved, the Commission assesses whether it is sufficiently comprehensive in view of the EU de-listing criteria and specific EU requirements, in particular on ensuring transparency of beneficial ownership information. Only when this is not the case, the Commission develops further mitigating measures ("EU Benchmarks") to “top-up” the existing FATF Action Plan. The objective is to protect the proper functioning of the Union financial system and the internal market from money laundering and terrorist financing risks posed by third countries. The Commission engages with third countries in case “top-up” EU Benchmarks are developed and closely monitors their implementation. Moreover, the Commission may assess autonomously AML/CFT regimes of third country jurisdictions.

H. whereas, on 14 March 2024, the Commission adopted a Commission delegated regulation amending Delegated Regulation (EU) 2016/1675 as regards adding Kenya and Namibia to the table in point I of the Annex and deleting Barbados, Gibraltar, Panama, Uganda and the United Arab Emirates from that table;

The Commission, as a founding member of the FATF, has been closely involved in the delisting process of the UAE within the FATF. Following an onsite visit, the FATF concluded that all the shortcomings identified in the Anti-Money Laundering / Counter Terrorism Financing regimes of the UAE have been addressed through the implementation of its FATF Action Plan. No additional EU benchmarks were required for the UAE since the Commission has assessed that the FATF Action Plan was sufficiently comprehensive in view of the EU delisting criteria. Therefore, in line with EU legislation, the Commission proposed to de-list the UAE shortly after its de-listing by FATF. During the FATF Plenary in February 2024, the Commission called on the UAE to continue improving its AML/CFT regime and to further collaborate in the field of international cooperation. The Commission is further monitoring and closely following developments on strengthening international cooperation, including the provision of mutual legal assistance, in the existing structural dialogue with the UAE in close cooperation with the European External Action Service (EEAS) and in close coordination with Member States. The last EU-UAE structured dialogue on anti-money laundering and counter-terrorism financing took place on 21 June. The Commission urged UAE authorities to improve law enforcement and judicial cooperation on AML/CFT matters with EU Member States.

I. whereas it is the view of Parliament that the list of criteria set out in Article 9(2) of Directive (EU) 2015/849 is non-exhaustive (‘in particular’) and that predicate offences to money laundering, such as the evasion of sanctions, may fall under these criteria and should be duly taken into account in the autonomous assessment process of the Commission;

Regarding the Parliament’s position that the list of criteria under Article 9(2) of Directive 2015/849 is non-exhaustive and that sanctions evasion might fall under these criteria (paragraph I), Article 9(2) of Directive 2015/849 does not provide legal basis for addressing sanctions’ circumvention. Accordingly, the Commission cannot assess third countries’ compliance with AML/CFT standards based on their compliance with the EU sanctions’ regimes.

J. whereas there is important and recent evidence suggesting that the UAE, Gibraltar and Panama lack efforts in addressing, or even facilitate the evasion of, sanctions imposed on Russia, including targeted financial sanctions on individuals, as a response to the Russian war of aggression against Ukraine; whereas those countries may act as platforms for circumvention of sanctions for Union entities, directly or indirectly, thus undermining the Union’s efforts in stopping the Russian war machine;

Regarding the Parliament’s view on the role of the UAE potentially acting as a platform for the circumvention of sanctions (paragraphs J, L, T, U and V), the Commission recalls that addressing sanctions circumvention is a key priority. The EU sanctions framework contains legal tools to act against entities or individuals that are facilitating circumvention and frustrating the effectiveness of EU sanctions regime, provided that there is an EU nexus. To date, three UAE-based entities have been listed in Annex IV of Council Regulation (EU) 833/2014, tightening export restrictions for EU businesses to these companies due to the high risk of diversion of EU technology to the Russian military industrial complex through these channels.

K. whereas the Treasury of the United States of America by Executive Order (E.O.) 14024 of 12 December 2023 imposed sanctions on entities based in the UAE over the shipment of technology, equipment and inputs to Russia;

The EU closely monitors suspicious trade of dual use and advanced technology items including Common High Priority (CHP) goods to prevent that these items fall into the hands of the Russian military industrial complex. Careful analysis of trade data has allowed the Commission to identify a number of third countries that are at risk of being used as platforms for circumvention. The UAE is among those jurisdictions.

L. whereas there are credible indications that the UAE plays a significant role in cash-for-gold schemes providing Russia with millions of USD and EUR banknotes despite such exports of banknotes being banned under Council Regulation (EU) 833/2014;

The Commission, in cooperation with the EEAS, is therefore in regular contact with the UAE on the issue of sanctions circumvention through its territory and closely cooperates to that end. The EU Sanctions Envoy has travelled to the UAE three times since January 2023. Following the Envoy’s second visit in September 2023, the UAE authorities announced a ban on the (re)export of CHP items to Russia, Belarus and Ukraine. The ban was expanded in November 2023 to reflect further additions to the CHP list.

M. whereas Panama is suspected of facilitating the evasion of the G7 imposed Russian oil cap, as warned by the United States of America, the United Kingdom and the Commission in a letter of December 2023;

While the announced measures targeting direct (re)export of CHP items was an important step, the outstanding issue in EU-UAE cooperation up until recently has been the lack of data transparency on the part of the Emirati side. This meant that the Commission had no reliable way in which to verify the effectiveness of these measures. During the Envoy’s last visit in April 2024, concrete data was requested to show that the announced export restrictions are effective. Further to passing the same message to the UAE in different fora, a technical EU-UAE meeting on sanctions circumvention and trade flows took place in June. Upon a request by the UAE, a further meeting took place in July whereby UAE presented to the Commission the requested data, which is currently being assessed by the Commission services against the information at their disposal. The UAE also announced that the ban will shortly apply to the whole CHP list. These are certainly much welcomed steps, which at the moment are under careful consideration.

N. whereas entities based in the UAE have been found by the final report, S/2024/65, of 15 January 2024 by the UN Panel of Experts on the Sudan to play a role in laundering proceeds from conflict zones such as from Sudan’s gold mines, whereas those activities may violate Union sanctions on Sudanese entities provided under Council Regulation (EU) 2023/2147 concerning restrictive measures in view of activities undermining the stability and political transition of Sudan;

Regarding the reference to the report of the UN Panel of Experts on the role of UAE entities in laundering proceeds from conflict zones, such as from Sudan’s gold mines (paragraphs R and S), the Commission has a keen interest in this issue and continuously monitors the situation in countries targeted by EU sanctions. However, the scope of application of sanctions does not extend extraterritorially. In its interactions with UAE interlocutors, the EEAS continue to emphasise the importance of the UAE’s constructive engagement for reaching a sustainable ceasefire in Sudan as well as cooperation in prevention of sanctions circumvention against Russia.

O. whereas the report of the UN Panel of Experts on the Sudan reveal that entities based in UAE are involved in the supplying of arms to Sudanese entities linked to the Rapid Support Forces, in violation of the UN Security Council arms embargo and Council Implementing Regulation (EU) 2024/384;

As regards the reference to Gibraltar (paragraphs N to Q), the Commission was closely involved in the delisting process of Gibraltar within the FATF process. Following the FATF onsite visit, the FATF concluded that all the shortcomings with regard to its FATF Action Plan have been addressed. No additional EU benchmarks were required for Gibraltar since the Commission had assessed that the FATF Action Plan was sufficiently comprehensive in view of the EU delisting criteria. This is why, as per the Commission methodology for the identification of high risk third countries, the Commission proposed to de-list Gibraltar. The Commission takes note of the concerns raised by the Parliament and will further reflect about possible implications in the context of the negotiations on the agreement with the UK.

P. whereas, in spite of the FATF re-assessment, credible civil society organisations (CSOs) have recently highlighted outstanding deficiencies in the UAE’s AML/CFT framework and lack of genuine commitment to address deficiencies in countering money laundering and financial crime;

As regards the reference to Panama and its lack of efforts in addressing the evasion of sanctions against Russia (paragraphs J and M), the Commission follows the same approach as explained above, according to which the scope of application of sanctions does not extend extraterritorially. The Commission had regular technical exchanges with Panama on AML/CFT following its listing by the EU in October 2020. Following the de-listing of Panama in October 2023, Panama provided evidence to the Commission towards the fulfilment of the EU’s additional benchmarks in addition to the FATF action plan. The Commission evaluated this information and shared its assessment with the Council and the Parliament in the context of the Expert Group on Money Laundering and Terrorist Financing (EGMLTF). On this basis, the Commission proposed the de-listing of Panama following improvements in the transparency of beneficial ownership information. Panama has notably demonstrated that its competent authorities are effectively responding to foreign requests for cooperation in identifying and exchanging basic and beneficial ownership information of legal persons and legal arrangements. The Commission is ready to discuss further this technical assessment with the European Parliament.

Q. whereas CSOs have notably decried that the UAE continues to figure among the biggest providers of financial secrecy in the world and expressed concerns with the low number of related investigations and prosecutions for financial crime offences, having in mind the UAE’s risk profile, and despite high profile scandals involving in particular politically exposed persons; whereas CSOs also expressed concern regarding the UAE’s continuously poor record in internal cooperation and exchange of relevant information to combat transnational financial crime;

R. whereas improvements in the AML/CFT framework in the UAE are undeniable and very welcome, taking into consideration the elements outlined above a delisting of the UAE from the Union’s list of high-risk third countries may not, however, properly ensure the protection of the integrity of the Union financial system, given the high exposure of the internal market to the UAE as a financial and trading hub; whereas a more thorough assessment of the risks and effective reforms carried out by the UAE is required before delisting the country;

1. Objects to the Commission delegated regulation;

2. Instructs its President to forward this resolution to the Commission and to notify it that the delegated regulation cannot enter into force;

3. Calls on the Commission to submit a new delegated act which takes account of the concerns set out above;

4. Instructs its President to forward this resolution to the Council and to the governments and parliaments of the Member States.