EU taxonomy and AML developments
blacklist, this may have serious consequences in terms of the potential to attract investors. EU AML Directive Casinos have been covered by the applicable EU anti-money laundering rules for many years, but with the 4th anti-money laundering directive 6 , all forms of gambling are, in principle, subject to AML obligations. Member States can only exempt such applicability in cases where a specific gambling sector is assessed as being at low risk of laundering money. Financial institutions are obviously also subject so restrictions and obligations under AML rules. As such, they have put in place policies and procedures to identify and manage the risks to which they are exposed in terms of money laundering and terrorist financing. One of the approaches taken by banks in this regard, is simply to refuse to enter into business relationships, or terminate existing ones with customers (determined as individuals or members of a specific category) associated with higher risk. This is referred to as “de-risking”. With gambling being brought fully under the scope of the 4th AML Directive, it has appeared more prominently on the radar of financial institutions pursuant to avoiding risk in terms of anti-money laundering. In principle, banks should pursue checks and procedures to make sure that their gambling- related clients do not engage in money laundering or terrorist financing. However, in reality, it seems that banks are simply opting for the “de-risking” approach when it comes to gambling. In other words, rather than making any sort of effort to assess actual money laundering and taking directed action, banks simply decline to deal with
gambling operators. In an opinion on de-risking of 5th January 2022 7 , the European Banking Authority takes the position that the de-risking approach taken by banks is counterproductive. It has a detrimental impact on the furthering of the EU’s objectives, especially in relation to fighting financial crime effectively, but also with regard to financial inclusion and the stability of the financial system. The EBA opinion states that “de-risking of entire categories of customers, without due consideration of individual customers’ risk profiles, can be unwarranted and a sign of ineffective ML/TF risk management”. Moreover, de-risking flies in the face of Member States’ gambling policies, which rely on trusted and safe operators, those that are licensed and regulated, to provide a safe alternative to illegal gambling. The regulated gambling sector cannot perform its tasks within national gambling policies if they are denied access to banking services. De-risking would therefore pave the way for illegal gambling based on crypto currencies, which, ironically, would not only be detrimental to player protection but also to the fight against money laundering and terrorist financing. Conclusion While EU objectives such as the fight against money laundering, or the taxonomy for sustainable investments are to be applauded, the legal instruments that are intended to achieve them can carry undesirable and unwarranted side-effects for the legal gambling business. It is advisable to closely monitor any such initiative, and to keep all stakeholders well informed of such risks and how to avoid a negative impact on society.
Philippe Vlaemminck is a founder member of IMGL and received the IMGL President cup in 2010. He is the principal at Vlaemminck Law. For more information contact: +32 (0) 475248549 philippe.vlaemminck@vlaemminck. law
Robbe Verbeke is a partner at Vlaemminck Law
6 Directive 2015/849 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, and repealing Directive 2005/60/EC and Commission Directive 2006/70/EC 7 https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Opinions/2022/Opin- ion%20on%20de-risking%20%28EBA-Op-2022-01%29/1025705/EBA%20Opinion%20and%20annexed%20report%20 on%20de-risking.pdf
IMGL Magazine • July 2022 • 19
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