EU countries revolt against Commission’s dirty money list

EU governments want to block the Commission’s list of countries that don’t do well on money laundering.

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The European Commission’s justice chief, Věra Jourová, has a problem.

EU governments are set to block the Commission’s draft dirty money blacklist after all 28 EU countries voiced their concerns, three diplomats told POLITICO.

The Commission last month published a list of 23 countries that it says are too lax on money laundering, including Saudi Arabia, Panama, and several American territories such as the U.S. Virgin Islands. The list, which needs the support of both the European Parliament and Council of the EU to come into effect, generated intense backlash and behind-the-scenes lobbying from the U.S. and Saudi Arabia.

EU government representatives today agreed to block the blacklist when they meet at a Council meeting, the three diplomats said. EU ambassadors will formalize that decision on Wednesday. The bloc’s home affair ministers would then sign off on the rejection when they meet next Thursday.

Commission deputy chief spokesperson Mina Andreeva told journalists that the EU’s executive arm would only “assess the situation” once this process is completed next week.

The draft blacklist is politically sensitive because it has teeth. EU banks that handle payments connected to the blacklisted countries and territories would have to conduct “enhanced due diligence” on any cash that moves to and from the EU and the blacklisted jurisdictions.

The U.S. Treasury called it “flawed” when it first emerged and said it “does not expect U.S financial institutions to take the European Commission’s list into account.”

EU countries’ misgivings surround the initiative’s selection process, with governments arguing that countries on the draft blacklist had too little time to contest their inclusion with the Commission.

“To achieve the full impact of this instrument and to ensure its quality we need to introduce the list in an orderly process,” a draft statement prepared by EU countries to explain their decision reads. “Therefore … we cannot support the current proposal that was not established in a transparent and credible process that incentivises affected countries to take decisive action while also respecting their right to be heard.”

Andreeva pushed back, saying the blacklist “was done in close cooperation with the member states,” which “were consulted on the methodology and the [candidate] countries last year.”

All EU countries, bar Belgium, had voiced concerns ahead of a Thursday night deadline to do so, four diplomats said. Belgium decided on Friday to also oppose, three diplomats said.

A Commission official who spoke on the condition of anonymity said Jourová’s team are “disappointed and regret the Council position today but we have to understand their exact reasons.” A block by the Council would force Jourová back to the drawing board.

It is also bad news for the Parliament.

MEPs had consistently called on Jourová to come up with a blacklist that did more than copy-paste a similar list on the global stage set up by a G7-initiated task force.

Jourová heeded their call but it could all be in vain.

MEPs point finger at UK

Sensing a Council revolt, 29 MEPs from different parties sent a letter to the Commission on Thursday morning to say they “strongly oppose any kind of political interference in the process of identification of high-risk countries.”

They also said they are “disturbed” that some countries, “notably the United Kingdom,” have lobbied “to remove Saudi Arabia” from the list.

London brushed off the criticism.

“The U.K. is a world leader in the fight against money laundering and terrorist financing,” a government spokesperson said in an email. “We — along with the majority of other member states — have concerns over the process and methodology used to produce this regulation.”

The fact that almost all countries balked at the new blacklist reveals just how diplomatically sensitive the initiative is.

POLITICO obtained a letter from Saudi King Salman bin Abdulaziz Al Saud to one EU government, complaining that the blacklist “will damage its reputation on the one hand, and will create difficulties in trade and investment flows between the kingdom” and the EU.

He also “urged” the country’s “representatives in the Council to support the position of the Kingdom and reconsider this decision.”

This story has been updated.