EFA-logoEFA-logoEFA-logoEFA-logo
  • About us
    • Our board
    • What we do
    • How we work
    • Ethics
    • Our history
    • Privacy Policy
  • Membership
    • Member benefits
    • EFA members
    • EFA associates
    • Join EFA
  • EFA Certification
    • Certification news
    • Why EFA Certification?
    • Standard Competence Framework handbook
    • Advanced Competence Framework handbook
    • EFA qualifications
    • Applying for EFA Certification
    • Certification committee
  • Public Affairs
    • Public Affairs news
  • News
    • Fundraising Europe
    • Latest news
    • Latest features
    • EFA news
    • European Fundraising Podcast
    • Contributor guidelines
    • Advertise with EFA
  • Events
    • Events Calendar
    • 2022 Nonprofit Pulse survey webinar
    • 2022 EFA Skillshare and AGA
  • Resources
  • About us
    • Our board
    • What we do
    • How we work
    • Ethics
    • Our history
    • Privacy Policy
  • Membership
    • Member benefits
    • EFA members
    • EFA associates
    • Join EFA
  • EFA Certification
    • Certification news
    • Why EFA Certification?
    • Standard Competence Framework handbook
    • Advanced Competence Framework handbook
    • EFA qualifications
    • Applying for EFA Certification
    • Certification committee
  • Public Affairs
    • Public Affairs news
  • News
    • Fundraising Europe
    • Latest news
    • Latest features
    • EFA news
    • European Fundraising Podcast
    • Contributor guidelines
    • Advertise with EFA
  • Events
    • Events Calendar
    • 2022 Nonprofit Pulse survey webinar
    • 2022 EFA Skillshare and AGA
  • Resources
✕
Special Focus: Leadership in the new normal
March 10, 2021
Zoe Amar: The road to recovery – what leaders need to do now
April 7, 2021

Patrick Gibbels: New EU Anti Money Laundering proposal on its way

April 7, 2021
Categories
  • Features
  • View from Brussels
Tags
  • European Commission
  • policy
Euros

The European Commission’s much anticipated Anti Money Laundering regulations are likely to be unveiled in May. Our columnist Patrick Gibbels explores what this could mean for nonprofits.

In recent statements, the European Commission has alluded to the new package of measures on Anti Money Laundering (AML) and Terrorist Financing potentially dropping as early as next month. How the European Commission will classify nonprofit organisations in the context of these initiatives could have a significant impact on the day-to-day operations of these organisations. Questions regarding the concepts of beneficial ownership and obliged entities, as well as risk assessment, form the main bottlenecks. Landing on the “wrong side” of the Regulation could mean a sharp increase in paperwork and scrutiny for nonprofit organisations.

A series of recent money laundering scandals has pointed to the need for the European Commission to come up with a more comprehensive and effective EU approach to preventing and combating money laundering and terrorist financing. In March of last year, I reported on the Commission’s plans in this direction. In the meantime the European Commission has undertaken a public consultation, in which the European Fundraising Association (EFA) has taken part, to assess stakeholder concerns and contributions. The next step is for the European Commission to table their final proposal and enter into negotiations with the Parliament and Council. The burning question here is whether nonprofits will be considered obliged entities as this will mean increased regulatory burden and scrutiny (more on this to follow).

Currently, the rules are based on the 5th Anti Money Laundering Directive and the July 2019 AML Package. By opting for a Directive, rather than a Regulation, the Commission has thus far taken a minimum harmonisation approach, which means that the legislation is unified only at a basic or ‘minimum’ level, leaving a lot of room for Member States to adapt legislation to their domestic systems. This has caused significant discrepancies between Member States; an uneven playing field, and legal uncertainty for nonprofits.

Some Member States engage in the practice of “gold-plating” whereby they unilaterally add more cumbersome rules and regulations on top of the EU directive which, according to NPOs in those countries, has led to a discriminatory approach. For these reasons, the European Commission has now decided to tackle this by means of a Single Rule Book in the form of an EU Regulation. The main differences with a Directive is that a Regulation is designed to accomplish maximum harmonisation across EU Member States, and that it enters into force immediately after the EU institutions have come to an agreement and it is published in the EU Official Journal. In theory, this means that the same rules will apply across Europe and that they will apply immediately.

But what rules apply to nonprofits very much depend on whether they are classified as an obliged entity. This is what will determine whether the organisation will fall under the full scope of the Regulation, in which case records of transactions and donors must be kept and they must be at the disposal of the public administrations and supervising authorities. The authorities may ask for these records in a proportionate and justified way, but in practice classification as obliged entities without a proper risk-assessment has resulted in overly zealous and frivolous requests.

Above, I also emphasised the need for clarification of the definition of beneficial ownership. Currently, the term is not always correctly understood at national level, which is interpreted as the Board members of an organisation directly benefiting from the organisation. In the context of a nonprofit, a Board member is quite different to a beneficiary and does not always have financial ownership, so the term can cause great confusion and results in a lack of uniformity when organisations report the nature and extent of the beneficial interest held.

Whilst the nonprofit sector agrees there is a need to tackle money laundering and terrorist financing, these measures can cause significant unintended regulatory and administrative burdens, in particular for smaller organisations, as well as making it more difficult to raise funds. In dialogues with the EU institutions, the sector has called for clarifications regarding beneficial ownership and obliged entities, as well as advocating for a risk-based approach. Moreover, nonprofits have signalled that there is a strong culture of responsibility, transparency, professionalism, and best-practice, which leads to effective self-regulation.

We have seen a lowering of the risk-assessment of the nonprofit sector in the Second Supranational Risk Assessment, so we are hopeful that the next (third) such assessment will continue this trend. EFA emphasises the importance of structured multi-stakeholder dialogue with the European Commission, to ensure the needs of the sector are understood, and potential pitfalls can be avoided.

Patrick Gibbels, Gibbels Public Affairs

 

About Patrick Gibbels

Patrick is EFA’s public affairs columnist in Brussels. He is the director of Gibbels Public Affairs. Follow Patrick @GPA_Brussels.

Read more from Patrick in our View from Brussels column here.

Share

Related posts

Swedish flag
February 22, 2023

Patrick Gibbels: The Swedish EU Presidency and latest policy developments


Read more
February 22, 2023

Felix Freese: In emergencies act fast, talk faster


Read more
Fundraising@LT PRO session with K. Bartovicova and K.Kovacsne Beres

Fundraising@LT PRO session with K. Bartovicova and K.Kovacsne Beres

February 22, 2023

Giedrė Šopaitė-Šilinskienė: Developing fundraising competencies – a case study from Lithuania


Read more

Most popular posts

Search news by country or category

Search news by date

Popular topics

  • Research
  • Individual giving
  • Coronavirus
  • Digital
  • Professional development
  • Legacies
  • Philanthropic trends
  • Events
  • Collaboration
  • Tax incentives

Registered Office

James Wattstraat 100
NL-1097 DM Amsterdam
Netherlands

EFA is registered at the Netherlands Chamber of Commerce
Reg. No. 34212817

Contact

Executive Officer, Denise Dawes
denise.dawes@efa-net.eu

Media enquiries:
news@efa-net.eu

Follow us

Twitter
Facebook
LinkedIn

Search

✕
© 2021 EFA | European Fundraising Association. All Rights Reserved. Privacy Policy
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies. Read More
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT