The European Commission decided today to refer Slovenia and Spain to the Court of Justice of the EU for failing to fully implement European rules on markets in financial instruments (MiFID II) as well as its supplementing Directive (Delegated Directive (EU) 2017/593).

These rules are crucial building blocks for the proper functioning of securities markets and are essential for the continued operation of the European single market. If Member States do not transpose the rules, investors are not able to benefit from the enhanced investor protection provided under MIFID II. This includes safeguards of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits. It also makes markets less safe as trading venues and investment firms do not have to operate under the more stringent and transparent operational requirements. National competent authorities of non-transposing Member States are further not able to deliver legally sound authorisations for activities that had not been previously regulated, or that were regulated differently under MiFID I. This includes the operation of trading venues, such as regulated markets, multilateral trading facilities (MTF) and organised trading facilities (OTF) and the registration of MiFID I investment firms as a systematic internaliser.

Not fully transposing these EU rules disrupts the single market as they became applicable on 3 January 2018 and complement the provisions of the Market for Financial Instruments Regulation (MIFIR). Cross-border “passporting” of various investment services and activities might not operate as smoothly as between Member States that have fully transposed the MiFID II rulebook.

Background

In September 2017, the European Commission formally requested several Member States to transpose MiFID II and its Delegated Directive. In January 2018, reasoned opinions were issued against those Member States that had not notified full transposition yet. To date, Slovenia has not notified any measures related to the Directives at stake and Spain has notified partial transposition only.

For More Information:

– On the key decisions in the July 2018 infringements package, see full MEMO/18/4486.

– On the general infringements procedure, see MEMO/12/12.     

– On the EU infringements procedure.

Ireland implemented only a very limited part of the rules and is therefore also referred to the Court of Justice. The Commission proposed that the Court charges a lump sum and daily penalties until the three countries take the necessary action.

Věra Jourová, Commissioner for Justice, Consumers and Gender Equality said: “Money laundering and terrorist financing affect the EU as a whole. We cannot afford to let any EU country be the weakest link. Money laundered in one country can and often will support crime in another country. This is why we require that all Member States take the necessary steps to fight money laundering, and thereby also dry up criminal and terrorist funds. We will continue to follow implementation of these EU rules by Member States very closely and as a matter of priority.”

The Member States had until 26 June 2017 to transpose the 4^th Anti-Money Laundering Directive into their national legislation. These rules reinforce the previously existing rules by:

• strengthening the risk assessment obligation for banks, lawyers, and accountants;
• setting clear transparency requirements about beneficial ownership for companies;
• facilitating cooperation and exchange of information between Financial Intelligence Units from different Member States to identify and follow suspicious transfers of money to prevent and detect money laundering or terrorist financing;
• establishing a coherent policy towards non-EU countries that have deficient anti-money laundering and counter-terrorist financing rules;
• reinforcing the sanctioning powers of competent authorities.

Meanwhile, in the wake of the Panama Papers revelations and the terrorist attacks in Europe, the Commission proposed a 5^th Anti-Money Laundering Directive to further step up the fight against money laundering and terrorist financing. These new rules aim at ensuring a high level of safeguards for financial flows from high-risk third countries, enhancing the access of Financial Intelligence Units to information, creating centralised bank account registers, and tackling terrorist financing risks linked to virtual currencies and pre-paid cards. These new rules entered into force on 9 July 2018 following its publication in the EU’s Official Journal and Member States will have to transpose the 5^th Anti-Money Laundering Directive into national legislation by 10 January 2020.

Next steps

Regarding the 4^th Anti-Money Laundering Directive the Commission has opened so far infringement procedures for non-communication of transposition measures against 20 Member States: 3 are currently at the stage of court referrals, 9 at the stage of reasoned opinions, and 8 at the stage of Letters of Formal Notice (see 8 previous reasoned opinions sent in December 2017, an additional 2 in March 2018).

In the meantime, a majority of Member States have adopted the relevant laws. The Commission is now carefully analysing whether these laws completely transpose the provisions of the 4th Anti-Money Laundering Directive before deciding on whether closing or proceeding with further infringements against Member States.

Background

In July 2017 the Commission opened infringement proceedings for non-communication of the transposition measures and sent a letter of formal notice to sixteen Member States, who had either not notified any measures (Bulgaria, Cyprus, Estonia, Greece, Finland, Hungary, Luxembourg, Latvia, Malta, the Netherlands, Poland, Portugal, Romania) or whose measure were not satisfactory (Ireland, Lithuania, Slovakia).

In November 2017 (Belgium and Spain) and January 2018 (Austria and France), the Commission opened infringement proceedings for non-communication of the transposition measures as the measures notified by these Member States represented only a partial transposition.

Last December 2017- 8 Member States (Bulgaria, Cyprus, Greece, Luxembourg, Malta, the Netherlands, Poland and Romania) had not yet notified any transposition measure. The Commission therefore sent them a reasoned opinion.

In March 2018 the Commission also sent a reasoned opinion to Slovakia and Ireland who – despite having notified to the Commission a partial transposition – had not yet transposed the main obligations of the 4^th Anti-money laundering Directive into their national law.

Following these infringement steps, a majority of Member States have adopted the relevant laws. The Commission is now carefully analysing whether these laws completely implement the provisions of the 4th Anti-Money Laundering Directive before deciding on whether closing these infringements or further proceeding with infringements against Member States.

Today, the Commission has also sent reasoned opinions to Latvia and Spain and an additional reasoned opinion to Malta for failing to transpose the 4^th Anti-Money Laundering Directive into national law as the assessment of the transposition laws notified by these countries has showed that the transposition is not complete.

For More Information

– 4th Anti-Money Laundering Directive and Funds Transfer Regulation

– The Supranational Risk Assessment Report

– The Staff Working Document on Financial Intelligence Units

– 5^th Anti-Money Laundering Directive and factsheet

– On the key decisions in the July 2018 infringements package, see full MEMO/18/4486

– On the general infringements procedure, see MEMO/12/12

– On the EU infringements procedure