Anti-money laundering regulations have gone too far


There was an avalanche of Belgian top tax experts’ comments on Twitter a few weeks ago, following the Supreme Court ruling of 13 October 2020. The stumbling block was the burden of proof in money laundering cases. Anyone who thought that hard evidence must be presented before someone can be charged with money laundering is wrong. Translated into layman’s terms, the Supreme Court confirmed that the courts may infer an illegal financial advantage from related, consistent facts that suggest such a gain.

This won’t really come as a surprise to anyone who has followed the developments in the application of anti-money laundering legislation. Yet, it obviously feels very unfair. It looks like a violation of our property right, and it may be so. The European Court of Human Rights will have to consider whether presumptions are sufficient to be able to pronounce an asset forfeiture in a money laundering case.

The judgment will spread through the financial sector like a shock wave. The European Banking Authority (EBA) already fears that anti-money laundering regulations have gone too far. In recent years, policymakers have kept tightening the thumbscrews on banks that don’t keep a close eye on their customers. Since they may end up paying hefty fines, they are not likely to take the slightest risk. They would rather stop providing services, refuse customers or sever relationships with some customers. This tipping point has almost been reached. The banks are under enormous pressure. Due to overly aggressive regulations and compliance requirements, they are throwing the baby out with the bathwater.

“The strain that the anti-money laundering legislation can put on the financial system has gradually reached breaking point.”

This de-risking approach is taking legitimate companies and individuals hostage. Not just in Europe, in Belgium as well. Ebury is such an example. This financial institution with a worldwide presence offers a platform to manage and execute international payments. The regulator is forcing the company to make its anti-money laundering policy too strict. As a result, Ebury only releases customers’ funds after intensive screening, which means long waiting times when going through the platform. A number of account holders are therefore faced with insurmountable problems. Being able to carry out transactions is just as important for companies as food and water are for a person. The president of the Brussels Business Court has already had to intervene. Ebury was legally ordered to transfer all funds within 24 hours of service of this ruling.

If banks are entrusted with far-reaching investigative tasks, the Supreme Court ruling will further increase the tension in that environment. The strain that the anti-money laundering legislation can put on the financial system has gradually  reached breaking point. Fortunately, I am not alone in saying that, and financial institutions are not alone in thinking it even though they don’t dare to say it out loud. The European Banking Authority, which is also known for its diplomacy, will rock the boat.

Published under