Book Description

This Ex-Post Impact Assessment, prepared at the request of the Committee on International Trade (INTA), addresses the implementation and effects of the inclusion of financial services in existing EU free trade and association agreements (FTAs) and, in particular, their impact on money laundering, tax evasion and avoidance. This study is structured in two parts. The opening analysis, prepared in-house by the Ex-Post Impact Assessment Unit of the European Parliamentary Research Service, outlines the geopolitical and trade context, as well as the EU policy framework to combat money laundering, tax evasion and avoidance. It examines the effects of the 'Panama Papers' leaks, assesses the consequences of tax evasion and money laundering and their link to trade in Africa, and evaluates the implementation of the EU-Central America Association Agreement. Finally, it provides a synthesis of the key findings and recommendations presented in the annexed study.^The annexed expertise has been provided by a team of researchers from the Asser Institute, in the Hague, and the University of Groningen, in the Netherlands. The analysis of illicit financial flows is at the centre of the researchers' evaluation of the implementation and effects of the financial services provisions in selected EU FTAs with third countries, and their propensity to curb money laundering, on the one hand, or to be misused for tax evasion and avoidance reasons, on the other. The team of researchers draw conclusions from their study of the FTAs that the EU has signed with Mexico, South Africa, Serbia, the Republic of Korea and Colombia/Peru on the transposition and implementation of relevant provisions in the national legal and institutional systems of these countries.^They also evaluate the actual and potential impact of the liberalisation of trade in financial services between the EU and the above-mentioned third countries on money laundering (insofar as it is linked to the use of the international financial system to conceal proceeds of crime) and tax evasion (insofar as this constitutes an aspect of money laundering). The annexed expertise concludes that the liberalisation of trade in goods and services with developing countries increases the threat of money laundering, and that it is therefore likely to contribute to an increase in illicit financial flows from developing countries to the EU. It does not find conclusive statistical data to support a causal link between the EU FTAs that are in force and an increase in illicit financial flows.^It deduces nonetheless that the far-reaching commitments made by the EU and developing countries in the selected EU FTAs on access to the markets for goods and services, including in the financial services sector, translate into such agreements significantly increasing trade openness, and hence also the threat of money laundering facing developing countries. To remedy these threats, the annexed study provides policy recommendations on the scope, content and wording of financial services in EU FTAs; on strengthening the effectiveness of provisions on tax cooperation and anti-money laundering; and on bolstering the effectiveness of existing compliance monitoring mechanisms in EU FTAs.