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Privacy and identity issues in financial transactions

The proportionality of the European anti-money laundering legislation
PhD ceremony:Ms C. (Carolin) Kaiser
When:October 25, 2018
Supervisors:G.P. (Jeanne) Mifsud Bonnici, Prof Dr, J.A. (Joseph / a.k.a. Joe) Cannataci, Prof Dr
Where:Academy building RUG
Privacy and identity issues in financial transactions

Few legal instruments shape the European financial system as much as the Anti-money laundering Directives. Currently in its fifth version, the Directive sets out measures to define a European approach against money laundering and terrorist financing. It binds all members of the financial services industry, making it an essential pillar in the system of regulation of the financial sector.

In essence, the Anti-money laundering Directive demands that obliged entities apply four measures. All customers of obliged entities must be identified, and all transactions must be monitored in order to filter out any transactions that seem unusual or suspicious. Information on suspicious transactions must thirdly be forwarded to the national Financial Intelligence Unit. Finally, obliged entities retain records for at least five years after the end of the business relationship with the customer.

Clearly, processing personal data so extensively clashes with the fundamental right to privacy. As everyone uses financial services, the measures of the Directive infringe the privacy of the entire European population. There are no meaningful exceptions to the group of people who are covered or the types of transactions that are monitored. The measures of the Directive are therefore also applied to people, who have never been suspected of any crime, and to transactions, that are connected to the most intimate aspects of someone’s private life.

In this way, the Anti-money laundering Directive is comparable to the Data retention Directive, which was annulled by the Court of Justice of the European Union (CJEU) for very similar reasons as outlined above. This thesis therefore argues that the Anti-money laundering Directive would be annulled by the CJEU in the same way, if it was challenged.