EU’s New AML Regulation Could Help Didier Reynders Avoid Investigation Over Lottery Funds

Exemption for State Lotteries: A Potential Loophole?

The new regulations, which were finalized earlier this year during the tenure of former EU Commissioner for Justice Didier Reynders, provide a significant carveout for state lotteries. This provision classifies these lotteries as entities with a minimal risk of facilitating illicit activities, thereby exempting them from certain AML checks that apply to other gambling operations.

This exemption has sparked considerable criticism, particularly in light of ongoing investigations into Reynders himself. Belgian authorities are currently probing the former commissioner for suspected misuse of funds from the Belgian National Lottery, raising questions about whether the new regulation could provide an unwitting cover for such activities.

Interestingly, the provision exempting state lotteries from AML scrutiny was not part of the European Commission’s original 2021 proposal. Instead, it was introduced later, following pressure from Members of the European Parliament (MEPs). Documents suggest that this issue remained contentious until late 2023, highlighting the political complexity behind the decision.

The exemption allows member states to request that their state lotteries be classified as low-risk entities for money laundering, subject to approval by the European Commission. As a result, these lotteries would be spared from some of the rigorous regulatory requirements applied to other gambling activities across Europe.

Allegations Against Didier Reynders Cast a Shadow on the Legislation

While Reynders has not been formally charged and is presumed innocent, the timing of the new regulations in conjunction with ongoing investigations into his activities has added a layer of controversy. Belgian police are investigating whether Reynders, while serving as Minister for Finance, engaged in money laundering by purchasing “e-tickets” from the national lottery over an extended period.

The Belgian National Lottery has confirmed that Reynders’ case is the only one in the past five years to have raised suspicions of money laundering. However, the lottery has also stated that, to their knowledge, neither Reynders nor his office sought to influence the operations of the lottery or the EU’s AML regulations during his time in office.

Concerns About the Impact on Broader AML Efforts

The inclusion of the exemption for state lotteries has fueled concerns that the EU’s broader efforts to combat money laundering and terrorist financing could be undermined. Critics argue that the provision could be exploited as a loophole for illicit financial activities, particularly given the ongoing investigation into Reynders and the allegations surrounding the Belgian National Lottery.

For Belgium, the scandal has added an embarrassing dimension to the debate over EU regulations. The timing of the new law’s provisions could be seen as indirectly endorsing the very practices that are under investigation, potentially diminishing the credibility of the EU’s AML efforts.