The Relation Between The Fourth Anti Money Laundering Directive and The General Data Protection Regulation: A Legal, Economic and Integrated Analysis

Angela Hao Yun Lo & Isabella Foshammer Andersen

Student thesis: Master thesis

Abstract

This thesis examines the effect data minimisation has on the efficiency of applying the enhanced customer due diligence measures, which is required in connection to the banks work on combating money laundering. Even though the bank lawfully can process personal data, it does not deprive the bank from complying with the general principles and the regulatory authorities. By analysing the two provisions the banks are imposed on, by the European Union, we are able to demonstrate that data minimisation has a restricting effect on the performance of the enhanced due diligence. One of the restricting core elements is that these provisions counteracts each other by both having the elements of subjective evaluation of whether the costumer is high or low; which determines the processing, amount and kind of personal data obtained by the bank. It is shown that assessment customers can require obtaining a large amount of personal data, while The General Data Protection Regulation finds it necessary to minimize the large amount. Verdicts from the supervisory authority data have shown that minimisation shall be followed at all cost. Furthermore, our analysis has shown that when banks have to perform an enhanced customer due diligence, an asymmetric information in personal information exist between the bank and the customer favouring the customer. The combination of Principal Agent solutions and signalling and screening theories have shown in our analysis to be the optimal solution for this asymmetric balance. This solution entails customers signs a contract which imposes the customers the burden of proof and sanctions if violation of the contract. In addition, the solution includes customers signals the bank in the case of establishing a business relationship and the bank monitors the customers. We hypothesise that this solution will result in a reduction of the deadweight loss the society suffers from money laundering. However, our final analysis demonstrates that the principles of data minimization limits the effects of our hypothesised solution for asymmetric information by restricting the processing of personal data to an inadequate level, in relation to its purpose. As a result of this, the element of signalling and partly monitoring will be restricted. In conclusion, our hypothesis cannot completely hinder an asymmetric balance of personal information resulting in an unsatisfying reduction of deadweight loss for the society.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages119
SupervisorsKalle Johannes Rose