Explainer: EU Directive v EU Regulation

The European Union began its move towards the use of Regulations in preference to Directives when it decided to take control of the financial sector during the Global Financial Crisis that began in 2007.

Amongst the areas it has targeted to migrate from Directive to Regulation is counter money laundering.

The difference between a Directive and a Regulation is vitally important to anyone in, or dealing with, the EU.

World Money Laundering Report - Learning

EU directives v EU Regulations.

AN EU Directive is a democratically approved measure directed to states requiring them, subject to a right of derogation (variation), to put in place laws (which may be primary or secondary legislation) that comply with the Directive. Directives are debated in the EU Parliament and (at least in theory) in national parliaments before being brought into force.

An EU Regulation is not subject to a similar democratic process. It is not directed to states but to individual persons (both legal and natural) in member states. Because it is not subject to enactment in states, derogation is not possible.

In short, the move from Directives to Regulations is a move towards centralised control and away from the ability of member states to determine the rights and responsibilities of persons within their jurisdiction.

Moreover, EU Regulations are structured in the highly prescriptive form of Civil Law which is an anathema to the principles of the Common Law because, in large part, they militate against the independence of the judiciary.

Education is perhaps the most important thing about financial crime risk and compliance. It's a field that is laden with misleading buzzwords and acronyms, with fluid terminology and, sadly, with much information that is at least inaccurate and often fundamentally wrong. Content in this section is carefully moderated to avoid these pitfalls with a view to creating a vital resource for everyone with an interest in this area of endeavour.

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