Europe & UK

November 04, 2019

European Union proposes anti-money laundering authority in the wake of high profile scandals

[ by Legal Era News Network ]


The European Union (EU) is set to explore the creation of a new central authority to tackle money laundering following a series of high-profile scandals that highlighted the bloc’s weakness in preventing dirty cash flowing through its banks.

The bloc’s Finance Ministers are expected to formally mandate the European Commission to make recommendations on a new “independent” enforcement body with “direct powers,” according to a draft statement prepared ahead of a December meeting. The body’s mission would be to police financial institutions’ compliance with EU regulations on customer due diligence and other safeguards.

There has been a trigger of money laundering-scandals in recent years in the EU revealing various ways in which criminals can exploit the EU’s banking system.

Last year, US authorities uncovered institutionalized money laundering at Latvian bank ABLV – which has since entered voluntary liquidation, while ING was fined €775m (£668m) for errors in its policies to stop financial crime. Authorities also identified around €200bn (£178bn) of suspicious payments which flowed through Danske’s Estonian branch between 2007 and 2015, in what is thought to be history’s biggest ever money-laundering scandal.

Deutsche Bank is also facing the possibility of legal action over its role in a $20bn Russian money-laundering scheme, and has been fined by UK and US authorities over the scandal.

Countries like France and the Netherlands are also seeking to toughen EU anti-money laundering rules. According to these countries, the best solution would be the creation of a new authority from scratch. But they fear it might take too long and have also suggested boosting the existing European Banking Authority (EBA), the pan-EU banking regulator, as an “alternative and quicker option.”

The EBA has been criticized by members of the European Parliament over its failure to act on recent scandals.

According to EU officials, new EU anti-money laundering legislation – first passed as directives at EU level, then needs to be translated into national law in each EU country — could be instead be introduced as regulations, which would apply directly to financial institutions. The European Commission wants the anti-laundering rules to be the same across the single market and easier to enforce.

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