Brussels has redoubled its efforts to combat money-laundering and the financing of terrorism by offering the European banking authority (EBA) a powerful new mandate to impose sanctions directly on the banks of member States.
A series of measuresthat would make Europe’s banking supervisor the ultimate arbiter in the most serious cross-border money-laundering cases were announced to coincide with the European commission president Jean-Claude Juncker’s annual state of the union speech on Wednesday.
Europe is under pressure to respond following a series of recent scandals including the collapse of ABLV Bank in Latvia and the freezing of assets at Pilatus Bank in Malta following allegations of sanctions busting by its Iranian owner.
Investigations such as the Panama Papers and the Global Laundromat series, which revealed the movement of $21bn (£16bn) in dirty funds from Russia, have underlined how poor supervision by member states and a lack of cross-border cooperation between law enforcement agencies is allowing money to flow from countries with high levels of corruption into Europe.
“Anti-money laundering supervision has failed all too often in the EU,” said Valdis Dombrovskis, vice-president for financial services policy at the commission. He said enhancing the powers of the EBA would ensure “different supervisors cooperate and exchange information and that anti-money laundering rules are enforced effectively across EU countries”.
The proposals, which must be agreed by member states and the European parliament, would be fast tracked by amending existing legislation.
The EBA would be able to order national regulators to investigate breaches and specify remedies such as sanctions. If national regulators failed to act, the commission explained in a memo on Wednesday, the EBA would have the power to step in “to address decisions directly” to banks.
The EBA’s head office is in London, but it will relocate to Paris after Britain leaves the EU in March.
The agency would be asked to act as a data hub, collecting information on money-laundering risks and trends and fostering exchange of information between national authorities. It would also facilitate cooperation with non-EU countries in cross-border cases.
The commission wants a new, permanent committee to bring together national anti-money laundering supervisors.
“Several recent cases of money laundering in European banks have given rise to concerns that gaps remain in the union’s supervisory framework,” the commission said in its briefing.
It also highlighted “delayed supervisory reactions and shortcomings with respect to cooperation and information sharing” both at domestic level, between prudential and anti-money laundering authorities, and across borders between authorities in different member states or countries outside of Europe.
Members of the European parliament have been calling for the creation of a single cross-border agency to step in when national regulators fail to police their banks.
Concerns about regulatory failings have not been limited to smaller member states. In September, an investigation commissioned by Denmark’s largest bank found $30bn of Russian and other former Soviet bloc money was pumped through its Estonian branch in a single year.
The MEP Molly Scott Cato, a member of the economic and monetary affairs committee, welcomed the proposals.
“We need this proposal to be brought into law urgently – and certainly during this parliamentary mandate – to protect the integrity of the European financial system,” she said.