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Bank failures show need for EU AML authority

Remarks by European Commission vice-president Valdis Dombrovskis, at the ECOFIN press conference in Vienna last week, underline the need for better rules and improved supervision on anti-money laundering legislation in the EU. Dombrovskis noted the risks linked to a lack of transparency, saying “there are risks for investment protection and market integrity, but also in the form of money laundering, potential fraud or hacking. So we need to continue monitoring the developments in this area, and we need to do so also in cooperation with our international partners at the Financial Stability Board or G20 level.”

He said it is also time to take crypto assets into account, seeing as they are “here to stay” despite recent market turbulence. He added: “I also note that we have already expanded the scope of the EU anti-money laundering and anti-terrorism finance legislation to crypto-asset exchanges and custodian wallet providers.”

Fifth AML Directive not enough

The vice-president's remarks come as the last revision of the 5th Anti-Money Laundering Directive entered into force in July, which, according to the Commission's statement, will “bring more transparency to improve the fight against money laundering and terrorist financing across the European Union”. But despite the latest revision of the fifth AML Directive, the Commission has stated clearly that its AML supervision and enforcement of the rules needs to be strengthened.

Writing in Euractiv, Brussels correspondent Jorge Valero says that “various high profile cases across Europe have shown that the new directive was also too modest to monitor the financial circuit even before its ink was dry.” The AML scandals referred to include those that have involved banks in Malta, Latvia, Estonia, the Netherlands, Germany and Denmark, which suggest weaknesses among national anti-money laundering authorities.

Valero's article also refers to a 'reflection paper' by German MEP Sven Giegold, who calls for better cooperation between AML/CFT and prudential supervisors and refers to the “gaps in the EU’s supervisory framework, in terms of the division of responsibilities and the sharing of critical information, which have contributed to the failure or serious difficulties of several European banks and presented challenges for the control of financial stability risks”.

Road ahead: 'swift legislative changes' needed

Giegold's paper considers some of the possible actions to address the weaknesses in AML/CFT regulation and enforcement, which it defines as follows:

  1. Better incorporation of AML/CFT considerations into prudential supervision;
  2. Enhancing cooperation and exchange of information among AML supervisors and prudential authorities;
  3. Enhancing the effectiveness, powers and governance of the European Supervisory Authorities; and
  4. Possible longer-term objectives leading to an enhanced AML/CFT supervisory framework.

In his blog, the German MEP is quite clear on the course of action needed:

“The report [the Joint Working Group's interim report] is proof that money laundering supervision does not work in the banking union. The Commission has no excuse any more to kick the dirty can along the road. It must swiftly propose legislative changes. To combat money laundering effectively, Europe needs a European anti-money laundering authority.”

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This item appears in the following sections:
Fraud Prevention
Anti-Money Laundering
Terrorist Financing

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