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EU should set up anti-money laundering body, publish fines - experts

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By Reuters
EU should set up anti-money laundering body, publish fines - experts

By Francesco Guarascio

BRUSSELS (Reuters) – The European Union should set up a new agency to counter money laundering after a series of high-profile cases at banks bared weaknesses in the system, an influential think-tank said in a report, urging full disclosure of fines imposed on wrongdoers.

Over the last months, lenders in Denmark, Estonia, Latvia, Luxembourg, Malta, Spain, the Netherlands, Britain and Cyprus have been embroiled in money laundering scandals, with criminal schemes often executed through foreign branches within the EU.

Increased media attention to recent cases has pushed EU regulators to discuss limited changes to the bloc’s legal framework, but proposals to slightly increase the monitoring powers of the European Banking Authority (EBA) face opposition in some member states.

However, the reform should go much further than what is currently discussed, experts at the Brussels-based think-tank Bruegel said in a report on Thursday.

“It is evident that recent anti-money laundering supervision in the EU has been embarrassingly ineffective, and that deep reform thus needs to be considered,” Joshua Kirschenbaum and Nicolas Veron wrote in the Bruegel paper titled: “A better European Union architecture to fight money laundering.”

European Union diplomats have been briefed on the content of the paper in recent meetings as they prepare an action plan on money laundering by the end of the year.

The Bruegel document urges the creation of a new European anti-money laundering authority with several hundred staff.

The plan is far more ambitious than legislative proposals put forward by the European Commission in September which would raise to 12 the total number of EU staff dealing with money laundering at the bloc’s banks, and would leave most powers in the hands of member states.


But the authors of the report say the establishment of a new authority would be easier and more effective than extending the powers of existing agencies, and would replicate the successful common supervision of financial risks at euro zone banks conducted by the European Central Bank.

The ECB has repeatedly endorsed the idea of a single money laundering body.

An EU-wide agency would break the “weak links” in some EU countries “where money launderers tend to concentrate their activity”, in some cases even with the complicity of governments, the report said, without naming specific states.

The establishment of the new body would take time, likely up to 2022, “but the decision to set it up need not be postponed,” the report said.

The new agency would also favour an improvement of EU rules against money laundering, which are currently insufficient and applied inconsistently in EU states, the authors said.

Exploiting loopholes in EU rules, states can currently decide on their own the size and publication of fines for banks involved in money laundering.

Denmark, Spain and Germany do not expose sanctioned banks, while other states like Luxembourg decide case-by-case, despite international guidelines that recommend publication of all sanctions as a key step toward deterring financial crime.

This situation would change with a new authority that publishes all its sanction decisions and imposes sufficiently large fines to discourage malfeasance, the report concluded.

(Reporting by Francesco Guarascio; Editing by Mark Heinrich)