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EU proposes watchdog to halt flow of dirty money

EU proposes watchdog to halt flow of dirty money
EU proposes watchdog to halt flow of dirty money   -   Copyright  Thomson Reuters 2021
By Reuters

By Huw Jones

– EU policymakers proposed a new agency on Tuesday to stop financial firms from supporting criminals and terrorists after a scandal at Danske Bank highlighted the inadequacy of the bloc’s defences.

Europe came under pressure to step up enforcement of its anti-money laundering rules after several countries began investigating Danske Bank after more than 200 billion euros ($235.86 billion) of suspicious transactions passed through its tiny Estonian branch between 2007 and 2015.

Danske said in April it may be required to investigate its former Estonian branch further this year.

Europol has estimated that around 1% of the EU’s economic activity involves suspicious transactions.

“Every fresh money laundering scandal is one scandal too many – and a wake-up call that our work to close the gaps in our financial system is not yet done,” Valdis Dombrovskis, vice president of the EU’s executive European Commission, said in a statement.

In the absence of an EU-wide authority to stop money laundering and terrorist financing, Brussels has relied on national regulators, but they have not always cooperated or enforced rules consistently.

The Commission, the EU executive, has proposed creating an EU Anti-Money Laundering Authority/Countering Financing of Terrorism Authority (AMLA) to directly supervise a yet-to-be-compiled list of cross-border financial firms considered the most risky, and to coordinate enforcement among national regulators.

AMLA, whose location has to be agreed by EU states, could intervene in companies not on the list if the national regulator has not taken sufficient action.

A levy on the risky firms will largely fund the new body, which should be fully up and running by 2026 with about 250 staff, including 100 to supervise the riskiest firms jointly with national regulators.

AMLA would effectively strip the EU’s European Banking Authority (EBA) of the role it has had since 2019 of coordinating enforcement of anti-money laundering rules.

The EBA‘s board in April 2019 closed an inquiry into Danish and Estonian regulators regarding Danske Bank, even though the watchdog’s officials found the two national regulators in breach of EU law.

In a statement at the time, it said the board had voted down a proposal for a breach of EU law recommendation without giving any further explanation.

“The proposals are a substantial overhaul of the EU’s current AML system and bring crypto-assets under the spotlight,” Kerstin Wilhelm, a business crime lawyer at Linklaters in Munich, said.

The EU package also includes making the bloc’s anti-money laundering rules more detailed and slotting them into a directly binding single rulebook by the end of 2025 to stop criminals exploiting differences in approach between national regulators, the Commission said.

Companies handling virtual assets, such as bitcoin, would become subject to anti-money laundering rules, along with transparency requirements for transfers of crypto assets.

The European Commission also proposed an EU-wide limit of 10,000 euros ($11,793) on cash transfers.

“Limiting large cash payments makes it harder for criminals to launder dirty money,” the EU executive said.

EU states and the European Parliament have the final say over the commission proposals in a negotiation process that can take around two years.

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