EU moves to boost monitoring of money laundering at banks

Reform does not address key loopholes in EU rules

BRUSSELS, Dec 23, (RTRS): European Union governments have reached a preliminary deal to clamp down on money laundering by strengthening bank supervision through the European Banking Authority (EBA), the EU said on Wednesday.

The EU has been beset by money-laundering scandals this year, including probes into 200 billion euros ($229 billion) of payments made through Danske Bank’s Estonian branch, the collapse of Latvia’s ABLV Bank and the closure of Malta’s Pilatus Bank.

The reform was rolled out by the EU Commission in September after cases of alleged money laundering at some EU banks that “raised concerns that antimoney laundering rules are not always supervised and enforced effectively across the EU,” an EU statement said.

Under the agreed text, the EBA would be able to directly force individual banks to take measures against money laundering “as a last resort” if national authorities do not act.

The text, backed by diplomats from the 28 EU states, needs the approval of the EU parliament to become law.

However, the overhaul does not address loopholes that give states broad discretion in imposing sanctions, and does not create a dedicated agency to counter money laundering at the EU or euro zone level, as proposed by the European Central Bank.

The agreement was announced as Estonia said it had arrested 10 former employees of the local branch of Danske Bank as part of an international investigation of alleged money laundering.

Latvia’s ABLV liquidated itself after being accused by the US Treasury Department’s Financial Crimes Enforcement Network of money laundering, violating sanctions on North Korea and using bribery to influence Latvian officials.

The ECB withdrew Pilatus Bank’s licence in November, after the bank’s chairman was charged in the United States over money laundering and bank fraud. Under the reform, the EBA, which is moving from London to Paris after Brexit, will have new powers to force national supervisors to investigate cases of suspected breaches of anti-money laundering rules.

In exceptional cases, when national supervisors do not act within set deadlines, the EBA could take measures against a bank “requiring it to take all necessary action to comply with its obligations”, the text proposed by the EU’s executive Commission said.

But decisions on penalties would remain in the hands of member states, some of whom have shown little interest in imposing or trumpeting sanctions, fearing reputational damage.

International guidelines say publicising sanctions is one of the most effective tools to prevent money laundering.

The EBA already has the power to investigate breaches of money-laundering rules and did so against Malta over its supervision of Pilatus Bank.

Under the overhaul, the EBA would get more powers and staff, but it will continue to depend on vague laws that have prevented it from acting in the past.

The EBA admitted that it could not pursue its probe into Malta’s financial supervisor because of a lack of clarity in EU rules, which will not change.

In this picture taken on Dec 22, Italian Prime Minister Giuseppe Conte (left), talks to Italian Economy Minister Giovanni Tria prior to the start of a confidence vote on the budget law at the Italian Senate in Rome. (AP)