EU to combat scourge of money laundering with new agency

The European Union is set to propose the creation of a new anti-money-laundering agency with direct powers to supervise financial companies, according to a document seen by Financial News sister title The Wall Street Journal.

The agency would be part of a broader plan to address failures that have made the region a haven for financial crime. The European Commission — the EU’s legislative arm — is set to make the proposal later this month, according to a person familiar with the matter.

The proposals are the EU’s most ambitious to date and come after several scandals tarnished its reputation. Repeated failures have caused consternation in Washington, where anti-financial-crime officials have often felt like the US has had to step into a void left by Europe.

A European Commission spokesperson did not immediately respond to a request for comment.

In 2018, the US used its purview over dollar transactions globally to effectively shut down ABLV, a Latvian bank that became a haven for dirty money. Washington informed European authorities about the imminent crackdown just minutes before making an announcement.

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That same year, one of Denmark’s largest banks, Danske Bank, disclosed that its tiny Estonian branch had moved more than $230bn from Russia and other former Soviet states into Europe for years, undetected. Other cases have emerged in Sweden, Malta and Portugal.

In June, the European Court of Auditors — the EU’s independent audit body — released a report lambasting authorities for being too slow and inefficient. It said the European Banking Authority, which has money laundering oversight, hasn’t used it effectively. The European Commission, meanwhile, hasn’t been efficient in monitoring changes in legislation among member countries or even producing updated statistics on the subject, it said.

A spokeswoman for Paris-based European Banking Authority, a European regulator, said it is already tackling some of the issues raised by the court of auditors, and that it was only given renewed anti-money-laundering powers last year.

The Commission plan also would force countries to apply anti-money-laundering rules uniformly. As of now, anti-money-laundering directives created by the EU are unevenly written into national law, resulting in there a patchwork of legislation across the Continent that opens the door for illicit fund transfers through the more relaxed countries.

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The plan could take years to implement. The new anti-money-laundering agency will be established in 2024 and begin operations in early 2026, according to the draft proposal, which still needs to be approved by member countries and the European Parliament. Breaches of the new agency’s laws could result in millions of euros in fines.

Sven Giegold, a German Green Party EU lawmaker, called the proposal “a major step forward against money laundering,” but said the new rules will be toothless unless the Commission watches over countries that don’t follow the rules. For instance, he said, the Commission hasn’t opened infringement proceedings against countries that haven’t properly adopted already-existing money-laundering directives.

“What Europe does best is to decide on new laws and new agencies, but it forgets to implement the rules that already exist,” Mr. Giegold said.

Karel Lannoo, chief executive of the Center for European Policy Studies, a Brussels think tank, also warned that a new agency won’t necessarily solve the much bigger problem of weaker controls on a national level. Financial intelligence units, which are national entities responsible for examining suspicious activity reports, for instance, are poorly resourced and staffed in some countries.

“What we need is a bottom-up approach,” Mr. Lannoo said. “Member states need to organize their house first.”

Write to Patricia Kowsmann at [email protected]

This article was published by Dow Jones Newswires

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