EU to bypass bank branch with new dirty money watchdog – POLITICO

The EU has a dirty money problem – and it’s finally admitting it.

Brussels plans to strip the European Banking Authority of all its anti-money laundering obligations and hand them over to a new EU anti-money laundering watchdog, according to proposals seen by POLITICO .

The plans, which are due to be released by the European Commission on July 20 and confirming details first reported by POLITICO in January, are designed to undo much of the reputational damage the bloc has suffered in recent years after quitting. ‘a series of scandals have exposed a blind spot in the banking sector. surveillance.

Amid concerns about the independence of the EBA board after the Paris-based agency failed to hold national regulators accountable for sleeping on the job, the Commission plans to dump the dedicated unit of agency and transfer powers to a new anti-money laundering authority. (AMLA), reveals the project.

The authority will have direct supervisory powers over financial companies across the bloc, with the power to impose fines totaling millions of euros. He will choose the supervised companies based on their exposure to illicit funds through cross-border activities and risky clientele.

With the new agency’s board to be independent from EU countries – contrary to EBA provisions – supporters say the proposals will be a big step forward in cleaning up the financial sector. About 1% of Europe’s wealth is involved in “suspicious activity”, the equivalent of around 160 billion euros.

“The EU’s approach to money laundering, with a central role for EBA, clearly lacks bite, as evidenced by the scandals with Danske Bank and ING in recent years,” said the Finnish MP Eero Heinäluoma, the Socialists and Democrats’ interlocutor on the fight against money laundering. money laundering. “A single anti-money laundering agency with clear powers and resources could be an important step forward, provided other bottlenecks, such as the lack of harmonization of regulatory requirements … are properly treated. “

The proposals include a single rulebook that the new watchdog would apply, to apply uniform rules on customer controls, cash limits and reporting requirements across the block. There is also an initiative to improve coordination between financial intelligence units, national centers that analyze reports from banks and other companies on combating suspicious activity.

However, the plan – which has yet to be worked out during negotiations between the European Parliament and the Council of the EU – would see the agency start direct supervision from 2026.

Noting that it would take at least two years to set up a new agency, Karel Lannoo, director general of the Brussels think tank Center for European Policy Studies, said it would be more effective to create an independent team within the ‘EBA than to set up create something from scratch.

The fact that “member states will also have to decide where to place it” opens the door for internal political struggles over the location of the new watchdog while the money launderers continue to operate, Lannoo said.

Reputation blow

The decision to come up with a new agency is also a blow to the EBA, which was moved from London to Paris after Brexit.

EU policymakers had considered expanding it into a more powerful body to fight illicit financiers. The regulator even received more money and manpower last year to bolster its anti-money laundering team in response to scandals in Denmark, Estonia, Germany, Latvia, Malta , the Netherlands and Sweden.

The EBA empowerment aimed to strengthen coordination across the bloc to crack down on illicit funds flowing within EU borders. But governance problems quickly arose within the EBA board of directors, made up of national supervisors.

In Latvia, for example, it was the US Treasury that had to take action against ABLV Bank, accusing the lender of washing dirty money linked to North Korea’s arms program.

The Commission has also made little effort to hide its dismay after EBA board members decided not to punish Denmark and Estonia for failing to detect huge amounts of funds suspects passing through one of Scandinavia’s largest banks. Rather, Danske Bank admitted its own flaws, releasing a report revealing that 6,000 “non-resident” customers had funneled some 200 billion euros through its Estonian branch between 2007 and 2015.

An investigation by the EU’s audit watchdog found that countries had pressured members of the EBA board to influence its investigation into the management by Denmark and the Estonia of the Danske scandal.

A spokesperson for the agency told POLITICO that “EBA remains fully engaged” in anti-money laundering and terrorist financing measures.

“We know that we can play an important regulatory role in the future, working with the new AML / CFT supervisory authority at EU level to tackle the fragmentation of supervision, encouraging effective cooperation between all relevant competent authorities and continuing to ensure that [money-laundering/counterterrorism-financing] risks are addressed effectively in all areas of oversight and throughout the lifecycle of institutions, ”the spokesperson said.


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