EU Contemplates New Anti-Money Laundering Body in the Wake of Scandals

Brussels plans to pursue the strengthening of powers of the EU agencies to combat money laundering and mitigate terrorist financing following a series of high profile scandals. These scandals have given insight into Europe’s insufficiencies in addressing criminal cross-border cash flow. 

The EU is working on proposals that would enable the European Banking Authority, the EU’s banking regulator, to acquire increased enhancement powers and more resources. According to senior officials, this would help the authority to better investigate the proceedings of banks involved in illegal financing. 

In other plans, the commission wants to empower the European Public Prosecutor’s Office (EPPO), a newly established pan-EU agency, to launch inquiries into the terrorist financing activity across it member states from 2025. 

Both of the initiatives are still being finalized and are most likely to be highlighted in EU’s president, Jean-Claude Juncker’s annual “State of the Union” speech on Wednesday. These initiatives are due to be officially announced the following week.  

The push to strengthen pan-EU anti-money laundering (AML) powers comes after a major disclosure. As much as $30 billion of former-Soviet and Russian money circulated through the Estonian branch of a Danish bank, Danske, in a single year. 

Earlier this month, the Dutch bank, ING, was also fined €775 million as the penalty for failing to properly enforce anti-money laundering regulations. 

These cases are some of the most recent in a series of scandals unfolding the ways criminals exploit weak and insecure links in Europe’s banking system to launder large amounts of cash. A Latvian bank, ABLV, was also wound up by regulators this year after accusations of “institutionalized money laundering” by US authorities. These accusations even included helping finance North Korea’s nuclear program. 

European Central Bank directly supervises most of the EU’s largest banks but keeping tabs on AML regulations is not covered by that system. Instead, the obligation for ensuring that banks carry out proper customer background checks and other AML regulations as required by EU law still lies largely with national watchdogs. The recent scandals have made the enforcement of these regulations a top priority.