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15th Aug 2020

'Disappointing' watchdog may get new EU banking role

  • The European Banking Authority refused to act on the Danske Bank money-laundering scandal (Photo: eba.europa.eu)

The EU banking watchdog which refused to act on €200bn of illicit Russian money may now end up getting a supervisory role on EU anti-money laundering rules.

The European Banking Authority's (EBA) board early last year shelved an internal report exposing how Danske Bank had done business with thousands of "suspicious" clients.

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But the European Commission is now suggesting the authority as an option for a new supervisor role as a part of an action plan to fight money-laundering and terrorist financing throughout the bloc.

"We may propose a new EU agency or add to the responsibilities of the European Banking Authority, depending on the feedback we get," European Commission executive vice-president Valdis Dombrovskis told reporters.

The action plan spells out measures that the commission wants to take over the next 12 months, in a bid to close loopholes in EU laws when it comes to money laundering.

One of those measures includes creating an EU supervisor, a proposal the commission will put forward next year following wider consultations.

Such a supervisor would carry out onsite investigations to determine the effectiveness of EU anti-money laundering laws.

Dombrovskis said both a new EU agency and the European Banking Authority each had their own advantages for the role.

A new EU agency would be more flexible in terms of governance, while the banking authority comes with fewer costs, he said.

"Their refusal to act on one of the biggest money laundering scandals in Europe in the Danske Bank case was very disappointing," said Dombrovskis of the European Banking Authority.

"If we are to choose the European Banking Authority as supervisor, it needs to come in parallel with governance changes," he added.

One EU official, who asked not be named, told reporters the commission wants the post to come with "direct supervisory powers".

"We are not looking at one particular model, we are looking at a mix and we will make a decision when the time comes," said the official, noting that they may separate the task over different sectors.

The package aims to pile pressure on EU states to tackle money laundering more seriously, and to implement existing EU-wide rules. Only one percent of €100bn in profits generated annually by organised crime is confiscated.

Lax EU states

Several EU states are known to be weak on the issue.

The European Commission in 2018 took Greece, Ireland and Romania to the European Court of Justice for failing to implement the EU's 4th Anti-Money Laundering Directive.

The directive, for example, sought to create greater transparency on who owns a company. Such directives must be transposed and adapted into national law.

An updated version of the directive, known as EU's 5th Anti-Money Laundering Directive, has since landed other EU states in trouble.

In February, the commission sent out warning letters to Cyprus, Hungary, the Netherlands, Portugal, Romania, Slovakia, Slovenia and Spain.

All had failed to inform the commission on whether they had transposed the latest directive into national law.

"We will soon launch infringement procedures against countries which have only notified partial transpositions," warned Dombrovskis.

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