Following a number of exchanges with the European Parliament and a request from the Council in December 2018, the European Commission has analyzed ten recent publicly known cases of money laundering in EU banks to provide an analysis of some of the current shortcomings as well as outline a possible way forward, the Estonian representation of the European Commission said.

It appears from the report that banks lacked the right internal mechanisms to prevent money laundering and did not align their anti-money laundering and counterterrorism financing policies when they had risky business models. The findings also highlighted a lack of coordination between such policies, either at the level of individual entities or at group level.

It was also found that national authorities responded with significant differences in terms of the timeliness and effectiveness of their supervisory actions. There were major divergences in terms of prioritization, resources, expertise and available tools.

More particularly with respect to the supervision of a banking group, the supervisors had a tendency to rely excessively on the anti-money laundering framework of host member states, and this impinged on the effectiveness of supervisory actions in cross-border cases at the EU level. In addition, the division of responsibilities led to ineffective cooperation between anti-money laundering authorities, prudential authorities, financial intelligence units and law enforcement authorities.

These deficiencies point to outstanding structural issues in the implementation of EU rules, which have been addressed only in part. Regulatory and supervisory fragmentation, coupled with the diversity of tasks, powers and tools available to public authorities, create weaknesses in the implementation of EU rules, it appears from the report.

Shortcomings in anti-money laundering policies and supervision are more prominent in cross-border situations, both within the EU and in relation to non-EU countries. While significant actions have been taken by banks and supervisors, more remains to be done. There is, for instance, a need for further harmonization across member states, as well as strengthened supervision.

There is also a need for reinforced cooperation between financial intelligence units. In the report, the European Commission identified the following issues: access by financial intelligence units to information as due to their different status, powers, and organization, some financial intelligence units are not able to access and share relevant information; information sharing between financial intelligence units remains insufficient and is often too slow; IT tools as financial intelligence units also sometimes lack the proper IT tools to efficiently import and export information to or from FIU.net; and limited scope of the EU Financial Intelligence Units' Platform, which cannot produce legally binding templates, guidelines and standards.

Commission adopts communication, reports

The European Commission on Wednesday adopted a communication and four reports that will support European and national authorities in better addressing money laundering and terrorist financing risks.

The reports stress the need for their full implementation while underlining that a number of structural shortcomings in the implementation of the Union's anti-money laundering and counterterrorist financing rules still need to be addressed. Wednesday's package will serve as a basis for future policy choices on how to further strengthen the EU anti-money laundering framework.

Following the uncovering of several money laundering cases in 2018, the European Commission in May 2018 set up a joint working group together with the European supervisory authorities and the European Central Bank.

On the basis of the working group's recommendations, in September 2018, the European Commission issued a communication on strengthening the anti-money laundering and prudential frameworks and new rules to strengthen the role of the European Banking Authority. This led to the reinforcement of the anti-money laundering and terrorist financing dimension in prudential banking legislation through the adoption of the fifth Capital Requirements Directive in December 2018.

The fifth Anti-Money Laundering Directive will improve the powers of financial intelligence units, increase the transparency around beneficial ownership information, as well as regulate virtual currencies and pre-paid cards to better prevent terrorist financing. Member states are due to transpose the directive into national law by January 2020.

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