EU is FAILING to stop money laundering — regulators issue warning after multiple scandals

This comes after recent scandals sparked fears the European Union was failing to crack down on illicit funds entering its banking system.

According to the Financial Times, EU financial supervisors have prepared a paper which said recent events had “exposed shortcomings” and “gaps” on how different national and EU authorities worked together to stop the flow of dirty money.

Findings have been revealed by a group of officials from regulators including the European Central Bank (ECB), European Banking Authority (EBA) and European Commission.

The report, sent to national governments and the European Parliament, has outlined a number of concerns that will raise fears in the bloc over money laundering. These include a lack of legal clarity on how different types of financial supervisors should work together, unclear arrangements for how information is shared between EU countries, and a lack of resources to ensure rules are being properly enforced.

The report also revealed “shortcomings with respect to co-operation of information sharing, both at domestic level between different authorities and across borders in other EU member states”.

It said that the EBA only had the equivalent of 1.8 full-time staff members working directly on money laundering and this only rises to 2.2 with the inclusion of sister authorities.

EBA Chairman Andrea Enria has backed the establishment of a new pan-European body to ensure carry out the necessary background checks and other ant-money laundering measures outlined in EU law. He told the Financial Times: “If you are in the single market, the strength of anti-money laundering controls can only be as high as the weakest link.

“So if you have a weak authority, then the criminal money may enter the single market.”

A range of suggested improvements to the worrying problems include establishing a “memorandum of understanding” on data sharing between the ECB.

Other options include a “mechanism” at EU level to better co-ordinate the work national supervisors or “centralisation of the AML supervision via an existing or a new Union body”, which would be able to enforce “harmonised rules and practices”. The criticisms follows a year of damaging revelations for the banking sector, with furious MEPs in March calling on eurozone officials to take stronger action following a number of money laundering scandals.

Versobank in Estonia had its licence withdrawn by the ECB because of serious breaches of EU anti-money laundering rules.

It followed similar breaches at Latvia’s ABLV Bank, while Malta’s Pilatus Bank and Estonia’s Danske Bank also faced sanctions over money laundering.

MEPs had urged the ECB to get tough on banks that broke rules and to consider taking monitoring and enforcement responsibilities away from the member states and European commission. Sven Giegold, financial and economic policy spokesman of the Greens/EFA group in the European Parliament said: «We have to protect the reputation of the banking union and finally clean up with money laundering across Europe.

“The ECB can no longer hide behind national anti-money laundering supervisors.

“The business models of all banks in the eurozone must be systematically checked for risks stemming from financial crime. The ECB already has the competence to do so.

“We are asking the ECB to draw up an action plan against financial crime fully exploiting its legal competences.

“The EU Commission must check whether the anti-money laundering authorities of the member states have fulfilled their obligation to prevent money laundering and, where necessary, initiate infringement proceedings.”