The European Commission (EC) has recommended changes to banking supervision in response to a string of money laundering cases involving some of Europe’s largest banks.

Overseeing European banks will no longer be left entirely to national watchdogs, and the European Banking Authority (EBA) will gain additional powers to force national agencies to investigate suspected money laundering.

However, the commission has not as some had expected set up a new agency to tackle financial crime as called for by the European Central Bank.

Inadequate compliance

The commission has been prompted to act after the Netherland’s ING Bank admitted its long-term failure to prevent money laundering.

Banks in Denmark, Estonia, Latvia, Luxembourg, Malta and Spain – some linked to criminal inflows from countries including Russia, Iran and North Korea – have also been found to inadequately comply with anti-money laundering regulations.

Money laundering focus

The EBA has persistently complained that it has insufficient powers and too few staff to effectively monitor and combat money laundering at banks in the 28 European Union (EU) member states.

The EC’s response is that the authority should increase the number of staff focused on money laundering from two to twelve.

Greater powers

The EBA will also have greater powers to force national bank regulators to investigate suspected anti-money laundering breaches.

This responds to the authority’s long held view that not all of the EU’s regulators are competent. For example, the EBA found that the Maltese regulator had “failed to conduct an effective supervision” of Pilatus Bank, a lender with links to Iran. The bank was found to be involved in the funnelling of illicit funds through a series of front companies.

Categories: Trade Based Financial crimes News