EU urges reforms against multi-billion-euro flow of dirty money


The European Commission said on Wednesday more should be done to counter the multi-billion-euro flow of dirty money in the European Union as major shortcomings have emerged in the way banks and governments handle the issue.

After a spate of money-laundering scandals at several lenders in the 28-country bloc, the EU reviewed existing rules and practices to identify the main shortfalls as well as counter illegal flows that Europol, the EU law enforcement agency, estimates could exceed 200 billion euros ($222.7 billion) a year.

Under the review, whose results were published on Wednesday, the EU executive assessed 10 known cases of money laundering at banks which were reported mostly between 2012 and 2018.

The case studies included lenders that have been at the center of large scandals such as Danske Bank (DANSKE.CO), Denmark’s biggest bank, which has admitted to having handled through its Estonian branch 200 billion euros ($225 billion) of suspicious transactions between 2007 and 2015 – as reported by Reuters last month.

The review also encompassed lenders that have been shut because of money-laundering woes, like Latvia’s ABLV, Malta’s Pilatus Bank and Cyprus’ FBME Bank. In addition, it covered cases of financial crime that led to fines or financial settlements at some of EU’s largest banks, like Deutsche Bank (DBKGn.DE), the Dutch giant ING (INGA.AS), Finland-based Nordea (NDAFI.HE), and France’s Societe Generale (SOGN.PA).

Other reviewed banks were Malta’s Satabank, whose activities were frozen by domestic authorities last year, and Estonia’s Versobank, whose license was revoked last year amid a money-laundering investigation.

Brussels concluded that banks often did not comply with anti-money laundering requirements, while watchdogs in member states failed to prevent and effectively address the shortfalls.

“These deficiencies point to outstanding structural issues in the implementation of EU rules,” a Commission statement said.

It suggested making EU anti-money laundering rules – now often at variance in their application – directly binding on member states, and considering improvements in banking supervision.

“We don’t want any weak links in the EU that criminals could exploit,” EU justice commissioner Vera Jourova said.

The outgoing EU executive, whose five-year mandate will lapse at the end of October, also said that states should consider whether to give more powers to the EU to improve the oversight of financial crime at banks.

The commissioner in charge of financial services, Valdis Dombrovskis, has long refrained from proposing the establishment of an EU supervisory body on money laundering, as many states oppose the idea, fearing a loss of national powers.

The European Central Bank and the EU Parliament have instead urged the creation of a fully-fledged EU supervisory agency, on top of a minor reform of anti-money laundering powers at the watchdog European Banking Authority that was agreed this year.

As part of the same push to strengthen EU defenses against dirty money, the EBA warned national supervisors on Wednesday that money-laundering shortfalls could imperil banks’ financial stability, urging them to take more preventive measures.

In a separate report, also released on Wednesday, the Commission added professional football, free ports, and visa-for sale schemes to the list of sectors that are at higher risk of money laundering, in addition to traditionally risky areas like cash transfers, financial services, gambling and non-profit organizations.

The commission said that professional football’s lack of transparency has created “fertile ground for the use of illegal resources”.

It also said free ports, which legally enjoy privileged tax treatments within the EU, could be abused for trade of counterfeited goods, money laundering and other crime if no sufficient checks are carried out to identify the owners of companies using them.

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