The increased dissatisfaction with the European Banking Authority’s (EBA) performance as the anti‑money laundering (AML) supervisor of banks’ national AML supervisors has gained momentum in light of recent money laundering scandals (namely that of Danske Bank). Such discontentment has led to calls by the bloc’s finance ministers for an “alternative” pan-EU “independent” authority with an explicit AML supervisory mandate and a “firm” approach to enforcement.
On 8 November 2019, six of the EU’s finance ministers, including those of France, Germany and Italy, published a joint paper on a proposal for a European Supervisory mechanism for money laundering/ terrorist financing (the Paper). This Paper provides a guide for the European Commission with regards to the framework for revised EU AML supervision to reduce the potential for delay caused by technical deliberations.
The most notable takeaway points of the Paper are set out below:
- The EBA’s current role as an EU‑level “supervisor of supervisors” in respect of AML oversight has often been shown to result in action which is “too late.” This delay in enforcement action was highlighted by Bruegel (a European think tank whose membership includes EU Member State governments, international corporations and institutions). The Paper therefore advocates for the introduction of an EU entity with a “direct” AML supervisory mandate.
- Such a supervisory body should be given the powers to enforce sanctions upon non-compliant firms, such as the imposition of fines or further business restrictions, which the EBA currently lacks despite recent strengthening of its AML duties.
- The Paper further advocates for the supervisory entity to be one which would exhibit authoritative behaviours as well as being politically independent – factors which in the view of the authors would encourage more aggressive supervision and consequently greater deterrence.
- It was suggested that the funding for such a body would stem from a levy on the financial industry, separate from the general budget of the EU, and which would be subject to EU parliamentary scrutiny. The Paper recommended staffing to be between 500 and 1,000 individuals, with the inclusion of country desks to enable proper communication with the judiciary and law enforcement communities in each Member State.
- By way of a timeline, the Paper proposes that the European Commission delivers a proposal on the potential new supervisory body by August 2020, at which point legislative discussions will commence spanning some 18 months, with the transfer of supervisory authority theoretically taking place in the first half of 2024.
Following the Paper, consensus was reached among all finance ministers of EU Member States in their Economic and Financial Affairs Council (ECOFIN) meeting on 5 December, in which they “invite[d] the [European] Commission to explore…conferring certain responsibilities and powers for AML supervision to a Union body with an independent structure and direct powers” and asked the Commission “to present legislative proposals in that regard in parallel to efforts to achieve a higher level of harmonisation through an AML regulation.”
The specific implications of any new pan-EU AML supervisory body in relation to compliance procedures of banks and their subsequent costs is yet to be determined. It is likely that the European Commission will consult on this matter during Q1 and the first half of Q2 this year, with the subsequent publication of their proposal during the latter half of Q2 or in any case, by August 2020 (some nine months following the December ECOFIN conclusions). It is thought that any further delay would likely risk losing the current momentum for reform in this area.