EU action against money laundering in the banking sector to go under auditor scrutiny

epa05925260 Fake Euro notes hang on a washing line during a protest action against money laundering in front of the Parliament offices in Berlin, Germany, 24 April 2017. Various associations call for an improvement in the law as they demonstrate before the finance committee debates on the implementation of the European guidelines on money laundery. According to them the German Federal law is lax on tax evasion and corruption. EPA/FELIPE TRUEBA

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The scale of money laundering is difficult to assess, but it is considered to be significant. The United Nations Office on Drugs and Crime (UNODC) estimates that between 2 and 5% of global GDP is laundered each year. That’s between EUR 715 billion and 1.87 trillion each year.

With a number of banking sector scandals affecting Europe in the past years, concerns have been raised that despite tougher legislation, this criminal activity remains at worrying levels. In this context, the European Court of Auditors (ECA) has started an audit to examine the Union’s efforts to tackle the laundering of dirty money, focusing specifically on the banking sector.

The EU’s anti-money laundering (AML) directive has been in place since 1991, and has been updated on four occasions – most recently in 2018. The Commission, the key player at EU level, has the role of developing and enforcing AML rules in close cooperation with the Member States.

This year the European Banking Authority (EBA) took on the tasks of leading, coordinating and monitoring the EU financial sector’s fight against money laundering. It is the responsibility of the Member States to apply and enforce the EU’s AML rules through national legislation, and to prosecute money laundering offences.

Within Europe, Europol estimates the value of suspicious transactions at around 1.3 % of EU GDP.
“Money laundering is increasingly a serious global threat, with criminals often seeking to launder money where controls are weakest, often far from the source of the funds”, says Mihails Kozlovs, the member of the European Court of Auditors responsible for the audit.

“Given the enormous scale of this criminal practice, including in the EU, and a number of recent high-profile scandals involving banks, we have decided to audit the effectiveness of the EU’s action in the fight against money laundering in the banking sector”.

Despite extensive international cooperation and increasingly sophisticated EU legislation, money laundering remains a huge policy challenge. The auditors will focus on the transfer of EU legislation into Member State law, how risks to the internal market are managed, co-ordination between national supervisors and EU bodies, and the EU’s action to remedy breaches of its AML law at national level.

The fieldwork for this audit will address the European Commission’s Directorate‑General for Financial Stability, Financial Services and Capital Markets Union, the EBA
and the European Central Bank.

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