The European Commission has put forward a strategy designed to better combat money laundering and terrorist financing in the EU. The measures – a communication setting out the Commission’s broader anti-money laundering strategy and a legislative proposal – were announced in parallel with President Jean-Claude Juncker's State of the Union address on 12 September 2018. One of the objectives of the proposals is to reinforce the role of the European Banking Authority (EBA) in anti-money laundering supervision of the EU financial sector.

Stronger role for the EBA

The proposals come on the heels of a number of recent instances of money laundering in European banks. These cases have highlighted weaknesses in the system. They have also demonstrated that the rules are not always supervised and enforced as well as they should be. Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, said anti-money laundering supervision "has failed all too often in the EU".

To make sure that supervisors are cooperating and exchanging information, the EBA will set up and regularly update a central database of anti-money laundering information collected by national authorities. It will ensure the information is available to the relevant authorities throughout the EU. It will also be a contact point for international authorities for issues related to combatting money laundering in the financial sector where EU interests are at stake.

The proposals will also mean that the EBA can ensure that legislation is being properly enforced across all Member States. The EBA will have the power to request that national anti-money laundering supervisors start an investigation into any alleged breach of EU anti-money laundering rules. It will also have the power to suggest that these authorities carry out specific measures, such as imposing sanctions. Under certain circumstances, the EBA will also be able to impose binding decisions on financial institutions or anti-money laundering supervisors.

Tackling weaknesses

Under current EU law, banks and other financial institutions are required to comply with anti-money laundering rules. Although these rules are set at European level, it is up to national authorities to enforce them. The EU adopted its first anti-money laundering directive in 1990, in order to prevent the misuse of the financial system for the purpose of money laundering. Over the years, the legislation has been updated several times, to adapt to changing and increasing risks. Recent revisions of the legislation have strengthened the supervision of compliance with anti-money laundering rules in the EU. The fifth anti-money laundering directive, which Member States have to incorporate into national legislation by January 2020, will bring some major improvements. This includes for instance improvements in the practical ways in which anti-money laundering supervisors and the European Central Bank cooperate and exchange information.

However, there are a number of areas where supervision needs to be further improved. For instance, weaknesses in financial institutions' anti-money laundering risk management need to be better tackled, including from a prudential perspective. Poor cooperation and information sharing – both at national level, between prudential and anti-money laundering authorities, and between authorities in different EU Member States – also needs to be addressed, including through improved arrangements for cooperation between the relevant authorities.

The European Parliament and the Council have highlighted the importance of tackling money laundering in the context of completing the banking union. Money laundering can compromise the integrity and reputation of the European financial sector and undermine the stability of EU banks. The Parliament and Council will now discuss the proposal to strengthen the EBA’s role as well as the broader strategy for strengthening anti-money laundering supervision.

Read more on the communication from the Commission and the EU’s anti-money laundering legislation