After a recent series of money-laundering scandals in a number of Mediterranean and Baltic Member States, it was just a matter of time for the Commission to react with a legislative initiative. The European executive did so on 12 September via a proposal for a regulation announced by Commission President Jean-Claude Juncker himself in his 2018 State of the European Union (SotEU) speech in front of the European Parliament’s assembled members.
In the legislative proposal the Commission refrains from creating from scratch a new European agency or authority specialized in the fight against money-laundering and terrorist financing. With the end of the mandate of the European Parliament and the European Commission in sight, such a proposal would have been adopted in a best-case scenario in 2020. The Commission preferred to show EU citizens that it could react fast. It chose to upgrade the European Banking Authority with new AML-TF powers. A clever move as all three European Supervisory Authorities (ESAs) are already under revision for a number of other empowerments and structural changes. Adding AML powers to the mix would allow for a fast adoption of the newest proposal.
Concretely the Commission proposes to equip the EBA with the power to collect information on weaknesses identified in the processes and procedures, governance and business models of financial institutions across the industry to prevent money-laundering and terrorist financing as well as on relevant measures taken by competent authorities. The proposal also highlights the significance of conducting reviews of competent authorities as well as risk assessment exercises to test the authorities’ strategies and means. The EBA would also play a role in cooperating and liaising with third country counterparts. In the EU, the coordination and cooperation would be to take place in an AML Committee that would be an integral part of the EBA.
The EBA would also have the power to request national competent authorities to initiate investigations in the case of indications of material breaches of relevant EU law. On the breach of Union law and on binding mediation, the EBA would under very specific circumstances be authorized to take individual decisions addressed to financial sector operators.
The proposal is currently making its way in parallel through the European Parliament and the Council. In the latter Minsters had a first discussion on the issue and works are ongoing. In the European Parliament support has been voiced for the general idea and its inclusion into the ESA review process. MEPs also had the opportunity to submit amendments on the AML part although for the rest of the ESA review the deadline had expired already at the end of August.
Although traditionally a matter for national authorities, the fight against money-laundering is about to start moving to the European level. Not today, not tomorrow. But a process has been set in motion and its final destination is unclear yet.
By Antoine Kremer, ABBL & ALFI Head of European Affairs