EU has a fragmented approach to countering money laundering and terrorist financing and fails to ensure a level playing field in the member states, according to a new special audit report with focus on the banking sector and published on Monday by the European Court of Auditors (ECA).
“EU-level weaknesses with regard to money laundering and terrorist financing need to be addressed, and the EU’s supervisory role significantly strengthened”, said Mihails Kozlovs, the Latvian ECA member responsible for the report at a press briefing (28 June). “Much more needs to be done to ensure that the EU law is implemented promptly and coherently.”
For a start, the EU should use regulations in preference to directives wherever possible, given the need for legislation to be implemented coherently at member state level, he added.
Money laundering is the practice of “legitimising” the proceeds of crime by filtering them into the regular economy to disguise their illegal origin. Within Europe, Europol estimates the value of suspicious transactions in the hundreds of billions of euros – at an equivalent of 1.3 % of the EU’s gross domestic product (GDP).
In an audit preview outlining the current legal framework and the roles of member states and the EU in fighting money laundering, the European Court of Auditors (ECA) writes that there is a renewed policy focus in EU on fighting money laundering to preserve the integrity of the internal market and the stability of the EU financial system.
Against the background of banking scandals in some EU member states, the European Commission adopted in July 2019 a Communication on improving implementation of EU’s regulatory framework on anti-money laundering (AML) and countering the financing of terrorism (CFT).
On 7 May 2020, the European Commission adopted an action plan for a comprehensive EU policy preventing money laundering and terrorism financing.
Currently it is up to each member state to individually supervise EU rules in this area and as a result, gaps can develop in how the rules are supervised. According to its recent action plan, the Commission will propose to set up an EU-level supervisor. To close loopholes in the rules, a single EU rulebook will also be proposed.
According to the new ECA audit, the most recent Eurostat figures show that over 75 % of suspicious transactions reported came from credit institutions in more than half of the EU member states.
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