Money laundering failures signal policy headaches for new Commission

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In the twilight of its five-year administration, Jean-Claude Juncker’s Commission on Wednesday released a package of reports that reveal how and why the EU failed to prevent a slew of dirty money scandals in recent years.

Reports that show that many banks prioritized profit over customer checks, while national watchdogs were understaffed and distracted with the fallout of the 2008 financial crisis.

POLITICO reports that money laundering has proved a sensitive subject in the EU after big lenders in the Baltics, Denmark, the Netherlands, Malta and Sweden were caught up in dirty money drama.

Denmark’s largest lender, Danske Bank, for example, revealed last September that over 6,000 “non-resident” clients had funnelled some €200 billion through its Estonian branch between 2007 and 2015 — most of which was deemed suspicious.

The Danish case was scrutinized in Wednesday’s report together with other incidents at ABLV, Deutsche Bank, FBME Bank, ING, Nordea, Pilatus Bank, Satabank, Société Générale and Versobank between 2012 and 2018.

“I’m not afraid to say that Europe has one of the strongest money laundering rules in place,” the Commission’s justice chief, Věra Jourová, told reporters after unveiling the reports. “But then these rules need to be vigorously enforced.”

Currently around 1 percent of European wealth is involved in “suspect activity,” she continued, the equivalent of around €160 billion.

Addressing the shortfalls will likely need uniform money laundering laws across the bloc and a new EU supervisor to enforce them, Jourová and Commission Vice President Valdis Dombrovskis said.

“We hope this is going to be a priority for the next Commission and there will be a follow-up on this report,” Dombrovskis said.

Their calls and reports may ramp up the pressure on Commission President-elect Ursula von der Leyen, who is due to take office on November 1. So far, the German has made only one reference to money laundering in her political guidelines, saying “we need better supervision and a comprehensive policy to prevent loopholes.”

Money laundering is currently handled at the national level after governments decided against giving the European Central Bank any supervisory role.

The European Banking Federation in Brussels maintains that the “sector is fully committed in the fight against money laundering and financial crime,” according to Raymond Frenken, the association’s spokesman.

“For this fight to be effective, we need to reduce fragmentation in national approaches while at the same increasing cross-border cooperation in and outside the European Union,” he continued.

That could prove difficult, according to the Commission’s analysis.

The scandals show that interaction between watchdogs “proved to be clearly ineffective and prevented a proper understanding of the gravity of the situation or did not result in joint supervisory action,” one of the reports says.


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