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Until recently, the question of who is in charge of cracking down on money laundering in Europe should arguably have been answered with: ‘the US’. After all, it has been the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that has acted as the sheriff in terms of discovering and penalising major scandals among European banks failing to live up to their anti-money laundering and counter-terrorism financing requirements in recent years.
These have included investigations into the Estonian branch of Danske Bank for laundering no less than €200 billion over the course of a decade and several probes into Deutsche Bank, including for its implication in a laundromat scheme that enabled the laundering of another $20-80 billion (many details of which only became known through the FinCEN Files leak), in both cases out of Russia.
But this might be about to change. The European Union has belatedly woken up to the challenge and has proposed legislation which effectively strips the European Banking Authority (EBA) of its few anti-money laundering powers, to the benefit of a proper EU-wide authority – a step which had long been called for by MEPs and outside observers. With the zeal of a convert, the new Anti-Money Laundering Authority (AMLA) is now supposed to be established by 1 January 2023 already, although it is only expected to be operational by the beginning of 2024, to be fully staffed by 2025, and to directly supervise financial institutions as of 2026. As a result, a number of key questions remain.
Why now?
Debates about centralising capacities to fight money laundering at the European level are at least as old and contentious as those around Europe’s economic and monetary union. When the euro was set to be introduced in the late-1990s, Germany in particular became one of the holdouts who staunchly opposed progress in the area of anti-money laundering, on the spurious grounds that it would force the German state to interfere with its independent judiciary. In reality, according to participants at the time, it seemed that policy-makers rather sought to protect an industry of legal and accounting professionals who benefitted greatly from lucrative financial activities that enabled money laundering (professionals which the Council of Europe’s Moneyval committee nowadays refers to as ‘gatekeepers’ and the US House of Representatives as ‘enablers’).
Why and how (and perhaps even whether) such long-standing opposition has finally been overcome is a pertinent question for future research. For now, we may take ‘comfort’ with the functionalist explanation that the sheer scale of the problem, and the failures to resolve it, have become plain for all to see: according to one recent report, 90% of the biggest European banks have been found culpable of money laundering activities in the past decade.
One root cause of the current malaise has been the patchy transposition and enforcement of previous anti-money laundering directives on behalf of EU member states and the leeway they were given by the European Commission, which has resulted in a fragmented regulatory landscape marked by a critical lack of coordination. The new authority will be expected to rectify some of these shortcomings.
What will it do?
The current legislative proposals suggest at least three main functions for the new authority: the harmonisation of supervisory practices in both the financial and non-financial sectors; the coordination of financial intelligence units (FIUs) and other institutions across member states; and, most importantly perhaps, the direct supervision of high-risk and cross-border financial entities.
However, the list of possible tasks and responsibilities appears to be growing by the year, now also encompassing the supervision of crypto assets and perhaps even the enforcement of economic sanctions related to the war in Ukraine. All of this raises immediate follow-up questions, including how AMLA’s relationships with existing national and international authorities will be structured, which risks it will prioritize, and, above all, how many and which entities it will directly supervise. Moreover, the exact set of functions that AMLA is ultimately expected to fulfil will (or at least should) influence the upcoming battles over finding an adequate home for the authority, which are about to kick off in earnest....
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