This article was written by Gürcan Avcı, the Regulatory Intelligence Advisor of Sanction Scanner.
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The Debate Between ECB and EBA on AML Regulations
The EBA's appeal is clear. The era of the interpretation of European legislation to combat money laundering and financial crime must end. The EU needs to work to establish a uniform set of rules and that they are binding on all member states. Only in this way can money laundering and terrorist financing be effectively combated. This is the content of the opinion of the European Banking Authority (EBA) addressed to the European Commission and published last Thursday, 10 September.
Furthermore, the EBA proposes to extend the scope of the same rules for banks to include other intermediaries such as payment institutions and electronic money institutions. Over the years, all anti-money laundering directives (including Directive 2018/1673- VI Directive) have been issued from Brussels, but in the EBA opinion, they are not sufficient. Instead, it is necessary to issue Regulations which - by their nature - are mandatory and directly applicable while the Directives can be interpreted to integrate and transpose them into national legislation. This causes:
- the approach (through the Directives) is different in the various Member States;
- international economic-financial crime takes advantage of the differences and possible loopholes.
This puts a strain on European citizens' confidence in the financial system, and, clearly, the EU cannot remain helpless. The recent and striking example concerns the Danske Bank branch in Estonia. Unfortunately, the money laundering signals were not intercepted by the various Supervisory Authorities who had set the controls and the general approach in a different way. The flow of doubtful payments made between 2007 and 2015 amounts to approximately Euro 200 billion, many of these payments are "suspect." The ING agreement with the Dutch authority also contributed to the EBA's "squeeze." Finally, a real scandal - for the EU - was the American authorities' discovery of the river of Russian money laundering through Latvian banks.
European Economic Security
Uniform and binding rules would ensure that cooperation and information exchange within the European single market become the rule and are not - as now - an exception, effectively paving the way for the effective and efficient functioning of a supervisory and monitoring European authority level.
The establishment of a European supervisory and monitoring authority dedicated to economic and financial crime is also the approach advocated by European finance ministers who favor a structure similar to the ECB model for the supervision of banks' financial soundness (Single Supervision Mechanism-SSM).
A cross - border approach is desirable where banks, law enforcement agencies, and prosecutors work together and complemented by the supervision of a "mechanism" that covers the whole of the EU, similar to what happens for monitoring the financial strength of European banks through the Single Supervisory Mechanism - SSM or Single Supervisory Mechanism set up by the ECB itself.