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European Union Strengthens European Banking Authority’s AML Supervisory Power

On December 19, 2018, the European Union reached a preliminary deal that would strengthen the European Banking Authority’s (“EBA”) ability to combat money laundering.1 The measure is the latest in a series of steps the EU has taken to bolster anti-money laundering (“AML”) efforts in the wake of several high-profile money laundering scandals involving European banks.2

Under the terms of the deal, if finalized, the EBA will:

  • Collect information from national authorities relating to identified AML risks;3
  • Develop common standards for national supervisory authorities;4
  • Perform risk assessments on national authorities to evaluate their preparedness to address emerging AML risks;5
  • Facilitate cooperation with non-EU countries on cross-border cases;6 and
  • Directly address individual banks if national authorities refuse to take action.7

Lawmakers, who previously called for an “EU money-laundering cop,” are likely to welcome the changes.8 Many EU officials have criticized the lack of clarity regarding the EBA’s scope of authority and expressed a need for greater cooperation among national authorities.9

Granting the EBA authority to take action with respect to individual banks is a powerful supplement to the EU’s current AML regime. Currently, national authorities are wholly responsible for AML enforcement. Enforcement may be lax in countries with limited resources or where banking constitutes a large portion of the economy. Some national authorities have an incentive to look the other way so as to avoid harming their banking industry’s reputation.

The president of the European Council and European Parliament will need to negotiate a final agreement before the proposed changes take effect. Although the changes will likely simplify AML compliance in Europe, coordination among authorities will take time. In the meantime, companies doing business in Europe should continue to monitor the issue.

Visit our website to learn more about V&E’s Government Investigations & White Collar Criminal Defense practice. For more information, please contact Vinson & Elkins lawyer Jennifer Freel or Misty Howell.

1 Council of the European Union, Anti-money laundering: Council agrees position on reinforced supervision for banks (Dec. 12, 2018), https://www.consilium.europa.eu/en/press/press-releases/2018/12/19/anti-money-laundering-council-agrees-position-on-reinforced-supervision-for-banks/#.

2 For example, we recently discussed the EU’s adoption of its Sixth Directive on Combatting Money Laundering by Criminal Law. See The EU Ramps Up Anti-Money Laundering Efforts, with Big Penalties for Professionals and Companies, https://www.velaw.com/Insights/The-EU-Ramps-Up-Anti-Money-Laundering-Efforts-With-Big-Penalties-For-Professionals-and-Companies/.

3 Amended Proposal for a Regulation of the European Parliament and of the Council, Art. 11c, available at https://data.consilium.europa.eu/doc/document/ST-15569-2018-ADD-1/en/pdf.

Id. at Art. 11b.

Id. at Art. 11d.

Id.

Id. at Art. 9b.3(8).

8 Money-Laundering Scandals Prompt EU Rethink on Policing Banks, Bloomberg (Oct. 2, 2018), https://www.bloomberg.com/news/articles/2018-10-02/money-laundering-scandals-prompt-eu-rethink-on-policing-banks.

E.g. EU bank watchdog examining Danish handling of Danske, Reuters (Oct. 8, 2018), https://www.reuters.com/article/us-eu-danske-regulator/eu-bank-watchdog-examining-danish-handling-of-danske-idUSKCN1MI1J7.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.