Under the spotlight: EU action against money laundering in the banking sector

In the wake of a number of high-profile money laundering (ML) scandals in the banking sector, the European Court of Auditors (ECA) has announced an audit of the effectiveness of the EU’s efforts to combat ML in the banking sector (the ECA audit). The ECA audit will examine:

• how anti-money laundering (AML) risks are assessed and communicated to banks and national authorities involved in fighting ML;
• whether the available AML information for supervisory authorities is shared among the stakeholders at EU and member state level;
• the EU’s action to remedy breaches of EU AML law at national level; and
• the transfer of EU legislation into member state law.

As well as wanting to bolster public confidence in the integrity of the banking sector, the high cost of ML to the economy is another driver of the ECA audit. Suspicious transactions linked to ML amount to hundreds of billions of euros per year within the EU. Europol estimates the value of suspicious transactions at around 1.3% of EU GDP. Despite the EU having had a ML directive since 1991 – updated four times to strengthen controls and take account of new technology and ML typologies – the controls do not seem to have been sufficiently robust to thwart the efforts of money launderers.

In recent months, the EU has placed renewed emphasis on the fight against ML and the ECA audit is one concrete outworking of that. The publication in May 2020 of the Commission’s AML action plan is another. The aim of the action plan is to ensure the EU puts on a more unified front in the fight against ML. For more information on the action plan, see our summary.

The findings of the ECA audit are due to be published in the first half of 2021. The audit report will be worthy of close consideration as we anticipate its findings will inform future updates of the ML directive.

Despite extensive international cooperation and increasingly sophisticated EU legislation, money laundering remains a huge policy challenge.