It should replace the current anodyne and ineffective coordination of national agencies
The European Commission wants to prevent a repeat of the Danske Bank-style money-laundering disasters. It’s about time: three years ago the Danish bank admitted that some € 200 billion of suspicious transactions had passed virtually unchecked by its Estonian subsidiary. Despite some potential pitfalls, the new entity appears less toothless than it is now.
The package of bills introduced Tuesday addresses a real problem. Up to $ 2 trillion a year is laundered worldwide, according to United Nations estimates. The scandals that have rocked Scandinavia and the Baltic since 2018, unearthed mainly by American investigations, highlighted the inadequacy of national oversight in certain corners of the European Union.
The single anti-money laundering agency, known as AMLA, should replace the bland and often ineffective coordination of national financial crime watchdogs by resource-poor actors like the European Banking Authority. Financial agents will pay 75% of their fixed costs through a fee.
The new single regulator will have clear powers reminiscent of those of the powerful European Central Bank. You can directly monitor and inspect a list of yet-to-be-defined financial institutions that pose risks due to the nature of their business structure or their cross-border activities. It will also have the ability to impose fines of up to 10% of a target’s annual turnover: about $ 700 million for a lender like Danske, but several billion for big players like Banco Santander or BNP Paribas.
The plan is not perfect. The agency won’t be fully operational until 2026, giving criminals time to find solutions. By creating a distinction between EU-supervised actors and the rest, it could also create regulatory arbitrage and push terrorists and criminals to operate through less strictly policed entities. The package needs the blessing of the EU member states, so it could be diluted during political negotiations.
Still, it’s an improvement over the status quo. If the agency were given the flexibility to expand the list of entities it will oversee if necessary, that would be even better. Member States, for example, should consider expanding the agency’s network beyond financial services to include areas such as real estate or gaming. Either way, AMLA has at least the chance of having a reasonable effect.