BRUSSELS
(Reuters) - European Union governments are considering new rules to counter
money laundering after alleged wrongdoing at two banks in smaller states of the
bloc flagged risks to financial stability, according to officials and an EU
document.
The
possible move follows the collapse of Latvian bank ABLV in February and the
freezing of operations at Malta’s Pilatus Bank in March after allegations of
money laundering.
In
both cases, the alleged wrongdoing was exposed by U.S. authorities and not by
EU watchdogs — a situation that the head of euro zone banking supervision,
Daniele Nouy, said was “very embarrassing” as it showed weaknesses in European
oversight.
European
finance ministers discussed how to strengthen the EU oversight at an informal
meeting in April and are likely to address the topic again in regular monthly
meetings later on Thursday and on Friday, as part of discussions on banking
rules reform, three EU officials told Reuters.
“EU
states agree that the existing anti-money laundering provisions are not
sufficient,” one of the officials said, reporting discussions held by EU
states’ envoys last week to prepare this week’s meeting of finance ministers.
Banks
are free to move capital across EU states and beyond, but checks on money
laundering and other financial crimes remain largely a national competence — a
mismatch that EU authorities say could hamper controls and create financial
stability risks.
The
recent banking troubles in smaller member states have strengthened the arm of
those who want to enhance EU oversight powers, overcoming long-standing
resistance in some capitals to relinquish national competence on this.
Some
states are calling for a new body to be set up to counter money laundering at
EU level, while others favor the idea of giving more power to one of the
existing EU financial regulators, like the European Banking Authority.
A
less bold option would entail a tighter application of existing anti-money
laundering rules, which have been overhauled several times in past years, with
the latest reform due to be applied by 2020, officials said.
One
of the options on the table could be agreed upon before an EU leaders’ summit
in December, officials said.
BANK
LICENSE
The
talks follow a letter sent by the EU Commission to the bloc’s financial
regulators in which the EU executive urged better cooperation against money
laundering to avoid “serious detrimental effects on the financial soundness of
individual institutions,” the document seen by Reuters said.
EBA
and the European Central Bank declined to comment on the letter.
The
Commission urged that EU powers to revoke banking license in case of money
laundering concerns be clarified.
EU
rules give the ECB the role of granting and withdrawing banking license in the
euro zone, but do not give Frankfurt a clear mandate to prevent money
laundering, which remains the job of domestic supervisors.
These
limits were evident in the Pilatus case. The Maltese bank had for long been a
concern for euro zone supervisors, an ECB official told Reuters. But it
maintained its license.
Maltese
authorities froze the bank’s accounts and assets only after Pilatus’ Iranian
chairman was arrested in the United States under charges of money laundering
and bank fraud.