The European Court of Auditors announced on Thursday that it will start an audit of EU’s fight against money laundering in the banking sector. The new audit follows the European Commission’s recent action plan on preventing money laundering and terrorism financing.
In an audit preview outlining the current legal framework and the roles of member states and the EU in fighting money laundering, the European Court of Auditors (ECA) writes that there is a renewed policy focus in EU on fighting money laundering to preserve the integrity of the internal market and the stability of the EU financial system.
Against the background of banking scandals in some EU member states, the European Commission adopted in July 2019 a Communication on improving implementation of EU’s regulatory framework on anti-money laundering and countering the financing of terrorism.
On 7 May 2020, the European Commission adopted an action plan for a comprehensive EU policy preventing money laundering and terrorism financing.
“Money laundering is increasingly a serious global threat, with criminals often seeking to launder money where controls are weakest, often far from the source of the funds”, says Mihails Kozlovs, the ECA member responsible for the audit (11 June).
“Given the enormous scale of this criminal practice, including in the EU, and a number of recent high-profile scandals involving banks, we have decided to audit the effectiveness of the EU’s action in the fight against money laundering in the banking sector”.
Money laundering is the practice of disguising the illegal origin of criminal proceeds. It is difficult to estimate the scale of money laundering, because by its very nature the activity is not disclosed unless detected.
The UN Office on Drugs and Crime estimates that the equivalent of 2.7 % of the world’s GDP is laundered each year. Within Europe, Europol, the EU law enforcement agency, estimates the value of suspicious transactions in the hundreds of billions of euros – the equivalent of 1.3 % of the EU’s GDP in 2014.
The ECA audit will focus on the transposition of EU legislation in member state law, the management of risks to the internal market, coordination among national and EU supervisory bodies, and the EU’s action to remedy breaches of its anti-money laundering law at national level. The audit will be concluded in the first half of 2021 and might influence new EU measures.
Currently it is up to each member state to individually supervise EU rules in this area and as a result, gaps can develop in how the rules are supervised. According to its recent action plan, the Commission will propose to set up an EU-level supervisor in the first quarter of 2021. To close loopholes in the rules, a single EU rulebook will also be proposed.