Major banks or financial institutions in more than 15 countries in the European Union (EU) have been hit in recent years by revelations involving violations of anti–money laundering (AML) laws. These cases have underlined the serious shortcomings of the European Union’s AML regime. AML supervision of banks and other firms rests largely with the national authorities of individual EU member states, in increasing tension with the legal framework for centralized prudential supervision within the euro area and the European single market. The system depends heavily on small, lower-capacity jurisdictions to provide the first line of defense against illicit financial practices, encouraging illicit actors to seek out weak links. The result is an erosion of supervisory effectiveness in those member states where money launderers concentrate their activity, undermining the integrity of the entire European system.
This study recommends the creation of a European AML Authority that would supervise banks, other financial institutions, and nonfinancial firms for AML purposes. The new agency should have high standards of governance and independence, publish all of its decisions, and be empowered to impose sufficiently large fines to deter malpractice.