POLICY BRIEF

crescendo in 2018 with the liquidation of ABLV Bank in 18-25 A Better , the reopening of criminal investigations into Danske Bank in Denmark and Estonia, and the imposition of the European largest AML fine in European history against ING Bank in the . Added together, these cases—large and Architecture to Fight small—have underlined the serious shortcomings of the ’s AML regime.2 Reports have pointed to Money Laundering a variety of bad actors as participants in these schemes, with linkages to organized crime, corruption, and North Korea Joshua Kirschenbaum and Nicolas Véron among others. The common thread, though, seems to be the December 2018 predominance of money originating in the former Soviet Union.

Joshua Kirschenbaum is a senior fellow at the German Marshall A major problem lies in the fact that AML supervi- Fund. Nicolas Véron is a senior fellow at the Peterson Institute sion of banks and other firms rests largely with the national for International Economics and Bruegel (Brussels). Véron authorities of individual EU member states, in increasing is also an independent nonexecutive director at the Global Trade Repository arm of the Depository Trust & Clearing tension with the legal framework for centralized prudential Corporation (DTCC), including DTCC Derivatives Repository supervision3 within the euro area and the European single plc (London), which is supervised by the European Securities and Markets Authority. market. This division of responsibilities is susceptible to political influence and regulatory capture. The system Authors’ Note: We are grateful for the insight and feedback of depends heavily on small, lower-capacity jurisdictions Jesper Berg, Sarah Boiteux, Per Callesen, Martin Chorzempa, Maria Demertzis, Panicos Demetriades, Juan Luis Díez to provide the first line of defense against illicit financial Gibson, Charlotte Dijkstra, Markus Forsman, Michael Gibson, practices, encouraging illicit actors to seek out weak links. Piers Haben, Michel Heijdra, Patrick Honohan, Jacob Funk Kirkegaard, Alexander Lehmann, Herwin Loman, Scott Marcus, The result is an erosion of supervisory effectiveness in those Sylvain Maréchal, Kadri Martin, Tobias Mackie, Priscille Merle, member states where money launderers concentrate their G. J. Michiels van Kessenich, Maria Nieto, Francesco Papadia, Thierry Philipponnat, Marcus Pleyer, Adam Posen, Sébastien activity, undermining the integrity of the entire European Raspiller, Elina Ribakova, Pawel Samecki, Dirk Schoenmaker, system. Elleonora Soares, Edwin (Ted) Truman, Liviu Voinea, Boris Senior European financial policymakers have acknowl- Vujčić, Harald Waiglein, Steve Weisman, Thomas Wieser, Guntram Wolff, Pierre Wunsch, Stavros Zenios, and others edged this unsatisfactory reality. Andrea Enria, chairman who have opted to remain anonymous. Our thanks do not of the European Banking Authority (EBA), has observed imply their endorsement of this paper, which represents only our views. that “if you are in the [EU] single market, the strength of anti–money laundering controls can only be as high as the © Peterson Institute for International Economics. All rights reserved.

Major banks or financial institutions in more than 15 coun- 2. Money laundering is the execution of a financial transac- tries in the European Union have been hit in recent years by tion involving the proceeds of a criminal act with the intent revelations involving violations of anti–money laundering to conceal the origin of the funds. An AML regime is a set of rules requiring financial institutions or other entities to main- (AML) laws. Many cases have involved staggering sums, tain controls and processes (an AML program) to detect and with billions of dollars laundered through accounts at one report such activity, to enable the government to discover, 1 track, prevent, or punish it. See Reuter and Truman (2004) single bank. The steady drumbeat of scandal reached a for a comprehensive and critical review of the US and global AML frameworks as they existed at that date. 3. Prudential supervision refers to oversight of the banking 1. See annex A for a list of recent AML violations and related system to ensure its safety and soundness, including moni- developments at EU banks. toring of capital ratios, lending practices, and governance.

1750 Massachusetts Avenue, NW | Washington, DC 20036-1903 USA | +1.202.328.9000 | www.piie.com PB 18-25 December 2018

weakest link.”4 Danièle Nouy, the top official for pruden- EXISTING AML SUPERVISORY FRAMEWORK tial supervision at the European Central Bank (ECB), has IN THE EUROPEAN UNION declared that it is “very embarrassing to depend on the The efforts of individual jurisdictions to combat money United States to do the [AML] job. This has to change…. laundering rest on three pillars. The first pillar consists We need a European institution that is implementing in a of administrative authorities, or AML supervisors, that thorough, deep, consistent fashion this [AML] legislation in examine supervised (“obliged”) entities for adherence to the the euro area.”5 jurisdiction’s AML regime and typically have the power to impose fines for noncompliance. The second pillar consists A major problem lies in the fact of financial intelligence units (FIUs), which collect, analyze, and disseminate the reporting that obliged entities submit that AML supervision of banks under applicable AML program requirements.6 The third and other firms rests largely pillar consists of law enforcement agencies and the justice with the national authorities of system, which investigate and prosecute individuals and individual EU member states. entities that commit criminal violations related to money laundering. The European Union first initiated AML legislation in Compounding these weaknesses is an increasingly men- the early 1990s, following AML developments in individual acing linkage between illicit finance and security threats, not member states. To date, there have been five successive least the risk of interference by Russia and other non-EU AML directives (AMLDs).7 AMLD4 has been in force since countries in EU domestic matters. European policymakers June 2015, with a deadline of June 26, 2017, for transposi- have accordingly stepped up their calls for greater capacity tion by member states. The transposition deadline for most to address such threats credibly and autonomously if need of AMLD5 is January 10, 2020. The successive AMLDs have be, without depending on the United States. generally followed, or even exceeded, recommendations set This Policy Brief outlines a path forward for the fight by the Financial Action Task Force (FATF), which sets AML against illicit finance with a stronger EU-level role in AML standards at the global level.8 AMLDs have expanded the supervision. Among the possible options, this study recom- scope of obliged entities subject to AML supervision, tight- mends the creation of a European AML Authority that would ened the definitions of suspicious activities and the processes supervise banks, other financial institutions, and nonfinan- to identify and report them, emphasized collecting ultimate cial firms for AML purposes. The new agency should have beneficial ownership information and adopting risk-based high standards of governance and independence, publish all approaches to compliance, and improved communication of its decisions, and be empowered to impose sufficiently between relevant authorities.9 large fines to deter malpractice. It would also act as a catalyst AML supervision in EU member states is conducted by for further harmonization of the AML legal regime across a wide range of national authorities. The AML supervisor of EU member states. a bank is generally but not always the same as its prudential Even radical reform of the European Union’s AML supervisory architecture would not address all the illicit finance challenges facing Europe. AML policy is difficult 6. There is one FIU for each jurisdiction. They participate in and will remain so. Even so, a better supervisory architecture a dedicated global body, the Egmont Group, formed in 1995 at a meeting in the eponymous building in Brussels. Egmont could make a material difference and significantly enhance has 156 members and established a permanent secretariat in the effectiveness of the European Union’s AML efforts. Toronto in 2008. 7. EU laws can be “directives,” framework laws that demand additional legislation (“transposition”) in each member state, or “regulations”—laws that are directly applicable in all mem- ber states with no need for national transposition. 8. The FATF was created at the G-7 Summit in 1989. Its per- manent Secretariat is hosted in Paris at the Organization for 4. Jim Brunsden, Caroline Binham, and Claire Jones, Economic Cooperation and Development (OECD). “Scandals expose weakness of EU’s dirty money fight, say watchdogs,” Financial Times, September 5, 2018. 9. The (EC 2018) observed, however, that even if the changes associated with the future imple- 5. Quoted from Ivan Camilleri, “Pilatus Bank incident ‘embar- mentation of AMLD5 are factored in, “cooperation between rassing,’ says European Central Bank supervisor,” Times prudential authorities and AML supervisors is also largely of Malta, March 28, 2018, and from Deslandes and Magnus dependent on the good faith and willingness of the relevant (2018). authorities.”

2 3 PB 18-25 December 2018

supervisor. In the United Kingdom, the AML supervisor Banking Union is the Financial Conduct Authority, and in Malta, Poland, In the euro area, the prudential supervision of banks has and Spain, the AML supervisor is the FIU, even though it been pooled at the supranational level within the ECB since may delegate certain tasks to the prudential supervisor. November 2014, as part of a broader policy integration project known as banking union.13 In this new framework, European Supervisory Authorities (ESAs) known as the Single Supervisory Mechanism (SSM), the Three European Supervisory Authorities (ESAs) were ECB works with all participating countries’ prudential established in 2011 to help coordinate financial regula- supervisory authorities (National Competent Authorities, or tion and foster supervisory convergence at the EU level: NCAs). The ECB makes all supervisory decisions directly for the European Banking Authority (EBA) in London (which the most systemically significant banks, including all those will soon move to Paris because of Brexit), the European with more than €30 billion in total assets. For the smaller Insurance and Occupational Pensions Authority (EIOPA) ones, the NCAs are in charge of many supervisory tasks, in Frankfurt, and the European Securities and Markets but the most important authorizations, such as those on Authority (ESMA) in Paris.10 banking licenses and significant changes of ownership, are The ESAs may investigate cases of “breaches of Union made centrally by the ECB. The banking union is currently law” in their respective sectors and even override the decisions limited to the 19 euro area countries, but it might expand of national authorities in some circumstances. However, in the future through the process of “close cooperation” that such investigations typically only happen after a large- allows non–euro area member states to join the banking scale prudential or AML supervisory failure and not more union voluntarily.14 proactively, which is why the EBA has described its breach- of-Union-law powers as “a rather blunt tool” (European Recent Policy Developments 11 Parliament 2018a). The EBA’s first-ever finding of breach In May 2018, the European Commission initiated joint of Union law for AML matters was reported in its July 2018 work on AML reform with the ECB and the three ESAs. 15 recommendation to the Maltese FIU following the case The first outcome of this work was a reflection paper sent to of Pilatus Bank (EBA 2018). Ongoing investigations are member states in late August 2018. This paper has not been underway at the time of writing in Denmark, Estonia, and made public by the EU institutions, but its text was posted Latvia. The EIOPA and ESMA have similar mandates to online by a member of the European Parliament.16 foster supervisory convergence in their respective nonbank On September 12, 2018, in his yearly State of the sectors. European Union address, European Commission President The Joint Committee that facilitates coordination Jean-Claude Juncker announced new measures to reinforce among the three ESAs has an AML subcommittee, known the effectiveness of AML enforcement, and on the same day as AMLC. The geographic scope of the ESAs’ authority the European Commission published proposals for corre- is the entire European single market, including the 28 sponding legislative amendments (EC 2018). If adopted, 12 EU member states and other members of the European these amendments would, among other things, confer Economic Area (EEA). additional authority on the EBA to request that national

13. See Schoenmaker and Véron (2016) for a description and early assessment of the ECB-led prudential supervision. 14. At the time of writing, several non-euro countries includ- 10. Contrary to what their name suggests, the ESAs currently ing Bulgaria, Denmark, and Sweden were at various stages of do not have direct supervisory authority over financial firms considering close cooperation. for either prudential or AML purposes. The ESMA alone has direct conduct-of-business supervisory authority over some 15. The European Commission’s letter of May 8, 2018 estab- limited categories of financial firms, such as credit rating lishing this work process refers to “a number of high profile agencies or trade repositories. incidents in recent months” as motivation for the endeavor. It was published by Politico and is available at https://www. 11. European Parliament, “Public Hearing: Combat of Money politico.eu/wp-content/uploads/2018/05/Letter-to-SSM- Laundering in the EU Banking System,” Committee on EBA-EIOPA-and-ESMA_signed.pdf. Financial Crimes, Tax Evasion and Tax Avoidance (TAX3), verbatim report, April 28, 2018. 16. “Reflection paper on possible elements of a Roadmap for seamless cooperation between Anti Money Laundering 12. Whether the United Kingdom will remain in the single and Prudential Supervisors in the European Union,” August market after its planned exit from the European Union in 31, 2018, available at https://sven-giegold.de/wp-content/ March 2019, and if so, for how long, is not known at the time uploads/2018/09/COM-Reflection-paper-on-elements-of-a- of writing. Roadmap-for-seamless-cooperation_Sept-2018.pdf.

2 3 PB 18-25 December 2018

AML supervisors investigate potential breaches and consider these events occurred in smaller euro area countries, where actions, and, in extreme cases of noncompliance by the resources for supervisory oversight are typically constrained. national authority, impose some direct decisions (though There are two important caveats, though, that suggest not fines) on individual firms. The amendments would caution about causality in that observation. First, major also empower the EBA to carry out periodic independent money laundering incidents at EU banks have not been reviews of AML issues and risk assessment exercises and to limited to smaller jurisdictions and have also occurred in collect data on AML supervision in the European Union. major financial centers such as London. Second, it is intrin- Unlike existing EBA competencies, this new authority sically hard to ascertain whether more publicized cases of would extend beyond the banking sector to other categories prominent money laundering reflect a greater frequency of of supervised financial firms. This would effectively deprive money laundering in a given jurisdiction, or, conversely, a EIOPA and ESMA of their existing AML roles, and as a greater willingness on the part of the jurisdiction’s authori- consequence, the AMLC would be integrated into the EBA. ties to root out problems and tackle illicit activity—or both. At the time of writing, the likelihood that these amend- ments will be adopted before the end of the current EU OPTIONS TO IMPROVE THE EU FRAMEWORK parliamentary term in the spring of 2019 is hard to assess. Given the difficulty of observing and quantifying money laundering, it is not self-evident that malpractice has actually European AML Enforcement in Practice become more widespread in Europe in recent years. It is also AML enforcement in the European Union is extremely possible that tolerance of money laundering has decreased heterogeneous, and disclosure practices vary consider- in the face of heightened awareness, possibly spurred by ably from one national authority to another. For example, such factors as: an assertive US stance, as illustrated by the AML fines have so far either been entirely anonymized or recent ABLV case; a perceived erosion of alignment between not published at all in Denmark, Germany, and Spain. In EU and US interests, paralleled by the rising perception France, Sweden, and the United Kingdom, by contrast, that Europe needs to develop its own security further; a fines are published and their subjects identified in most or greater sensitivity of the European Union and many of its all cases. Even in the latter circumstance, the publication member states to risks emanating from Russia; improve- format has often made it difficult to understand the exact ments brought about by the implementation of AMLD4; nature of the violations and the punitive or deterrent impact and the emergence of dedicated European authorities with a of a given fine. In principle, Article 60 of AMLD4 mandates mandate to oversee banking practices, first the EBA in 2011 that member states publish most decisions, including the and especially the SSM in 2014. The last of these might identity of the affected person or entity and the nature of have reduced overall European tolerance of supervisory the breach, but it is not clear that all member states comply failures, in contrast to an earlier era in which all relevant with this requirement, and the June 2017 deadline for authorities were national and many were inclined to defend transposition is too recent for a firm assessment. From national banking champions. discussions with practitioners conducted for this paper, the Irrespective of whether the problem is growing or not, UK Financial Conduct Authority appears to have a repu- however, it is evident that recent AML supervision in the tation for imposing higher fines for AML violations than European Union has been embarrassingly ineffective and most other national authorities, even though fines are often that deep reform is needed. The core problem is one of much higher still in the United States.17 Italy and Germany supervisory incentives and architecture. The coexistence of impose lower fines for AML violations, whereas France is an integrated, enforceable single financial market policy with somewhere in between. the national structures of AML supervision means that AML Recent AML cases for which some information is supervisory weakness in any one EU/EEA member state publicly available are summarized in annex A. Many of leads to that country becoming attractive for money laun- derers who can then use it to access the entire single market. This, in turn, creates a constituency in the country against 17. Very recently, the Dutch central bank has also moved strong AML enforcement, bringing together the criminals to impose large fines as documented in annex A. Article 59 of AMLD4 raised and harmonized the maximum amount of and their representatives, an array of service providers, and AML fines to “at least €5 million or 10 percent of the total potentially also government authorities that have failed in annual turnover” of the affected entity. As with the mandate their past AML supervisory duties. If sufficiently large, this to publish decisions, however, it is too soon to assess the ex- tent to which this new legislation has fostered convergence aggregate constituency might weigh on national political of actual behavior of national AML supervisors. processes and outcomes, even in cases that stop short of

4 5 PB 18-25 December 2018

outright government capture. The resulting pressures within the banking union, any national authority’s AML further weaken the AML supervisory framework. In sum, supervisory failure potentially compromises the integrity the combination of the EU/EEA single market and national of the entire prudential supervisory framework (and of the AML supervision generates national vicious circles, which licensing, qualifying holdings, and fit-and-proper review tend to be self-perpetuating rather than self-correcting.18 processes) to the extent that the latter relies on AML assess- In this “AML vicious circle” analytical framework, ments conducted by NCAs, as the case of ABLV and others money laundering and AML violations end up being have shown. Moreover, the likely future development of asymmetrically distributed in the European Union. Some financial technology and new business models for financial member states become weak links from which clients can intermediation and services that are inherently cross-border be served throughout the entire single market, for those is likely to exacerbate the tension between the single market activities for which a passporting regime exists. Not all framework and national AML supervision. member states need be weak links for money launderers to achieve their objectives. As long as at least one weak link Addressing the AML Vicious Circle: Two-Tier exists, the entire AML system is at risk of failure. A corollary versus Unitary Architecture To deal with the European Union’s core AML supervisory The combination of the EU/ problem, the incentives of AML supervisors should be aligned with the objective of effectively enforcing the AML EEA single market and national framework and fighting money laundering throughout the AML supervision generates entire single market. Breaking the vicious circle thus requires national vicious circles, which increasing EU-level supervision significantly beyond the tend to be self-perpetuating limited oversight that already exists. To do so, the European Union faces a choice between rather than self-correcting. two models. In an enhanced two-tier architecture that builds on the present situation, the ultimate responsibility for AML is that even if some EU member states have highly effec- supervision of individual firms would remain at the national tive AML frameworks, it does not disprove the assessment level, but an EU authority would be empowered to oversee that the AML problem is systemic and a matter of EU national AML supervisors (“supervisor of supervisors”).19 In supervisory architecture. Furthermore, it is not enough to a unitary architecture, a European agency would have ulti- eliminate a weak link—even if the vicious circle is broken in mate AML supervisory responsibility for firms, though this one member state, it is likely to reappear in another. Also, responsibility might be exercised through a network that not all weak-link countries need be smaller member states. involves national agencies and other European-level bodies. While insufficient administrative capacity may be a more The distinction between a two-tier and a unitary archi- acute problem in very small countries, undue influence from tecture has become a familiar one in matters of European certain special interests or other forms of institutional failure financial supervision over the past decade. Until 2010, can affect larger countries as well. The variety of patterns financial supervision was entirely national. In 2011, the of deficiencies in AML regimes in the European Union are creation of the three ESAs established a two-tier architec- illustrated in annex A. ture, encompassing prudential, conduct-of-business, and To be sure, in theory national AML authorities in the AML supervision of financial firms. The SSM, imple- other member states can monitor transactions originating mented in 2014, is an almost pure unitary system.20 In a in the weak-link countries and should be able to spot suspi- different area, the European Commission’s Directorate- cious activity. In practice, national authorities must priori- General for Competition embodies a unitary architecture tize undercapacity constraints and operate within a dense web of relationships and interdependencies. Furthermore,

18. Panicos Demetriades, a former governor of the Central 19. A two-tier architecture might also entail technical assis- Bank of , gave a vivid description of this vicious circle: tance from the central hub to the member states that need “The ‘political pressure’ on supervisors in small EU states help improving their national frameworks. with large offshore sectors, such as Cyprus, Estonia, Latvia, and Malta ‘is so great that it’s very hard for them to do the 20. Even for the smaller euro area banks, the ECB, not NCAs, right thing,’ Demetriades said.” Quoted in Andrew Rettman, is the ultimate decision maker for bank licensing and other “Cyprus: Russia’s EU weak link?” EUobserver, September 25, key authorization procedures, implying that it is much more 2018. than a mere “supervisor of supervisors.”

4 5 PB 18-25 December 2018

for the enforcement of competition policy in the European risk of confusion of responsibilities would be positive for Union.21 the legitimacy, accountability, and effectiveness of the Given the experience of the SSM, and taking into supervisory system. The reduced administrative friction account the differences between prudential and AML between different supervisory authorities would decrease supervision, a well-designed unitary architecture for AML overall operating costs and the risk of errors and omissions; supervision would be a practical proposition, as would a the efficiency of the system would be further enhanced by reinforced two-tier model such as the one that the European economies of scale, e.g. in terms of specialist expertise and Commission proposed in mid-September 2018 (EC 2018). skills. If implemented with the division of operational tasks To be sure, current AML legislation in the European Union between the national and European levels properly articu- is less harmonized than many other areas of financial legis- lated, a unitary system would not entail a loss of local knowl- lation, including the bank capital requirements that the edge or communication with supervised entities, national SSM enforces. But a European-level authority in charge of law enforcement agencies, or national FIUs. As Nouy has enforcing poorly harmonized national law is not an unprec- repeatedly argued in describing the SSM’s supervision of euro area banks, such arrangements provide “the best of both worlds: the experience of national supervisors, while Breaking the vicious circle requires also keeping some distance from individual banks” and increasing EU-level supervision the related risks of political interference.24 Once in place, a significantly beyond the limited unitary architecture also reduces political conflict between European and national authorities, a problem endemic in oversight that already exists. any two-tier system. Based on SSM experience since 2014, the supervisory edented situation; one example is the ECB’s fit-and-proper effectiveness of a European agency under a unitary architec- vetting of senior executives of the euro area’s significant ture should be significantly greater than that of the weaker banks. Furthermore, the experience of the SSM suggests member states’ AML supervisors, and not necessarily less that the establishment of a unitary European supervisory than the best current national practice. Conversely, in a mandate can spur the development of policy expertise two-tier system, even with forceful capacity at the hub, weak towards further regulatory harmonization. There is in prin- links will inevitably remain. As such, even to the extent that ciple no legal obstacle to a European agency imposing fines an effective two-tier system may be able to spot malpractice, or other restrictions on individual firms, as illustrated by the a unitary system is bound to do so at an earlier stage and existing practice of the SSM.22 In sum, the establishment of to be more proactive in taking action. For similar reasons, a unitary architecture need not await the creation of a single a unitary system would be more resilient than a two-tier rulebook for AML supervision; indeed, it can be expected to system against the possibility of erosion of the rule of law vastly accelerate its emergence.23 in a given member state, even though it would cover only A unitary architecture would entail a significantly AML supervision and not the FIU and law enforcement simpler system, essentially eliminating problems of infor- pillars of the AML framework. mation sharing between AML supervisors and allocation A unitary system would also greatly enhance and of tasks between home and host authorities. The reduced facilitate the European AML supervisor’s cooperation and information sharing with its counterparts in other juris- 21. The competition directorate-general, in turn, has del- dictions, first and foremost the United States. While this egated back to national competition authorities the handling would not deprive the US government of its ability to act of cases that lack a European dimension. unilaterally, e.g. by wielding its authority under Section 311 22. The ability of EU agencies such as the ESAs to make of the Uniting and Strengthening America by Providing decisions that are binding on individual firms has been es- tablished by the jurisprudence of the Court of Justice of the Appropriate Tools Required to Intercept and Obstruct European Union, including the Meroni judgment of June 13, 1958 (case 9-56) and the short-selling judgment of January 22, 2014 (case C-270/12). 23. There is no compelling case for introducing in AML supervision a divide similar to that in the SSM between larger 24. As paraphrased, for example, in the Council of the and smaller banks. This is because the most significant and European Union’s partial summary record of the meeting complex AML breaches often occur in comparatively small of the ECON Committee of the European Parliament held firms. Therefore, the EU principle of proportionality does in Brussels on November 3-4, 2014, available at http://data. not apply to AML supervision in the same way as it does to consilium.europa.eu/doc/document/ST-15376-2014-INIT/en/ prudential supervision. pdf.

6 7 PB 18-25 December 2018

Terrorism (USA PATRIOT) Act,25 it would likely help of obliged entities. The following analysis explores the main ensure that the use of such instruments would remain selec- advantages and shortcomings of seven different options: tive, as it appears to have been so far. At the global level, a n the ECB as single AML supervisor of euro area banks, unitary European architecture would reduce the complexity in addition to its existing role as prudential supervisor; of the Financial Action Task Force’s processes, as fewer n each ESA for its respective area: EBA for banks, EIOPA European participants would need to be directly involved. for insurers, and ESMA for other financial firms; Conversely, the main advantage of a two-tier architec- n EBA for all financial firms or even all obliged entities;28 ture is the more incremental nature of the change compared n ESMA for all financial firms or even all obliged entities; to the status quo. But to be effective, the central agency will n a joint venture of the three ESAs, building on the need to have unfettered access to information and strong existing AMLC; enforcement capabilities, powers which ultimately raise n a dedicated new agency, which may be referred to as the political challenges similar to those inherent in a unitary European AML Authority or EAMLA;29 and system.26 On balance, a unitary architecture for AML super- n a dedicated new agency with authority over only a vision in the European Union is feasible, simpler than a subset of member states, established through a process two-tier system, likely to be significantly more effective, and of enhanced cooperation. compliant with the principle of subsidiarity. There are parallels between the AML vicious circle and Option 7 is only a fallback option in case all others the bank-sovereign vicious circle that ultimately led to the lead to political deadlock. This is unlikely to be the case, establishment of Europe’s banking union. In both cases, the however, since Options 2-6 can be implemented through coexistence of the single market and euro area frameworks EU single market legislation (on the basis of Article 114 of with national banking supervision (respectively prudential the Treaty on the Functioning of the European Union, or and AML) led to perverse incentives for national authorities TFEU), which only requires approval by a qualified majority and ultimately to pervasive supervisory and crisis-manage- 30 27 of EU member states. ment failures. In both cases, the attempted solution was a Option 1, using the ECB as a single AML supervisor of two-tier architecture. The EBA was created in 2011 in the euro area banks, has immediate appeal given the generally midst of Europe’s decade-long banking system crisis, which solid performance of the ECB as a banking supervisor. But it was ultimately resolved thanks to the creation of the SSM. also has several drawbacks. Like Option 7, it does not cover Unlike the earlier institutional mismatch in the prudential the entire single market, leaving space for a continued AML space, Europe’s AML problem should be comprehensively vicious circle affecting countries outside the banking union tackled before it grows to a critical systemic dimension. area. This is a concern in any case, and particularly if, as appears possible at the time of writing, the United Kingdom Which Agency at the Hub? remains in the European single market for an undetermined If the European Union decides to move toward a unitary period of time following its planned exit from the European architecture to combat money laundering, then one or several European agencies needs to be empowered to that effect. The European AML supervisor(s) may be an existing 28. This option is hinted at as a long-term outcome by or new agency, or different agencies for different categories the European Commission Communication of September 12, 2018 (EC 2018). However, the European Commission’s legislative proposal of the same day stops short of Option 3, since it entails a two-tier and not a unitary architecture for 25. This authority, which the Treasury Department has dele- AML supervision. gated to its Financial Crimes Enforcement Network (FinCEN) unit, enables the US government to target administratively 29. A variant of Option 6, which is not explored further foreign financial institutions that it determines are “of pri- here, might be the creation of a dedicated new European mary money laundering concern” (an undefined term). It can Commission directorate-general, modelled on the existing condition, restrict, or cut off those institutions’ access to the framework for competition policy under the competition US financial system, including prohibiting the provision of US directorate-general, which would take over the AML super- correspondent accounts, effectively ending their ability to visory mandate directly. This would not be functionally very make international payments cleared in dollars. different from a new EU agency, but it would entail a differ- ent framework for governance, accountability, and funding. 26. The European Commission’s proposal of September 12, 2018 (EC 2018) stopped well short of that objective. 30. In the European Union, “qualified majority” refers to a specific supermajority of member states defined in the EU 27. Véron develops this analysis for prudential supervision treaties. Under the currently applicable Lisbon Treaty, it in “Banking Nationalism and the European Crisis,” speech at implies approval by at least 55 percent of member states the European Private Equity and Venture Capital Association (16 out of 28) representing at least 65 percent of the EU (EVCA) Annual Symposium in Istanbul, June 2013. population.

6 7 PB 18-25 December 2018

Union in late March 2019.31 Option 1 could also run into experience with cross-sectoral oversight.34 Option 5 (a joint legal difficulties.32 Furthermore, adding the AML task to venture of all three ESAs) has the advantage of being cross- the ECB’s already heavy burden of responsibilities might sectoral but may suffer from too much complexity and a centralize too much authority in a single institution, given deficit of accountability in the corresponding governance the comparatively fragile framework for general-purpose arrangements. executive authority and democratic scrutiny at the European The obvious drawback of Option 6 (EAMLA) is that level. a new agency would further complicate the EU financial Options 2, 3, 4, and 5 all build on the existing struc- regulatory landscape. But it would provide a straightforward tures of the three ESAs. Option 2, employing each ESA and cross-sectoral solution to the specific challenge of AML for its respective area, is the most straightforward but has supervision. It could also learn from the early experiences the drawback of entrenching fragmented AML supervi- of the three ESAs and other European bodies, including sion along sectoral lines. The drawbacks of such sectoral the SSM. The EAMLA could thus adopt an optimized fragmentation will likely become increasingly significant, governance and funding framework from the outset. This as future financial technologies may blur the boundaries model would have further potential advantages from the between subsectors of finance and correspondingly open standpoint of the “twin-peaks” vision—in which pruden- new avenues for regulatory arbitrage. tial and conduct-of-business supervision are separate—as Option 3, relying on the EBA, might be justified by the it would be separated from the prudential concerns of the fact that publicly identified AML failures have been particu- ESAs and the SSM. A separate agency might also be pref- larly prominent in the European banking sector, and that erable in terms of ring-fencing sensitive information about the EBA has been so far the most active of the three ESAs potentially criminal activity. in the AML field.33 But the EBA does not otherwise have experience with, or a mandate for, direct supervision, and it An Initial Blueprint for an EAMLA is unlikely to gain such authority in the future. Moreover, The creation of a new European AML Authority (Option 6) the members of the EBA’s Board of Supervisors are desig- emerges as the best response to the current challenges of nated by national prudential supervisory authorities, not all AML supervision in the European Union. EU leaders’ of which have AML duties, creating a potential governance current heightened awareness of AML challenges justifies an misalignment. Having the EBA supervise firms other than overhaul of the European Union’s AML supervisory archi- banks may create further awkward mismatches. tecture without delay. While enacting new legislation within By contrast, ESMA (Option 4) has existing direct the current European Parliament term (ending in May supervisory experience and is likely to gain more in the 2019) does not appear realistic, leaders could in principle future (e.g., over central counterparties). It also has more decide to proceed immediately with a mandate for the next European Commission to propose legislation accordingly in the second half of 2019. If so, one could realistically envisage supervisory 31. If the United Kingdom leaves the single market, it will be authority transferring to the EAMLA starting around late treated as a third country for AML purposes, as is currently 2022, allowing for one year’s legislative debate and two years the case with Switzerland. for institutional buildup and recruitment, which is signifi- 32. Option 1 would presumably be based on Article 127(6) cantly more than was the case for the ESAs or the SSM. TFEU, like the SSM, raising challenges of both procedure The transfer could itself be gradual to allow the new agency (unanimity) and legal robustness. It is not clear that the reference in Article 127(6) TFEU to “specific tasks […] con- to absorb lessons from early experience, e.g. starting with cerning policies relating to […] prudential supervision” can banks in 2022 and subsequently adding other categories of be understood as including AML supervision in addition to the prudential supervisory tasks already conferred on the obliged entities. Before 2022, the existing two-tier archi- ECB by the SSM regulation. It is also not clear that the ECB could be granted an AML supervisory mandate under an- other treaty article, e.g. Article 114 TFEU. Article 127(6) also specifically refers to “credit institutions and other financial 34. Furthermore, there is a scenario in which the ESMA institutions with the exception of insurance undertakings,” so could acquire some supervisory responsibilities in the future the sectoral scope beyond banks would be correspondingly over banks and insurers, if the European Union adopts a limited. “twin-peaks” vision for the long-term evolution of its gen- eral financial supervisory architecture, i.e. a separation of 33. The EBA’s existing capacity and experience should not prudential oversight from conduct-of-business supervision be exaggerated, however, since the August 2018 discussion (Schoenmaker and Véron 2018). A “twin peaks” financial paper states that its entire staff for AML tasks is fewer than supervisory framework asserts that prudential supervision two full-time equivalents. should be separated from supervision of conduct.

8 9 PB 18-25 December 2018

tecture would remain in place, possibly with the limited posed, let alone enforced, suggests policy discussions should enhancement proposed by the European Commission on follow a more delayed timetable. Given that experience, it September 12, 2018. makes sense to create a European AML supervisor ahead of The governance of the EAMLA should take into any attempt at, for example, an AML Regulation (AMLR) account the experience of the ESAs, of the SSM, and of the that would move EU law in that area closer to the vision of Single Resolution Board that was established in 2015–16 a single rulebook.37 The SSM experience argues in favor of to manage banking crises in the euro area. It should rely on such sequencing. a compact collective decision-making board of fewer than Similarly, supervisory integration should help increase 10 members, including the agency’s chair.35 All members of the size and consistency of AML fines and ensure the transparent publication of individual AML decisions. The The creation of a new European European Union should aim to impose fines with a genu- inely dissuasive impact and should expect detailed public AML Authority emerges as the announcements of all individual decisions containing the best response to the current name of the subject entity, the nature of the alleged AML challenges of AML supervision violations, and the size of the penalty. Whether the FIU pillar of Europe’s AML regime should in the European Union. also undergo supranational integration in the future is an open question. The creation of an EU-level FIU was recom- that board should be individually vetted by the European mended in a 2016 report (EU FIUs’ Platform 2016); it was Parliament, thus creating legitimacy and accountability. The also considered but ultimately rejected in the European agency’s funding should be through a levy directly collected Parliament discussion of AMLD538 and more recently from supervised entities, similar to the funding of the SSM. recommended by Latvia’s finance minister, among others.39 The steady-state size of EAMLA staff would depend Since the most notable recent AML cases in the European on how much of its supervisory work is delegated to other Union have tended to be concentrated in the banking sector bodies—other EU agencies such as the SSM (for banks), and linked to failures of AML supervision, AML supervi- or national AML supervisors, or both. The EAMLA would sory integration appears more urgent than a European FIU. need staff for policy work and rule drafting, similarly to the Establishing an EU FIU also appears comparatively more ESAs.36 For supervisory work, the EAMLA could rely on challenging from both political and technical perspectives, hybrid teams of its own staff and those of other supervi- given how the activities of FIUs are embedded in member sors for both regular and targeted examinations. Even so, to states’ specific arrangements for criminal justice, law be effective, the EAMLA could easily need a staff of several enforcement, and intelligence gathering and analysis. If the hundred, especially if, as might be desirable, it is granted creation of a European AML Authority is undertaken and AML supervisory authority over all categories of obliged succeeds, then the case for a European FIU might become entities including nonfinancial entities. more realistic than it is now.

Conclusion: Focus on AML Supervisory Integration First 37. An AMLR may or may not be needed to achieve maxi- Getting the supervisory architecture right is the current mum harmonization, which can also be pursued through central challenge of AML policy in the European Union, directives. Correspondingly, it is possible that the optimal but it is not the only one. The content of applicable AML steady state includes a combination of regulation(s) and directive(s), as is currently the case for the EU bank capital legislation might also be ripe for improvement. But the fact requirements legislation. No indepth investigation of the that AMLD5 was very recently enacted and is not yet trans- corresponding tradeoffs has been done in the preparation of this paper. 38. , “Won and Lost: Details of the Compromise 35. A larger body could be set up with every member state on the European Anti-Money Laundering Directive,” blog represented, but only for consultative purposes in the post, December 15, 2017. process of drafting new rules, not for individual supervisory decisions. 39. “Latvian Finance Minister Dana Reizniece-Ozola called for ‘the creation of a financial intelligence unit at the EU level 36. Under the Meroni and short-selling jurisprudence, the as the scope of combating money laundering and terrorism EAMLA is unlikely to be empowered as an autonomous rule- financing goes far beyond the supervision of the financial maker (beyond the issuance of non-binding opinions, guide- sector.’” Quoted in Alexander Weber, “Money-Laundering lines, and recommendations) but would draft binding techni- Scandals Prompt EU Rethink on Policing Banks,” Bloomberg, cal standards for approval by the European Commission. October 2, 2018.

8 9 PB 18-25 December 2018

REFERENCES Deslandes J., and M. Magnus. 2018. Regular Public hearing Kirschenbaum, Joshua. 2018. Latvian Banking: Recent Re- with Danièle Nouy, Chair of the ECB Supervisory Board: ECON forms, Sustainable Solutions. Alliance for Securing Democ- on 19 June 2018. Economic Governance Support Unit Briefing racy Brief No. 020 (May). Washington: German Marshall Fund (June). Brussels: European Parliament. of the United States. EBA (European Banking Authority). 2018. Recommendation Schoenmaker, Dirk, and Nicolas Véron, editors. 2016. Euro- to the Maltese Financial Intelligence Analysis Unit (FIAU) on pean Banking Supervision: The First Eighteen Months. Bruegel action necessary to comply with the Anti-Money Laundering Blueprint 25 (June). Brussels: Bruegel. and Countering Terrorism Financing Directive. July 11. London. Schoenmaker, Dirk, and Nicolas Véron. 2018 (forthcoming). A EU FIUs’ (Financial Intelligence Units) Platform. 2016. Mapping ‘Twin Peaks’ Vision for Europe. In The Cambridge Handbook of Exercise and Gap Analysis on FIU’s Powers and Obstacles for Twin Peaks Financial Regulation, ed. A. Godwin and A. Schmu- Obtaining and Exchanging Information. December 15. Brus- low. Cambridge: Cambridge University Press. sels: European Commission. Reuter, Peter, and Edwin M. Truman. 2004. Chasing Dirty EC (European Commission). 2018. Strengthening the Union Money: The Fight against Money Laundering. Washington: framework for prudential and anti-money laundering supervi- Peterson Institute for International Economics. sion for financial institutions. Communication COM(2018) 645 (September 12). Brussels.

© Peterson Institute for International Economics. All rights reserved. This publication has been subjected to a prepublication peer review intended to ensure analytical quality. The views expressed are those of the authors. This publication is part of the overall program of the Peterson Institute for International Economics, as endorsed by its Board of Directors, but it does not neces- sarily reflect the views of individual members of the Board or of the Institute’s staff or management. The Peterson Institute for International Economics is a private nonpartisan, nonprofit institution for rigorous, intellectually open, and indepth study and discussion of international economic policy. Its purpose is to identify and analyze important issues to make globalization beneficial and sustainable for the people of the United States and the world, and then to develop and communicate practical new approaches for dealing with them. Its work is funded by a highly diverse group of philanthropic foundations, private corporations, and interested individuals, as well as income on its capital fund. About 35 percent of the Institute’s resources in its latest fiscal year were provided by contributors from outside the United States. A list of all financial supporters is posted at https://piie.com/sites/default/files/supporters.pdf.

10 11 PB 18-25 December 2018

ANNEX A SELECTED BANK-RELATED ANTI–MONEY LAUNDERING (AML) DEVELOPMENTS IN THE EUROPEAN UNION Austria (covered by the Single Supervisory Mechanism—SSM) In 2018, Austria’s Financial Market Authority fined Raiffeisen Bank €2.7 million for AML violations, including beneficial ownership and customer due diligence failures. The Financial Market Authority also fined Hypo Vorarlberg Bank €414,000 for AML violations that year.

Cyprus (SSM) In 2018, the Central Bank of Cyprus (CBC) imposed a €715,000 fine on the Cyprus Development Bank for AML violations. Also in 2018, the CBC issued a circular previewing forthcoming regulations that will restrict the holding of accounts for shell companies.1 Similar fines were imposed in 2017 and 2016 against RCB Bank and Hellenic Bank. In 2014–15, the CBC initiated resolution and liquidation proceedings for FBME Bank and revoked its branch license.2 FBME had been the subject of a US Treasury Department action under Section 311 of the PATRIOT Act in 2014.3

Czechia (non-SSM) In 2016, the Czech National Bank revoked the license of ERB Bank, which it found lacked a functioning AML system.

Denmark (non-SSM) In 2018, Danish prosecutors announced a new probe into Danske Bank after the bank’s publication of an internal report that disclosed that over €200 billion in transactions flowed through its Estonian branch over a nine-year period, of which at least 40 percent was potentially suspicious. The Danish Financial Supervisory Authority (FSA) also announced a new investiga- tion, and the bank’s CEO resigned.4 In September 2018, at the European Commission’s request,5 the European Banking Authority (EBA) started a breach-of-Union-law preliminary enquiry into AML supervision of Danske Bank in Denmark and Estonia. In 2017, Danish prosecutors had fined the bank DKK 12.5 million following the receipt of a 2015 referral from the FSA.

Estonia (SSM) In 2018, prosecutors opened a criminal investigation into alleged illicit activity at the Estonian branch of Danske Bank.6 In September 2018, the EBA started a breach-of-Union-law enquiry into AML supervision of Danske Bank in Denmark and Estonia (see Denmark above). Also in 2018, the Estonian FSA announced that the European Central Bank had withdrawn the license of Versobank at its request.7

1. Elias Hazou, “Under the US cosh? The crackdown on money laundering,” Cyprus Mail, June 30, 2018. See also Joshua Kirschenbaum, “The Other ‘Cyprus Problem,’” German Marshall Fund Alliance for Securing Democracy blog, July 5, 2018. 2. FBME in Cyprus was a branch of FBME Bank Ltd, headquartered in Tanzania, but it conducted the bulk of the consolidated group’s activity. 3. Announcements available on the respective websites of FinCEN, of the CBC, and of the District Court. 4. Danish FSA memorandum and internal report, both available on Danske Bank’s website. See also Teis Jensen, “Under fire Danske bank faces fresh money laundering inquiry,” Reuters, September 20, 2018; Stine Jacobsen and Jacob Gronholt- Perdersen, “Denmark to investigate Danske Bank over money laundering allegations,” Reuters, August 6, 2018; and Danske Bank’s own announcement of the 2017 fine. 5. Tiina Astola, Director-General for Justice and Consumers, European Commission, “Request to investigate a possible breach of Union law under Article 17 of Regulation (EU) No 1093/2010,” letter to Andrea Enria, chairman of the European Banking Authority, September 21, 2018. 6. Teis Jensen, “Estonia to investigate Danske Bank over money laundering allegations,” Reuters, July 31, 2018. 7. See also Joshua Kirschenbaum, “Estonian Regulators and European Central Bank Move Forcefully Against Russian Money Laundering,” German Marshal Fund Alliance for Securing Democracy blog, March 30, 2018.

10 11 PB 18-25 December 2018

France (SSM) In 2017 and 2018, the Autorité de Contrôle Prudential et de Résolution (ACPR) fined two entities of the Crédit Mutuel group a total of €2.5 million, a member bank of the Crédit Agricole group €2 million, Société Générale €5 million, and BNP Paribas €10 million for AML violations, including failures related to the filing of suspicious transaction reports and the detection of suspicious activity.

Germany (SSM) Germany’s Federal Financial Supervisory Authority (BaFin) does not publish individual sanction decisions. According to press reports, BaFin fined Deutsche Bank €40 million for AML violations in 2015.8

Hungary (non-SSM) In 2018, the Hungarian National Bank fined MagNet Bank 47 million forint for a variety of shortcomings including AML violations. The 2018 penalty followed a 2014 AML fine against MagNet. Also in 2018, the Hungarian National Bank imposed an AML fine of 9.5 million forint against MKB Bank, which followed a 2016 fine for a variety of violations including those related to AML.

Ireland (SSM) In 2017, the Central Bank of Ireland fined the Bank of Ireland €3.1 million for AML violations, including the failure to file suspicious transaction reports.

Latvia (SSM)9 In 2016, the Financial and Capital Markets Commission (FCMC) imposed an AML fine against ABLV, and in 2018 ABLV was the subject of an action by the US Treasury Department under Section 311 of the PATRIOT Act and was subsequently liquidated. Then, at the European Commission’s request, the EBA started a breach-of-Union-law preliminary enquiry into AML supervision of ABLV. In 2017, the FCMC fined five banks—Baltikums Bank, Privatbank, Regional Investment Bank, Norvik Bank, and Rietumu Bank—for AML violations including violations related to activity involving North Korea.10 On the recommendation of the FCMC, the ECB in 2016 withdrew the license of Trasta Komercbanka on the grounds of capital adequacy problems and AML violations.

Luxembourg (SSM) In 2017, the Commission de Surveillance du Secteur Financier fined DNB SA, Nordea Bank SA, and local opera- tions of Crédit Agricole and Novo Banco for AML violations.11

Malta (SSM) In 2018, the ECB withdrew the license of Pilatus Bank upon the recommendation of Malta’s FSA. The EBA conducted a preliminary enquiry into the Pilatus case under its breach-of-Union-law authority and found “general and systematic shortcom- ings in the FIAU’s application of AMLD3” (EBA 2018).

Netherlands (SSM) In 2018, the Netherlands Public Prosecution Service fined ING €775 million for money laundering violations that facilitated illicit activity including bribery in Uzbekistan. The Dutch National Bank said in a letter to the finance minister that other

8. See Arno Schuetze and Jonathan Gould, “Bafin fines Deutsche Bank for anti-money laundering flaws: source,”Reuters , June 24, 2016. 9. A detailed analysis of recent AML-related developments in Latvia is provided in Kirschenbaum (2018). 10. Announcements available on FCMC’s website: “FCMC and ABLV Bank, AS signed administrative agreement, applying fine to Bank and issuing reprimand to board member,” press release, May 26, 2016; and “FCMC in collaboration with U.S. law en- forcement authorities identifies weaknesses and imposes monetary fines on three banks,” press release, June 27, 2017. 11. See Martine Huberty, “Panama Papers: Fines for 9 Financial Institutions,” Delano, December 21, 2017.

12 13 PB 18-25 December 2018

Dutch banks might also have inadequate AML controls.12 In 2017, the Fiscal Information and Investigation Service raided Trade Bank as part of an investigation into the bank’s failure to comply with suspicious activity reporting and customer due diligence obligations.13

Portugal (SSM) In 2016, the EBA liaised with the Bank of Portugal regarding its implementation of the qualifying holdings approval process in two instances in which a politically exposed Angolan purchased stakes in Banco BIC and the Bank of the Philippine Islands (BPI).14

Spain (SSM) In 2017, prosecutors started an investigation into suspected money laundering through the Madrid branch of the Industrial and Commercial Bank of China’s Luxembourg subsidiary.15 In 2016, the Supreme Court upheld a €1 million AML fine against Banco Santander imposed by Spain’s government in 2015.16

Sweden (non-SSM) In 2015, the Swedish FSA imposed AML fines against Nordea and Handelsbanken of SEK 50 million and SEK 35 million, respectively. Both banks were found to have committed violations related to nonresident customers, politically exposed persons, private banking, and correspondent banking.17

United Kingdom (non-SSM) In 2017, the UK Financial Conduct Authority (FCA) fined Deutsche Bank £163 million for AML violations related to $10 billion in securities “mirror trades.”18 In 2015, the FCA fined Barclays £72 million for inadequate AML controls related to a high-value transaction for politically exposed persons. The head of the UK National Crime Agency declared that “many hundreds of billions of pounds of criminal money is almost certainly laundered through UK banks and their subsidiaries each year.”19

12. See Joshua Kirschenbaum, “Europe Needs Money Laundering Penalties That Hurt,” German Marshall Fund Alliance for Securing Democracy blog, September 12, 2018; and Bart Meijer, “Dutch banks too lax on money laundering: central bank,” Reuters, September 25, 2018. 13. See Aleya Begum Lønsetteig, “Amsterdam Trade Bank under new money laundering investigation,” Global Trade Review, December 20, 2017. 14. See EBA letter to Ana Gomes, Member of the European Parliament, December 16, 2016. 15. See Angus Berwick, David Lague, and Jesús Aguado, “Spain probes ICBC’s European unit over money laundering,” Reuters, September 11, 2017. 16. See Paul Day and Angus Berwick, “Banco Santander fined 1 mln euros for failing to stop money laundering,” Reuters, November 28, 2016; and Reyes Rincón, “Multa de un millón de euros al Santander porque Banesto incumplio la ley contra el blanqueo,” El Pais, November 28, 2016. 17. See also Jonathan Boyd, “Swedish regulator fines, Nordea, Handelsbanken for AML failures,” Investment Europe, May 19, 2015. 18. Given the absence of disclosure by BaFin, it is impossible to know if this case is related to the German case also referred to in this annex. 19. Keith Bristow, “Transnational organized crime as a national security threat,” speech at George Washington University, January 2015.

12 13 PB 18-25 December 2018

Annex B Anti–money laundering (AML) supervisors for banks and financial intelligence units (FIUs) in EU Annex B Anti–money laundering (AML) supervisors for banks and financial intelligence units (FIUs) in EU and EEA countries and EEA countries (continued) Country AML supervisor for banks Financial Intelligence Unit* Financial Intelligence Unit setup Country AML supervisor for banks Financial Intelligence Unit* Financial Intelligence Unit setup Division of the Federal Police FIU of the National Crime Austria Financial Market Authority (FMA) Austrian FIU (A-FIU) Slovakia National Bank of Slovakia Unit of the Ministry of the Interior Force (Bundeskriminalamt) Agency (FSJ) Financial Services and Markets Belgian Financial Intelligence Agency supervised by the Office for Money Laundering Belgium Slovenia Bank of Slovenia Unit of the Ministry of Finance Authority (FSMA) Processing Unit (CTIF-CFI) Ministries of Justice and Finance Prevention (OMLP) Financial Intelligence Directorate, Executive Service of the Unit of the Commission for the Directorate within the national Bulgaria Bulgarian National Bank (BNB) State Agency for National Commission for the Prevention Prevention of Money Laundering and counterintelligence agency (SANS) Spain SEPBLAC Security (FID-SANS) of Money Laundering and Monetary Offences (CPBCIM) under Monetary Offences (SEPBLAC) the Ministry of Economic Affairs Anti–Money Laundering Independent unit within the Croatia Croatian National Bank (HNB) Office (AMLO) Ministry of Finance Sweden Finansinspektionen (Swedish FSA) FIU Sweden Unit of the Swedish Police Authority Unit for Combating Money Unit within the independent United Unit of the National Crime Agency, Cyprus Central Bank of Cyprus (CBC) Financial Conduct Authority (FCA) UK FIU (National Crime Agency, NCA) Laundering (MOKAS) Law Office of the Republic Kingdom a national law enforcement agency Independent unit of the Unit of the Coordinating Centre for Czechia Czech National Bank (CNB) Financial Analytical Unit (FAU-CR) Gibraltar Financial Services Commission (FSC) Gibraltar FIU (GCID-GFIU) Ministry of Finance Criminal Intelligence and Drugs Money Laundering Secretariat EEA = European Economic Area Denmark Finanstilsynet (Danish FSA) Unit of the Prosecution Service (FIU Denmark) * As listed by the Egmont Group. FIU Estonia (Money Laundering Independent unit of the Police Estonia Finantsinspektsioon (Estonian FSA) Note: Gibraltar is included in the list above because of its inclusion in the Internal Market. FSA refers to Financial Supervisory Authorities Information Bureau / MLIB) and Border Guard Board in Nordic countries and Estonia. Unit of the National Bureau Sources: Websites of the Egmont Group, the Anti–Money Laundering Forum (https://www.anti-moneylaundering.org/), and selected Finland Finanssivalvonta (Finnish FSA) FIU (RAP) of Investigation, part of national agencies, consulted on September 2, 2018. the national police Autorité de Contrôle Prudential Intelligence Processing and Intelligence unit under the France et de Résolution (ACPR) under Action against Illicit Financial Ministry of Finance the Banque de France Networks Unit (TRACFIN) Bundesanstalt für Unit of the Customs Service, Germany FIU Germany Finanzdienstleistungsaufsicht (BaFin) part of the Ministry of Finance Unit of the Hellenic Anti–Money Greece Bank of Greece Hellenic FIU Laundering Authority (HAMLA) Unit of the National Tax and Hungary Hungarian National Bank (MNB) Hungarian FIU (HFIU) Customs Administration Iceland Fjármálaeftirlitið (Icelandic FSA) FIU Iceland (FIU-ICE) Unit within the National Police Unit of the Garda National Ireland Central Bank of Ireland (CBI) Bureau of Fraud Investigation (MLIU) Economic Crime Bureau, part of the national police Independent unit hosted Italy Bank of Italy FIU of Italy (UIF) by the Bank of Italy Office for Prevention of Laundering Financial and Capital Markets Independent authority under the Latvia of Proceeds derived from Criminal Commission (FCMC) supervision of the Prosecutor’s Office Activity (Control Service) (KD) Liechtenstein Financial Market Authority (FMA) FIU Liechtenstein (EFFI) Independent administrative agency Financial Crime Information Service under the Ministry Lithuania Bank of Lithuania Service (FCIS) of the Interior Unit of the Economic and Commission de Surveillance Luxembourg FIU (CRF) Financial Prosecution Service du Secteur Financier under the Ministry of Justice Financial Intelligence Malta FIAU Independent agency Analysis Unit (FIAU) Netherlands Dutch National Bank (DNB) FIU Netherlands (FIU-NL) Independent agency Police specialist agency Norway Finanstilsynet (Norwegian FSA) FIU Norway (EFE) and prosecutor body General Inspector of Financial Poland GIFI Unit of the Ministry of Finance Information (GIFI) Portugal Bank of Portugal FIU Portugal (UIF-Portugal) Department within the Criminal Police National Office for Prevention Romania National Bank of Romania (BNR) and Control of Money Independent government agency Laundering (ONPCSB) (table continues)

141 152 PB 18-25 December 2018

Annex B Anti–money laundering (AML) supervisors for banks and financial intelligence units (FIUs) in EU and EEA countries (continued) Country AML supervisor for banks Financial Intelligence Unit* Financial Intelligence Unit setup FIU of the National Crime Slovakia National Bank of Slovakia Unit of the Ministry of the Interior Agency (FSJ) Office for Money Laundering Slovenia Bank of Slovenia Unit of the Ministry of Finance Prevention (OMLP) Executive Service of the Unit of the Commission for the Commission for the Prevention Prevention of Money Laundering and Spain SEPBLAC of Money Laundering and Monetary Offences (CPBCIM) under Monetary Offences (SEPBLAC) the Ministry of Economic Affairs Sweden Finansinspektionen (Swedish FSA) FIU Sweden Unit of the Swedish Police Authority United Unit of the National Crime Agency, Financial Conduct Authority (FCA) UK FIU (National Crime Agency, NCA) Kingdom a national law enforcement agency Unit of the Coordinating Centre for Gibraltar Financial Services Commission (FSC) Gibraltar FIU (GCID-GFIU) Criminal Intelligence and Drugs EEA = European Economic Area * As listed by the Egmont Group. Note: Gibraltar is included in the list above because of its inclusion in the Internal Market. FSA refers to Financial Supervisory Authorities in Nordic countries and Estonia. Sources: Websites of the Egmont Group, the Anti–Money Laundering Forum (https://www.anti-moneylaundering.org/), and selected national agencies, consulted on September 2, 2018.

14 152