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ECB urges stepping up fight against money laundering, EU states cautious

LUXEMBOURG (Reuters) - The European Union needs clearer rules to combat money laundering that would apply equally to all EU countries, European Central Bank Vice President Luis de Guindos said on Tuesday.

FILE PHOTO: European Union flags flutter outside the European Central Bank headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo

The 28-nation bloc is grappling with high-profile cases of money laundering at banks in member states, including Estonia, Denmark, the Netherlands, Luxembourg, Malta and Latvia, which have exposed serious gaps in the EU’s framework to fight the issue.

“A higher level of harmonisation of the applicable rules in the form of a regulation should be considered,” de Guindos told EU finance ministers during a public debate in Luxembourg.

An EU regulation is directly applicable in all member countries, but rules against money laundering are currently defined in directives which give governments broad leeway in their application.

This has resulted in different levels of enforcement and gaps in the EU framework. Governments have long been reluctant to give away national powers to monitor banks and fight crime.

Many confirmed their scepticism to de Guindos’s appeal and to a European Commission plan to strengthen common supervision against money laundering.

Germany, the largest country in the bloc, asked for more time to change the system.

Replying to de Guindos’s proposal on transforming directives into a regulation, Joerg Kukies, Germany’s state secretary at the finance ministry, said: “We think this is not an easy thing to do in the short term but something we would be very open to discuss.”

The Netherlands, Luxembourg, Estonia and Finland said more time was required to decide which changes were needed, confirming the skeptical line they held in a closed-door meeting last week, according to a confidential document seen by Reuters.

The flexibility given to states in applying money laundering rules allows them to decide whether to expose banks that are fined for breaches of the rules.

Germany and Luxembourg are among countries that refuse to reveal all sanctioned banks, despite international guidelines saying publicity is one of the most efficient tools to combat money laundering.

“All sanction decisions should be published. The current situation is massively unsatisfactory,” Nicolas Veron, an economist at Brussels-based think-tank Bruegel, said.


Many states were even less supportive of the idea of setting up a common agency to supervise financial crime at banks.

The ECB has openly called for such an organization which would mirror the monitoring it does on banks’ financial stability.

France backed the initiative, but many states urged further talks and Hungary opposed any proposal that would reduce national powers.

The European Commission, which has proposed giving more powers to the European Banking Authority to close the most urgent gaps, said the meeting was positive despite the divisions.

“Everybody agrees something needs to be done to strengthen enforcement,” EU Justice Commissioner Vera Jourova said.

Reporting by Francesco Guarascio; editing by Philip Blenkinsop and Ed Osmond