BRUSSELS (Reuters) - European Union governments have reached a preliminary deal to clamp down on money-laundering by strengthening bank supervision, but do not address key loopholes, documents show.
A series of money-laundering cases at banks in several EU states have forced regulators to act after public outcry.
The preliminary deal, which could be finalised before EU finance ministers are due to meet in December, confirms proposals made by the European Commission in September to give more powers to the European Banking Authority (EBA).
However, it does not address loopholes that give states large discretion on imposing sanctions or the creation of a dedicated agency to counter money laundering at EU or euro zone level, as proposed by the European Central Bank.
EU states have agreed to give the EBA new powers to force national supervisors to investigate cases of suspected breaches of anti money laundering rules, the documents prepared by the Austrian presidency of the EU and dated Nov. 12 show.
The plans were broadly supported by EU governments, diplomats said on Tuesday. The supervision reform is expected to be coupled with a plan in December that lists actions to be taken over the coming months by EU states.
In exceptional cases, when national supervisors do not act within set deadlines, EBA could take measures against a bank “requiring it to take all necessary action to comply with its obligations”, one of the documents says.
But decisions on penalties would remain in the hands of member states, some of whom have shown little interest in imposing or trumpeting sanctions, fearing reputational damage.
International guidelines say publicizing sanctions is one of the most effective tool to prevent money laundering.
The EBA has already the power to investigate breaches of money-laundering rules and did so against Malta over its supervision of Pilatus Bank, which was shut down last week over financial crime allegations.
Under the plans, the EBA would get more powers and staff, but it will continue to depend on vague laws that have prevented it from acting in the past.
The EBA admitted that it could not pursue its probe into Malta’s financial supervisor because of a lack of clarity in EU rules, which will not change.
Under the reforms, the EBA would get ten new employees from two now to monitor risks of money laundering at hundreds of EU banks.
The ECB has called for a new agency with more resources dedicated to this task, but these calls have so far been opposed by member states who prefer maintaining national control.
Reporting by Francesco Guarascio; Editing by Alexander Smith