REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the assessment of recent alleged money laundering cases involving EU credit institutions
Date: 2019-07-24
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: application of EU law, banking supervision, credit institution, fight against crime, financial supervision, judicial cooperation in criminal matters in the EU, money laundering, supervisory power, terrorism financing, third country

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.7.2019  COM(2019) 373 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the assessment of recent alleged money laundering cases involving EU credit institutions   
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT 
AND THE COUNCIL 

on the assessment of recent alleged money laundering cases involving EU credit 
institutions  

I. 

INTRODUCTION 

Over time, the Union has developed a solid regulatory framework for preventing money 
laundering  and  terrorist  financing,  in  line  with  international  standards  adopted  by  the 
Financial  Action  Task  Force.  However  there  have  been  a  number  of  recent  incidents 
involving European banks which have focused attention on how Union rules have been 
implemented.   
On  12  September  2018,  the  Commission  published  a  Communication1  proposing 
immediate  actions  intended  to  address  some  of  the  more  readily  identifiable  regulatory 
and  institutional  inadequacies,  followed  by  a  more  recent  Communication  on  the 
Economic  and  Monetary  Union2,  in  which  the  Commission  reiterated  that  those 
immediate actions must be followed by a deeper reflection about what further measures 
might  be  needed  in  order  to  ensure  the  effectiveness  of  the  framework  for  anti-money 
laundering and countering the financing of terrorism in the long-term.  

The Union’s co-legislators also agree on the need to identify any structural flaws in the 
current  regulatory  and  supervisory  framework.3  The  European  Parliament’s  Committee 
on Financial Crimes, Tax Evasion and Tax Avoidance and the Committee on Economic 
and Monetary Affairs have repeatedly called for the adequacy of the current framework 
to be assessed. On 4 December 2018 the Council adopted conclusions on an Anti-Money 
Laundering action plan,4 inviting the Commission to conduct “a post-mortem review of 
the recent alleged money laundering cases involving EU credit institutions.”  

This  report  constitutes  the  Commission’s  response.  Its  principal  aim  is  to  indicate  the 
shortcomings  and  lessons  learnt  and  to  provide  evidence  with  a  view  to  informing  any 
further policy actions, should they be considered necessary. Evidence is drawn from case 
studies covering a sample of ten banks5 during the period 2012-2018, although some of 

1  Communication  from  the  Commission  on  Strengthening  the  Union  framework  for  prudential  and  anti-
money laundering supervision for financial institutions, COM/2018/645 final, 12.9.2018 
2 Communication from the Commission to the European Parliament,  the  European Council,  the Council 
and the European Central Bank Deepening Europe's Economic Monetary Union: Taking stock four years 
after the Five Presidents' Report, COM(2019) 279 final, 12.06.2019 
3 The relevant framework is set out principally in Directive (EU) 2015/849 of the European Parliament and 
of  the  Council  of  20  May  2015  on  the  prevention  of  the  use  of  the  financial  system  for  the  purposes  of 
money laundering or terrorist financing, amending Regulation (EU) 648/2012 of the European Parliament 
and  of  the  Council,  and  repealing  Directive  as  amended  (the  Anti-Money  Laundering  Directive),  and 
complemented by provisions in Directive 2013/36/EU of the European Parliament and of the Council of 26 
June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions 
and investment firms, as amended (the Capital Requirements Directive). 
4  https://www.consilium.europa.eu/en/press/press-releases/2018/12/04/money-laundering-council-adopts-
conclusions-on-an-action-plan-for-enhanced-monitoring/ 
5 The ten banks included in the sample have not been subject to a holistic analysis, but the review focused 
on  specific  publicly  known  events  linked  to  individual  banks  and  the  related  supervisory  actions.  The 
findings  in  this  report  do  not  necessarily  characterise  each  of  the  cases  studied,  nor  do  they  have  equal 
weighting in all cases where they apply. The sample of cases included:  ABLV Bank in relation to events 
that led to the closure of the bank, Danske Bank in relation to events that led to the closure of its Estonian 
branch, Deutsche Bank in relation to the mirror trade case that led to the imposition of fines, FBME Bank 
in relation to events that led to its closure, ING in relation to events that triggered the settlement with the 

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the  events  studied  date  back  earlier.  Banks  were  chosen  following  the  invitation  of  the 
the  Council  and  with  a  view  to  ensuring  a  sufficiently  comprehensive  picture  of  anti-
money laundering-related shortcomings, across different types of credit institutions6 and 
covering a range of different supervisory responses, as well as considering the impact of 
the cases. The selection of cases should by no means be seen as an imputation of blame 
or  responsibility  regarding  individual  banks  or  public  authorities,  nor  as  an  indication 
that there have not  been any problems  regarding other banks or public authorities.  It  is 
noted  that  this  Report  is  without  prejudice  to  the  right  of  the  Commission  to  launch 
infringment proceedings against Member States for breaches of Union law. 

During  the  reference  period,  regulatory  and  institutional  frameworks  have  evolved 
substantially. The applicable legal requirements were contained in either the 3rd or the 4th 
Anti-Money  Laundering  Directive.7  Other  requirements  pertaining  to  governance  and 
risk management systems stemmed from the 3rd and 4th Capital Requirements Directive.8 

The Commission drew evidence from desk research as well as discussions with the credit 
institutions  and  public  authorities  across  eleven  Member  States.  The  European  Central 
Bank  in  its  supervisory  capacity  and  the  three  European  Supervisory  Authorities  were 
also closely associated.  

While the report seeks mainly to present findings that are common to all or several case 
studies  analysed,  it  is  inevitable  that  the  focus  on  individual  cases  has  also  identified 
issues  which  may  be  specific  to  a  particular  bank  or  jurisdiction.  In  such  cases,  the 
findings  have  only  been  described  where,  due  to  their  severity  or  specific  nature,  they 
might provide specific lessons regarding the Union’s legal or institutional framework. 

The findings are organised into two categories:  

  highlighting events within credit institutions;  

  examining how the various public authorities acted in relation to events.  

While it is important to understand the context of the legal framework applicable at the 
time  of  the  events,  it  is  also  useful  to  view  the  findings  from  the  perspective  of  recent 
regulatory  and  institutional  developments,  in  particular  the  adoption  of  the  5th  Anti-
Money Laundering Directive, the 5th Capital Requirements Directive9  and the review of 

Dutch  Public  Prosecutor,  Nordea  in  relation  to  events  that  triggered  fines  for  anti-money  laundering 
compliance deficiencies,  Pilatus Bank  in relation to events  that led to its closure, Satabank in relation to 
events  that  led  to  restrictions  of  its  operations,  Société  Générale  in  relation  to  events  that  led  to  the 
imposition of fines for anti-money laundering compliance deficiencies, Versobank in relation to events that 
led to the bank’s closure. 
6 In terms of size, business model, cross-border presence, governance models, etc. 
7  Directive  (EU)  2015/849  of  the  European  Parliament  and  of  the  Council  of  20  May  2015  on  the 
prevention of the use of the financial system for the purposes of money laundering or terrorist financing, 
amending  Regulation  (EU)  648/2012  of  the  European  Parliament  and  of  the  Council,  and  repealing 
Directive  2005/60/EC  of  the  European  Parliament  and  of  the  Council  and  Commission  Directive 
2006/70/EC, OJ L 0849, 09.07.2018, p.1. 
8  Directive  2006/48/EC  of  the  European  Parliament  and  of  the  Council  of  14  June  2006  relating  to  the 
taking up and pursuit of the  business of credit institutions, OJ L 177, 30.6.2006, p. 1–200 and Directive 
2013/36/EU of the European  Parliament and of the  Council of 26 June 2013 on access to the activity of 
credit  institutions  and  the  prudential  supervision  of  credit  institutions  and  investment  firms,  amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176, 27.6.2013, p. 338–
436.  
9  Directive  (EU)  2019/878  of  the  European  Parliament  and  of  the  Council  of  20  May  2019  amending 
Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding 
companies, remuneration, supervisory measures and powers and capital conservation measures, OJ L 150, 
7.6.2019 

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the European Supervisory Authorities.10 Furthermore, this report should be looked at in 
conjunction  with  the  Commission’s  Supranational  Risk  Assessment  Report,11  the 
Commission’s  report  on  Financial  Intelligence  Units12  and  the  Commission’s  report  on 
the interconnection of national centralised automated mechanisms of the Member States 
on bank accounts,13 all published at the same time as this report.  

The  fight  against  money  laundering  and  terrorist  financing  is  a  continuous  task 
underpinned by a regulatory framework that requires regular updates to  keep pace with 
new  developments.  Much  has  been  achieved  to  improve  the  existing  framework, 
particularly  through  the  legislative  adjustments  made  since  2018.  Yet  it  becomes  ever 
more  apparent  that  the  application  of  the  framework  is  largely  divergent,  presenting  a 
structural problem in the Union’s capacity to prevent that the financial system is used for 
illegitimate purposes. 

II.  FINDINGS  RELATED  TO  CREDIT 

INSTITUTIONS’  ANTI-MONEY 
LAUNDERING/COUNTERING THE FINANCING OF TERRORISM DEFENCE 
SYSTEMS  

While the review of  cases has identified  flaws in the anti-money laundering/countering 
the  financing  of  terrorism  systems  across  all  the  credit  institutions  included  in  our 
sample,  not  all  shortcomings  are  identical  and  the  joint  analysis  has  resulted  in  the 
compilation of an indicative typology of failures, which is not necessarily common to all 
institutions analysed.14 

The  analysis  has  identified  four  broad  categories  under  which  shortcomings  may  be 
grouped:  

1)  ineffective  or  lack  of  compliance  with  the  legal  requirements  for  anti-money 

laundering/countering the financing of terrorism systems and controls;  

2)  governance failures in relation to anti-money laundering/countering the financing 

of terrorism;  

3)  misalignments between risk appetite and risk management;  
4)  negligence of group anti-money laundering/countering the financing of terrorism 

policies. 

10  Directive  (EU)  2018/843  of  the  European  Parliament  and  of  the  Council  of  30  May  2018  amending 
Directive  (EU) 2015/849 on the prevention of the  use  of the  financial system  for the purposes of  money 
laundering  or  terrorist  financing,  and  amending  Directives  2009/138/EC  and  2013/36/EU  and  Directive 
(EU)  2019/878  of  the  European  Parliament  and  of  the  Council  of  20  May  2019  amending  Directive 
2013/36/EU  as  regards  exempted  entities,  financial  holding  companies,  mixed  financial  holding 
companies, remuneration, supervisory measures and powers and capital conservation measures (OJ L 150, 
7.6.2019, p. 253–295 ) and the European Supervisory Authorities’ review to be formally adopted on XXX. 
11 Report from the Commission to the European Parliament and the Council on the assessment of the risk 
of  money  laundering  and  terrorist  financing  affecting  the  internal  market  and  relating  to  cross-border 
activities  COM (2019) 370 
12 Report from the Commission to the European Parliament and the Council assessing the framework for 
cooperation between Financial Intelligence Units COM(2019) 371 
13  Report  from  the  Commission  to  the  European  Parliament  and  the  on  the  interconnection  of  national 
centralised  automated  mechanisms  (central  registries  or  central  electronic  data  retrieval  systems)  of  the 
Member States on bank accounts COM(2019) 372 
14  There  are 
terms  of  detailed  causes  or  manifestations  of  anti-money 
large  variations 
laundering/countering  the  financing  of  terrorism  related  flows,  as  there  are  variations  also  in  relation  to 
their intensity 

in 

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1.  Anti-money  laundering/Countering  the  financing  of  terrorism  compliance 

failures   

Under  the  Union’s  anti-money  laundering/countering  the  financing  of  terrorism  legal 
framework, credit institutions are required to: (i) identify and assess the risks of money 
laundering and terrorism financing and have in place policies, controls and procedures to 
mitigate  and  manage  effectively  such  risks;  (ii)  carry  out  adequate  customer  due 
diligence; and (iii) adequately inform the Financial Intelligence Unit of any suspicions of 
money laundering/terrorist financingl.  

In many of the cases assessed, credit institutions did not prioritise compliance with anti-
money  laundering/countering  the  financing  of  terrorism  legislation  in  their  policies.  In 
some  cases,  although  control  systems  were  formally  in  place,  no  overall  money 
laundering/terrorist  financing  risk  assessment  was  conducted  at  either  the  level  of 
individual entities or at group level. Furthermore, compliance departments were in some 
cases understaffed, or the compliance function was rarely involved in ultimate decision-
making.  

As  a  consequence  of  their  failure  to  perform  adequate  customer  due  diligence,  some 
credit  institutions  had  insufficient  understanding  of  their  customers’  actual  operations 
and  were  ultimately  unable  to  draw  meaningful  conclusions  as  to  whether  or  not  a 
customer’s activity was suspicious. Many credit institutions had difficulties to determine 
the  identity  of  the  beneficial  owners  behind  their  customers  due  to  the  fact  that 
identification is burdensome and beneficial ownership registers were not yet in place. In 
several  cases,  whereas  the  institutions  were  conducting  business  with  a  significant 
number of politically exposed persons, they were neither identified as such, nor treated as 
high-risk  customers,  in  violation  of  national  laws  transposing  the  Anti-Money 
Laundering  Directive.  In  other  cases,  shortcomings  related  to  remote  booking  models 
rendered  elements  of  transaction  monitoring  more  difficult  (for  example,  knowing  the 
trades  across  different 
origins  of  orders  and  payments  or 
jurisdictions15).  

identifying 

linked 

Finally,  certain  shortcomings  could  be  identified  as  regards  reporting  to  Financial 
Intelligence  Units.  For  instance,  in  a  specific  case  the  number  of  alerts  generated  by 
automated monitoring systems was capped to a number that was considered appropriate 
in  relation  to  the  number  of  staff  managing  such  alerts,  whilst  in  other  instances  credit 
institutions did not have in place appropriate risk assessment tools to be able to analyse 
transactions. In most cases, the number of suspicious transaction reports filed was low – 
and the number of actionable suspicious transaction reports was even lower.  

In  a  small  number  of  cases  examined,  employees  may  have  been  directly  involved  in 
committing money laundering, or in assisting customers in committing the offence.16 In 
other  cases,  negligence  related  to  anti-money  laundering/countering  the  financing  of 
terrorism controls made money laundering by customers possible or highly probable. 

15  One  credit  institution  assessed  had  complex  group  structures  executing  transactions  in  foreign 
jurisdictions,  which  were  then  booked  via  an  overseas  branch  into  the  Union.  This  particular  model 
presents  risks  around  third-party  involvement  in  payments  and  tends  to  be  associated  with  the  full 
delegation of customer due diligence to the entity booking remotely. 
16 It is noted that these cases are for national authorities to investigate. The European Commission has no 
competences in this regard. 

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Case study: Implementation of anti-money laundering policies and controls 

In one instance, national criminal investigations involving several organisations that held 
accounts at a bank led to suspicion that the bank or its employees contributed to making 
money  laundering  through  these  accounts  possible.  The  subsequent  broadening  of 
investigations  to  the  bank’s  policies  and  procedures  revealed  major  deficiencies  in  the 
application  of  anti-money  laundering/countering  the  financing  of  terrorism  controls  by 
the  bank  in  relation  to  customer  due  diligence,  transaction  monitoring  and  reporting  of 
suspicious  transactions,  despite  apparently  robust  anti-money  laundering/countering  the 
financing of terrorism policies and controls displayed in documentation.    

2.  Governance failures   

Under  the  Capital  Requirements  Directive,17  credit  institutions  should  have  governance 
arrangements  in  place  to  ensure  sound  and  effective  risk  management.    This  includes 
adequate  internal  control  mechanisms  that  should  prevent  failures  in  the  compliance 
framework.  The  analysis  revealed  deficiencies  in  credit  institutions'  anti-money 
laundering/countering  the  financing  of  terrorism-related  governance  arrangements 
(including the "three lines of defence"),18 their internal reporting, group policies and the 
senior  management’s  responsibilities  and  accountability.  Those  deficiencies  may  have 
played  a  significant  role  in  facilitating  money  laundering  within  a  number  of  credit 
institutions,  or  exposing  them  to  money  laundering  due  to  ineffective  anti-money 
laundering/countering the financing of terrorism prevention.  

The three lines of defence 

In most of the cases analysed, there was evidence of weaknesses with  regard to  one or 
more lines of defence, as well as weaknesses in the way those responsible in the different 
lines  of  defence  interacted  with  each  other.  In  the  most  serious  cases,  the  first  line  of 
defence  (business  units)  was  practically  non-existent,  as  the  employees  in  the  business 
origination  did  not  fulfil  basic  obligations  under  anti-money  laundering/countering  the 
financing  of  terrorism  framework,  such  as  recognising  or  reporting  suspicious  types  of 
customer  and  transactions.  Often  the  second  line  of  defence  (risk  management  and 
compliance)  also  turned  out  to  be  inadequate,  as  it  either  did  not  correctly  assess  and 
mitigate  weaknesses  identified  by  the  ‘front  line’  employees  or  did  not  acknowledge 
compliance  failures  by  ‘front  line’  employees.  In  several  cases,  the  third  line  (internal 
audit)  seemed  not  to  have  adequately  prioritised  anti-money  laundering/countering  the 
financing of terrorism work, was not independent from the ‘front line’, or did not receive 
sufficient  attention  from  senior  management.  Moreover,  the  resource  allocation  or 
responsiveness of the three lines of defence was often not commensurate to the levels of 
money  laundering/terrorist  financing  risks  to  which  the  institution  was  exposed,  or 
remained  static  (and  therefore  increasingly  inadequate)  despite  the  credit  institution 
engaging in higher risk activities.  

Internal reporting of money laundering/terrorist financing risks 

In most cases,  the internal  reporting of money laundering and terrorism financing  risks 
from  business  lines  and  control  functions  to  local  or  senior  management  was  not 
adequately established or followed.  Information  reaching senior management was often 
also  not  sufficiently  comprehensive  to  enable  informed  decisions.  In  large  cross-border 

17 Article 74 of the Capital Requirements Directive 2013/36/EU.  
18  The  three  lines  of  defence  involve:  (1st  line)  the  business  units,  (2nd  line)  the  compliance  and  risk 
management function and (3rd line) the internal audit function. 

5 

 
 
 
   
                                                           
banking  groups,  reporting  deficiencies  also  appeared  to  be  caused  by  the  absence  of 
translations  of  audit  reports,  and  difficulties  for  local  staff  to  get  access  to  the  top 
management of the credit institution in another Member State.  

Case study: Failures in traditional lines of defence and internal reporting 

In  one  case,  it  was  pursuant  to  a  whistle-blower  report  about  risky  business  and 
suspicious  money  flows  in  certain  group  entities  that  the  Board  triggered  internal 
investigations. Local management had not reported any issues to the Board, nor did the 
Board read local internal audit reports (drafted in local language). 

Senior management's responsibilities and accountability  

In  several  cases,  the  senior  management  of  credit  institutions  was  not  sufficiently 
informed about failures related to compliance with anti-money laundering/countering the 
financing  of  terrorism  requirements  and  money  laundering  risks,  and  hence  unable  to 
recognise  and  address  failures  in  an  adequate  and  timely  manner.  In  some  cases,  the 
corporate culture promoted by senior management focused predominantly on profitability 
over  compliance.  Where  internal  investigations  were  conducted  upon  request  of  the 
senior management, they were sometimes very limited in scope, although the level of risk 
should  have  triggered  a  much  more  comprehensive  response.  Failures  in  the  role  of 
senior management in large and complex credit institutions also resulted from a limited 
attention span of senior management for problems in smaller business units, despite the 
disproportionate  amount  of  damage  that  would  result  for  the  credit  institution  as  a 
consequence  of  anti-money  laundering/countering  the  financing  of  terrorism  issues 
arising in such business units. 

Case study: Role of senior management 

In  one  instance,  the  composition  of  the  management  board  of  the  bank  has  changed 
several  times,  including  upon  request  of  the  supervisory  authority.  The  supervisor  was 
dissatisfied  with  the  inability  of  several  consecutive  boards  to  steer  the  business  away 
from an exclusive focus on high risk areas or customers.  

3.  Business model and risk appetite  

without 

deposits 

establishing 

The analysis of cases suggests that certain credit institutions may have actively pursued 
business models that are risky from an anti-money laundering/countering the financing of 
terrorism  perspective.    More  specifically,  it  appears  that  some  institutions  engaged  in 
high-risk business carried out directly in certain (especially third country) jurisdictions or 
originating from such jurisdictions, and based their business model almost exclusively on 
non-resident 
anti-money 
laundering/countering  the  financing  of  terrorism  policies  and  controls.  In  addition,  in 
several  of  the  cases  significant  exposures  to  anti-money  laundering/countering  the 
financing  of  terrorism  risks  appeared  in  the  context  of  correspondent  banking  services, 
whilst 
institutions  did  not  have  dedicated  or  sufficiently  clear  anti-money 
laundering/countering  the  financing  of  terrorism  policies  for  such  business.  While 
pursuing  business  opportunities,  several  credit  institutions  were  willing  to  accept  risky 
customers  without  appropriately  managing  them,  including  politically  exposed  persons 
and  commercial  entities  where  the  beneficial  owner  could  not  be  identified.  In  some 
cases, credit institutions engaged in anonymous transactions or non-face-to-face business 
relationships  without  undertakinging  adequate  due  diligence.  In  other  instances,  some 
credit  institutions  appear  to  have  been  promoting  an  aggressive  business  model  of  on-

commensurate 

6 

 
 
 
 
boarding clients and processing transactions on the basis of deliberately limited customer 
due diligence.  

Case study: Increased risk appetite 

In one case, a credit institution had attracted many of its customers through a system of 
references  that  paid  so-called  introducers  to  bring  in  new  clients  while  relying  on  the 
same  introducers  to  check  the  prospective  client’s  probity.  Customers  paid  the 
introducers  as  well.  There  is  no  evidence  of  clients  being  rejected  during  this  process, 
although  the  credit  institution  did  close  some  customer  accounts  and  cut  ties  with  a 
number  of  introducers  when  it  was  fined  for  weak  money  laundering  controls  by  the 
supervisor. 

4.  Anti-money laundering/Countering the financing of terrorism group policies 

Some  of  the  cases  involved  banking  activities  undertaken  in  different  parts  of  a  group, 
through  branches  established  in  different  Member  States  or  third  countries,  or  through 
subsidiaries located in Member States other than where the headquarters are established. 
Most of those groups organised their anti-money laundering/countering the financing of 
terrorism  compliance,  governance  and  risk  management  with  a  view  to  ensuring 
primarily  compliance  with  local  anti-money  laundering/countering  the  financing  of 
terrorism  frameworks.  Very  often,  this  was  appropriately  supplemented  with  a  group-
wide  anti-money  laundering/countering  the  financing  of  terrorism  policy,  where  local 
regulatory  needs  would  have  been  integrated  in  a  broader  group  risk  management  and 
lack  of  a  group-wide  anti-money 
compliance  policy  and  processes.  The 
laundering/countering the financing of terrorismpolicy suggests that problems may have 
been  largely  left  to  be  tackled  by  local  management.  In  some  instances,  local 
management  was  situated  in  third  country  jurisdictions  and  subject  to  obligations  that 
were not necessarily as strict as those applicable in the Union.  

In  some  instances,  it  appears  that  the  parent  company  had  difficulties  in  forming  an 
accurate and complete overview of the existing risks in the group. On several occasions, 
this  seems  to  have  prevented  local  anti-money  laundering/countering  the  financing  of 
terrorism-related problems from being taken into account in the context of wider group 
actions. In a few cases, the policies and control processes of acquired credit institutions 
(often  on  a  cross-border  basis)  were  not  aligned  in  a  timely  manner  to  the  group-wide 
risk management framework, with IT and reporting systems remaining separate and with 
no integration or inter-connection with the group’s system. Furthermore, in certain cases, 
problems  in  branches  seem  to  have  been  discarded  at  group  level  on  the  basis  of 
proportionality considerations related to the size of local peripheral group entities, while 
seemingly neglecting the reputational impact  that even peripheral  entities and activities 
might have on the whole group. 

III.  FINDINGS RELATED TO ACTIONS BY COMPETENT AUTHORITIES 

The review has focused on actions taken by supervisory authorities. The functioning of 
Financial  Intelligence  Units  and  their  cooperation  with  other  competent  authorities  is 
examined  in  the  Report  on  assessing  the  framework  for  Financial  Intelligence  Units’ 
cooperation.  Moreover,  criminal  investigations  by  competent  authorities  in  Member 
States, some of which are ongoing, are not covered by this report. 

reactions 

Supervisory 
anti-money 
to 
laundering/countering  the  financing  of  terrorism  shortcomings  were  very  different  in 
terms of timing, intensity, and measures taken. It may not in all cases be possible to make 

institutions’ 

individual 

relation 

in 

7 

 
 
 
 
generalised findings, but the analysis does allow a series of observations that give a better 
understanding  of  supervisory  actions  and  practices.  Given  that  the  institutional 
framework  is  governed  by  complementary  norms  enshrined  in  the  anti-money 
laundering/countering the financing of terrorism and prudential frameworks, findings are 
presented separately in relation to actions taken by anti-money laundering/countering the 
financing of terrorism supervisors and by prudential authorities. 

1.  Anti-money laundering/Countering the financing of terrorism supervision 
Under the 3rd Anti-Money Laundering Directive, Member States were obliged to require 
the  competent  authorities  to  effectively  monitor  and  take  the  necessary  measures  to 
ensure compliance with the Directive by all institutions and persons covered. In the case 
of  credit  and  financial  institutions,  the  competent  authorities  were  required  to  have 
enhanced supervisory powers, notably the possibility to conduct on-site inspections and 
impose  administrative  sanctions  and  measures  for  violations  of  the  obligations  of  the 
Directive. 

a)  Powers, organisation and resources 

In  most  of  the  cases,  anti-money  laundering/countering  the  financing  of  terrorism 
supervision  was  carried  out  by  the  same  authority  that  also  had  prudential  supervision 
responsibilities.  In  one  case,  supervision  was  carried  out  by  the  Financial  Intelligence 
Unit.  With  very  few  exceptions,  relevant  supervisors  appear  to  have  had  sufficient  and 
adequate supervisory powers, although there were divergences in their powers to impose 
sanctions  and  supervisory  measures  for  violations  of  the  Anti-Money  Laundering 
Directive.  There  appears  to  have  been  a  wide  discrepancy  in  the  level19  of  applicable 
sanctions,  mainly  due  to  the  lack  of  harmonisation  of  sanctions  in  the  3rd  Anti-Money 
Laundering Directive.  

In several cases, anti-money laundering/countering the financing of terrorism supervisors 
appear to have been critically understaffed and in others, staff seem to have been lacking 
sufficient  experience  or  knowledge  of  how  to  carry  out  their  supervisory  tasks.  This 
seems  to  have  had  a  direct  impact  on  the  ability  of  supervisors  to  effectively  perform 
their  supervisory  duties.  In  most  assessed  cases,  the  intensity  of  actions  by  national  
supervisors appears to have been largely affected by a lack of prioritisation of anti-money 
laundering/countering the financing of terrorism issues more broadly both at government 
as  well  as  at  authorities  level.  In  a  number  of  cases,  incidents  occurred  against  the 
background  of  the  financial  crisis,  when  the  public  and  political  focus  was  geared 
towards other shortcomings in the financial system. 

b)  Supervision of local entities 

In  a  number  of  cases,  the  anti-money  laundering/countering  the  financing  of  terrorism 
supervisor  appears  to  have  often  only  relied  on  remote  supervisory  tools  and  to  have 
carried out only few, limited or late on-site inspections even when the risk appeared to be 
high. Even in cases where on-site inspections were carried out, supervisors seem to have 
often only relied on documents submitted by the credit institutions, without carrying out 
sample  checks  to  test  whether  the  information  submitted  by  the  credit  institutions  was 
correct. This was often against the background of what supervisors have described as a 

19  While  some  authorities  could  only  impose  a  maximum  of  46.500  euro  per  infringement,  others  could 
impose millions of euro in administrative sanctions. 

8 

 
 
 
 
 
                                                           
climate of trust which existed between the supervisor and the supervised entity. In many 
cases, primary compliance failures kept recurring over years before being picked up by 
supervisory  activity  or  before  the  bank  reported  on  them.  In  a  few  cases,  anti-money 
laundering/countering  the  financing  of  terrorism  supervisors  did  not  seem  to  have 
sufficiently  rapidly  acknowledged  the  severity  of  the  situation,  which  prevented  them 
from  engaging  with  the  supervised  institutions.  Despite  finding  violations,  supervisors 
often  did  not  adopt  any  sanctions  or  supervisory  measures,  mostly  relying  on  informal 
letters and recommendations. 

Case study: Enforcement culture 

In  one  Member  State  the  relevant  national  anti-money  laundering/countering  the 
financing  of  terrorism  supervisor  explained  that  the  supervisory  culture  was  of  a  "non-
intrusive" nature and built on trust.  The supervisor relied mainly but not exclusively on 
off-site  reviews,  written  exchanges  with  the  supervised  entities  and  had  never  imposed 
sanctions or taken other supervisory measures. 

c)  Supervision of cross border entities 

In  most  cases,  the  respective  supervisory  responsibilities  and  tasks  of  the  relevant 
authorities  were  not  sufficiently  well  understood  nor  pre-agreed  in  order  to  ensure 
comprehensive coverage of anti-money laundering/countering the financing of terrorism 
levels.  In  fact,  no  anti-money 
issues  at  group  and 
laundering/countering 
take 
responsibility for the supervision of a group, relying only on the supervision of the local 
business  in  each  Member  State.  Some  supervisors  noted  that  the  3rd  Anti-Money 
Laundering  Directive  lacked  a  specific  obligation  in  this  respect.  Nevertheless,  it  was 
implicit that such a responsibility existed in both the Directive and Financial Action Task 
Force standards. This has been clarified in the 4th Anti-Money Laundering Directive. 

terrorism  supervisor  appeared 

individual  establishment 

financing  of 

the 

to 

The  analysis  found  that  in  several  cases  the  anti-money  laundering/countering  the 
financing  of  terrorism  supervisor  in  charge  of  supervising  the  group  was  unable  to 
understand the severity of problems in a branch, due to lack of or limited direct contact 
with  the  authority  entrusted  with  anti-money  laundering/countering  the  financing  of 
terrorism  supervision  of  the  branch  or  vice  versa.  Also,  the  group  supervisor  did  not 
receive  relevant  information  and  analysis  on  activities  of  overseas  branches  from  the 
Financial Intelligence Units concerned. This may have resulted in an understatement of 
the  impact  that  anti-money  laundering/countering  the  financing  of  terrorism  related 
problems had on the branch or the group. 

d)  Supervisory measures and their effectiveness 

While divergences were found in the legal powers of anti-money laundering/countering 
the financing of terrorism supervisors to impose sanctions and supervisory measures, in 
several  assessed  cases,  irrespective  of  the  scope  of  their  powers,  supervisors  appear  to 
have  been  often  hesitant  to  impose  sanctions  or  take  supervisory  measures.  While  in 
some cases the supervisor took effective measures and imposed substantial sanctions for 
serious  breaches,  in  most  cases,  there  was  a  mismatch  between  the  gravity  of  the 
violations  and  the  sanctions  or  measures  imposed,  sometimes  due  to  the  limited  legal 
terrorism 
powers  available.  Anti-money 
supervisors hesitated to impose new sanctions or measures in cases where a new on-site 
inspection  revealed  that  there  had  been  no  or  insufficient  compliance  with  previous 
measures.  There  were  in  fact  very  different  approaches  across  the  cases  in  terms  of 
recourse  to  sanctions  to  deal  with  identified  problems  and  their  effectiveness.  Several 

laundering/countering 

the  financing  of 

9 

 
 
 
 
authorities were deprived of efficient sanctioning powers, whereas others appear to have 
been  reluctant  to  apply  existing  powers,  often  invoking  uncertainty  about  available 
evidence.  In  several  cases  authorities  imposed multiple  supervisory  measures  which  do 
not  appear  to  have  brought  substantial  improvements.  It  appears  that  the  applicable 
frameworks  and/or  their  implementation  did  not  provide  the  necessary  certainty  that 
supervisors could apply effective, proportionate and dissuasive sanctions and measures. 

In  some  cases,  where  credit  institutions  failed  to  respond  to  supervisory  demands 
requiring enhanced specific anti-money laundering/countering the financing of terrorism 
controls so as to align them with actual level of risks, supervisory authorities explicitly 
required  termination  or  restriction  of  certain  business  relationships  with  specific 
categories  of  customers  or  in  specific  jurisdictions.  This  proved  to  be  an  effective 
measure. In another case, supervisors introduced controlled release of deposits, through 
the appointment of a competent person, which also proved effective. The withdrawal of 
authorisation  as  the  sanction  for  breaching  anti-money  laundering/countering  the 
financing  of  terrorism  rules  appears  to  be  used  only  as  a  last  resort  measure  (further 
described under section 2d)).  

In  some  of  the  cases,  prosecutors  also  took  measures  targeted  at  anti-money 
laundering/countering  the  financing  of  terrorism  failures,  given  that  in  some  Member 
States  they  are  competent  on  these  matters.  In  addition,  prosecutors  also  looked  into 
criminal offences associated with money laundering. In two Member States, prosecution 
services  have  indicted  and  are  currently  pursuing  charges  against  staff  of  credit 
institutions  who  were  allegedly  involved  in  criminal  offences  associated  with  money 
laundering. 

Case study: Lack of effective, proportionate and dissuasive sanctioning powers  

Although  the  requirements  of  the  Anti-Money  Laundering  Directive  applicable  at  the 
relevant  time  required  Member  States  to  ensure  that  anti-money  laundering/countering 
the financing of terrorism  authorities had the power to  impose "effective,  proportionate 
and  dissuasive"  sanctions  for  violations  of  the  Directive,  in  one  Member  State  the 
maximum monetary sanction available to the relevant authority was at the time limited to 
a maximum of €46.500 per infringement. 

2.  The  Anti-money 

laundering/Countering 

the 

financing  of 

terrorism 

dimension in prudential supervision 

Prudential  supervision,  alongside  anti-money  laundering/countering  the  financing  of 
terrorism supervision, plays an  essential role in  the fight  against money laundering and 
terrorist  financing.  It  is  a  role  which  is  embedded  in  the  prudential  supervisory 
framework,  although  the  anti-money  laundering/countering  the  financing  of  terrorism 
dimension  is  not  always  explicitly  highlighted.  Prudential  supervisors  are  in  charge  of 
authorisation and the withdrawal of licences, assessing the suitability of the shareholders 
and of members of the management body and key function holders of credit institutions 
and undertaking the supervisory review and evaluation process, which checks that credit 
institutions have sufficient capital and liquidity as well as robust governance systems. 

a)  Powers, organisation and resources 

During  the  period  reviewed,  many  prudential  supervisors  were  predominantly  focusing 
on  crisis  management  and  taking  remedial  measures  in  the  aftermath  of  the  2008-2009 
financial  crisis  and  the  subsequent  sovereign  debt  crisis.  As  other  supervisory  aspects 
often  took  priority,  anti-money  laundering/countering  the  financing  of  terrorism  issues 
may not always have received the required attention. Although all prudential authorities 

10 

 
 
 
 
interviewed  consider  anti-money  laundering/countering  the  financing  of  terrorism  to  be 
important,  it  seems  priority  and  resources  were  predominantly  allocated  to  other 
prudential concerns.  

Whereas the prudential framework ensures that prudential authorities are endowed with a 
far-reaching  set  of  powers,  several  supervisors  signaled  their  unease  as  regards  using 
such powers in relation to anti-money laundering/countering the financing of terrorism-
related shortcomings, as the prudential framework only exceptionally refers explicitly to 
such concerns.  

the  establishment  of 

the  Single  Supervisory  Mechanism,20  prudential 
With 
responsibilities  for  significant  credit  institutions  and,  in  case  of  certain  functions 
(authorisation,  withdrawal  and  assessment  of  qualifying  holdings  acquisitions),  for  all 
credit institutions in the Banking Union, were transferred to the European Central Bank. 
The  European  Central  Bank,  like  all  prudential  supervisors  has  to  take  anti-money 
laundering/countering  the  financing  of  terrorism  concerns  into  account  in  its  prudential 
supervisory  activities.  When  acting  in  its  supervisory  capacity,  the  European  Central 
Bank  is  not  considered  to  be  the  anti-money  laundering/countering  the  financing  of 
terrorism  authority.21  The  transfer  of  prudential  supervisory  powers  to  the  European 
Central  Bank 
layer  for  cooperation  and 
coordination,  adding  interaction  with  the  European  Central  Bank  to  the  interaction 
terrorism 
between  domestic  anti-money 
supervisors and prudential authorities.  

introduced  an  additional 

laundering/countering 

the  financing  of 

institutional 

b)  Supervision of local entities 

Prudential supervision is based on the principle of home country control, which attributes 
supervisory responsibility to the competent authority in the Member State where a credit 
institution  has  its  registered  office  (which  is  the  European  Central  Bank  for  significant 
credit institutions established in the Banking Union). This responsibility extends also to 
the  branches  of  the  credit  institution,  irrespective  whether  they  are  established  in  the 
same Member States or outside. The prudential authority in the host Member State where 
branches are established has only residual  competences related to  the general  good and 
for statistical purposes.22  

risk 

factors.  Nor  was 

Given  the  confidentiality  of  supervisory  decisions,  it  could  not  be  ascertained  whether 
prudential  supervisors  consistently  used  business  model  analysis  to  assess  the  viability 
and  vulnerability  of  several  credit  institutions,  even  when  such  institutions  engaged  in 
activities  involving  substantial  anti-money  laundering/countering  the  financing  of 
to  assess  whether  anti-money 
terrorism 
laundering/countering  the  financing  of  terrorism-related  governance  concerns  were 
consistently 
institutions’  governance 
the  broader  review  of  credit 
arrangements by prudential authorities. According to anecdotal evidence and in light of 
the  lack  of  specific  guidance  in  the  single  rulebook,  it  appears  that  anti-money 
laundering/countering the financing of terrorism concerns were not consistently factored 
into the supervisory review and evaluation process. Ex post, and on closer examination of 
the  activity,  some  authorities  admitted  that  some  red  flags  could  indeed  have  been 
triggered. In several cases, prudential supervisors did not appear to have acknowledged 

it  possible 

included 

in 

20 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European 
Central  Bank  concerning  policies  relating  to  the  prudential  supervision  of  credit  institutions,  OJ  L  287, 
29.10.2013, p. 63–89 (Regulation establishing the Single Supervisory Mechanism). 
21 Recital 28 of the Regulation establishing the Single Supervisory Mechanism. 
22 Host authorities are more closely associated to the supervision by the home authorities where branches in 
their territory have been designated as significant. 

11 

 
 
 
                                                           
the severity of the situation in a timely manner, which prevented them from engaging in 
suitable substantial information exchanges and coordinated action with other authorities. 
In  several  cases,  supervisors  have  invoked  insufficient  information  on  the  adequacy  of 
compliance  or  risk  management  systems,  as  required  under 
the  anti-money 
laundering/countering the financing of terrorism framework. 

Some  of  the  cases  analysed  show  that  certain  credit  institutions  were  authorised  by 
national  competent  authorities  without  sufficient  scrutiny  in  relation  to  anti-money 
laundering/countering  the  financing  of  terrorism  related  aspects,  both  from  a  business 
plan  perspective,  as  well  as  from  the  perspective  of  the  suitability  of  shareholders  and 
members of the management board and key function holders.  

c)  Supervision of cross-border entities  

While cross-border branches are under the prudential  supervision of the  home Member 
State  authority,  the  anti-money  laundering/countering  the  financing  of  terrorism 
supervision of such branches falls within the remit  of the host Member State authority. 
Banking groups (i.e. a parent and its subsidiaries) are subject to prudential requirements 
(including  on  governance)  and  prudentially  supervised  on  a  consolidated  basis.  The 
consolidating supervisor is usually the authority in the home Member State supervising 
the  credit  institution  with  the  largest  assets,  and  where  group  policies  are  usually 
centralised.  The  group  dimension  in  anti-money  laundering/countering  the  financing  of 
terrorism  supervision  is  much  less  prominent,  assigning  very  limited  tasks  to  the  home 
Member State authority. 

The  analysis  found  that  often  it  was  the  home  Member  State’s  prudential  authority  in 
charge  of  supervising  the  branch  that  failed  to  understand  the  severity  of  anti-money 
laundering/countering  the  financing  of  terrorism  related  problems  in  a  branch.  This 
appears to have been due to lack of direct contact between the home prudential authority 
and the host authority entrusted with the anti-money laundering/countering the financing 
of  terrorism  supervision  of  the  branch,  or  due  to  a  misunderstanding  of  such  problems 
even by the anti-money laundering/countering the financing of terrorism authority in the 
home country with whom home prudential authorities were in regular contact. In several 
cases,  this  appears  to  have  led  to  an  understatement  of  the  impact  that  anti-money 
laundering/countering the financing of terrorism related problems in a branch might have 
on the parent company and on group’s reputation.  

As  for  the  consolidating  supervisor  in  charge  of  organising  and  leading  supervisory 
colleges,  some  anecdotal  evidence  suggests  that  anti-money  laundering/countering  the 
financing  of  terrorism  issues  in  subsidiaries  were  regularly  discussed  in  supervisory 
colleges.  Yet  there  is  no  evidence  that  joint  decisions  taken  at  group  level  required 
banking  groups 
in  a  structured  and  consistent  way  anti-money 
laundering/countering the financing of terrorism deficiencies within the group.  

to  address 

the  different 

In  many  cases, 
levels  at  which  prudential  and  anti-money 
laundering/countering  the  financing  of  terrorism  supervisiory  tasks  were  entrusted 
(home/host  authorities,  national/Union  authorities)  appear 
to  have  exacerbated 
cooperation  difficulties,  including  problems  in  identifying  the  relevant  institutional 
counterparty. 

12 

 
 
 
 
 
 
 
Case study: Inefficiencies in group supervision 

In the case of a bank with overseas branches, the home Member State supervisor and the 
host Member State supervisor were integrated authorities that did not necessarily draw a 
clear  line  between  their  responsibilitites  for  prudential  supervision  and  for  anti-money 
laundering  supervision.  The  home  supervisor,  although  in  charge  of  the  prudential 
supervision  of  overseas  branches  did  not  factor  in  anti-money  laundering  related 
problems  signalled  by  the  host  supervisor.  Ultimately  it  was  the  host  Member  State 
authority who required the branch to reduce and later to stop its activities that involved 
anti-money laundering/countering the financing of terrorism risks. 

d)  Supervisory measures and their effectiveness 

The review found that in the absence of detailed rules on how to take into account anti-
money laundering/countering the financing of terrorism concerns, prudential supervisors 
relied  substantially  on  remedial  action  by  the  anti-money  laundering/countering  the 
financing  of  terrorism  supervisors  when  such  concens  had  been  identified.  On  certain 
occasions,  the  focus  of  prudential  supervisors  was  geared  towards  ensuring  adequate 
provisioning for fines, an appropriate level of liquidity or increasing capital requirements 
for  operational  risk.  Some  prudential  authorities  used  their  broader  prudential  tool-kit, 
including  on-site  investigations  and  targeted  deep-dives,  when  concerned  about  anti-
money  laundering  related  risks.  This  led  sometimes  to  the  adoption  of  qualitative 
measures  addressing  weaknesses  in  governance,  internal  controls  and  unsustainable 
business  model,  as  well  as  in  the  risk  management  framework  of  credit  institutions. 
Given  confidentiality  constraints,  it  was  not  always  possible  to  ascertain  whether 
prudential  supervisors  consistently  took  adequate  and  timely  prudential  measures  to 
address  governance  weaknesses  or  risk  management  deficiencies  that  allowed  the 
primary  anti-money  laundering/countering  the  financing  of  terrorism  failures  to  occur. 
Some supervisors requested certain credit institutions to adjust their business model with 
a view to de-risking.   

of 

of 

serious 

breaches 

authorisation 

The  withdrawal 
anti-money 
for 
laundering/countering the financing  of terrorism  rules is  also  listed as  a sanction in  the 
prudential  framework.  Only  prudential  authorities  may  withdraw  the  licence.  The  tool 
has been used by prudential  authorities in  several of the cases analysed, principally  for 
smaller institutions. It has not been possible in the analysed cases to ascertain how such 
breaches and their intensity were assessed in view of applying the withdrawal sanction. 
Among  the  analysed  cases,  there  were  several  situations  where  licence  withdrawal 
proved 
for  anti-money 
rather 
laundering/countering the financing of terrorism  violations, as the credit  institution was 
already declared failing or likely to fail, or put under a special administrator.  

to  be  a  mere 

formality 

sanction 

than  a 

No common rules exist in relation to the closure of branches, and there is some evidence 
that the home prudential authority is not always substantially involved in the decision on 
branch  closure  taken  by  the  host  anti-money  laundering/countering  the  financing  of 
terrorism authority. 

Case study: Withdrawal of licence 

In  one  case  a  bank  saw  its  access  to  markets  being  cut  following  a  warning  issued  by 
third country authorities on suspicions of money laundering in connection with that bank. 
This led to the significant deterioration of the bank’s liquidity, rendering it unable to pay 
its debts  or other liabilities as they  fell due. This  triggered a decision by  the  prudential 

13 

 
 
 
 
authority to declare that the bank was failing or likely to fail. The licence of the bank was 
withdrawn a few months later, whilst the bank was under liquidation. 

3.  Cooperation within the EU 

Provisions  on  cooperation  among  the  various  authorities  are  scattered  across  the  anti-
money  laundering/countering  the  financing  of  terrorism  and  prudential  regulatory 
frameworks  and  vary  in  terms  of  their  precision  and    the  degree  to  which  they  are 
binding.  Cooperation  is  substantially  influenced  by  the  distribution  of  responsibilities 
between home and host Member States authorities, which is centred around host Member 
State  authorities  in  the  Anti-Money  Laundering  Directive  and  around  home  Member 
State  authorities  in  the  Capital  Requirements  Directive.  An  additional  dimension  of 
cooperation  follows  from  the  establishment  of  the  Single  Supervisory  Mechanism  and 
the exercise of prudential competences by the European Central Bank. 

of 

the 

authorities 

(prudential 

authorities, 

interviewed 

the  financing  of 

terrorism  supervisors, 

anti-money 
Most 
law  enforcement 
laundering/countering 
authorities,  Financial  Intelligence  Units)  expressed  their  willingness  to  cooperate  and 
share  information  with  other  relevant  authorities.  In  the  cases  covered  by  the  post 
mortem analysis, authorities appear to have interacted with each other both domestically 
and across borders on several occasions. For instance, most integrated authorities pointed 
out that their anti-money laundering/countering the financing of terrorism and prudential 
departments  regularly  coordinated  or  have,  on  occasion,  worked  in  joint  teams.  Across 
borders,  authorities  appear  to  have  discussed  anti-money  laundering/countering  the 
financing  of  terrorism  concerns  in  the  context  of  supervisory  colleges  or  on  a  bilateral 
basis,  especially  when  problems  have  become  more  acute.  However,  not  all  relevant 
authorities  interacted,  and  where  there  was  interaction  the  intensity  and  frequency  of 
contacts  has varied significantly.  In several  of the cases analysed, interaction proved to 
be clearly ineffective and prevented a proper understanding of the gravity of the situation 
or did not result in joint supervisory action. 

With  regard  to  domestic  cooperation,  authorities  did  highlight  a  number  of  issues  that 
may  have  affected  the  intensity,  quality  and  frequency  of  cooperation  and  information 
sharing,  suggesting  that  cooperation  did  not  always  enable  effective  supervision.  For 
example,  several  authorities  mentioned  that  confidentiality  requirements  prevented 
efficient cooperation and information exchange between the Financial Intelligence Units, 
law enforcement authorities and the prudential or anti-money laundering/countering the 
financing  of  terrorism  supervisor.  Other  authorities  pointed  to  a  lack  of  experience  in 
identifying  what  constitutes  important  information  to  share  between  an  Financial 
Intelligence Unit  and a prudential or anti-money laundering/countering the financing of 
terrorism  supervisor  or  between  the  two  supervisors  and  observed  that,  with  increasing 
experience,  information  sharing  had  recently  intensified.    Some  integrated  supervisors 
reported  never  having  had  requested  input  from  a  Financial  Intelligence  Unit  in  the 
context  of  prudential  assessments  such  as  for  fit  and  proper  purposes,  but  relying  on 
information  from  the  prudential  departments.  Furthermore,  many  of  the  cases  analysed 
showed that  Financial  Intelligence Units did  not share information  with  the  anti-money 
laundering/countering  the  financing  of  terrorism  and  prudential  supervisors  in  a 
structured  way.  Financial  Intelligence  Units  may  sometimes  have  been  prevented  from 
sharing  information  with  the  supervisors  by  provisions  in  domestic  laws  (for  example 
when  the  analysis  conducted  by  the  Financial  Intelligence  Unit  was  considered  to  be 
criminal intelligence and only shareable with law enforcement authorities). On the other 
hand, Financial Intelligence Units very rarely received feedback from supervisors about 
the  use  made  of  the  information  provided  and  about  the  outcome  of  inspections 

14 

 
 
 
performed on the basis of that information. These issues are examined in more detail in 
the Report on assessing the framework for Financial Intelligence Units’ cooperation. 

Moreover,  other  potential  issues  affecting  the  intensity,  quality  and  frequency  of 
cooperation  include  several  definitions  and  rules  in  the  relevant  directives,  which  may 
have  led  to  different  understandings  of  obligations  and  different  expectations  by  the 
different authorities.  

in 

law 

authorities 

enforcement 

The  review  found  effective  action  in  instances  where  supervisory  authorities  interacted 
intensively  with 
anti-money 
laundering/countering the financing of terrorism  findings. However, it became apparent 
that there is a large variety of triggers for the involvement of law enforcement authorities, 
given that there is no common denominator in Union law. This may also explain why the 
contacts of law enforcement authorities with supervisors in other Member States remain 
reduced.  There  appear  to  be  also  differences  in  the  role  and  scope  of  powers  of  law 
enforcement  authorities,  which  may  also  partly  explain  why  cooperation  and 
coordination  amongst  law  enforcers  on  anti-money  laundering/countering  the  financing 
of terrorism issues remains scarce. 

relation 

to 

that  contacts  between  authorities 

With  regard  to  cross-border  cooperation  within  the  Union,  the  analysis  did  not  allow 
identification  of  the  intensity,  quality  and  frequency  of  interaction  between  the  various 
(anti-money 
authorities.  The  cases  showed 
laundering/countering  the  financing  of  terrorism  supervisors  and  prudential  authorities) 
across Member States were uneven and often established on an ad hoc basis, which may 
be largely attributed to the differences in the applicable legal frameworks as regards the 
distribution  of  supervisory  competences  and  the  approach  to  group  supervision. 
Cooperation  was  often  reduced  to  mere  information  exchange,  and  did  not  in  all  cases 
result in a joint understanding of cross-border implications, nor the taking of  concerted 
supervisory  action.    Moreover,  there  does  appear  to  have  been  an  absence  of  a  shared 
strategic aim of preventing money laundering across the multitude of institutional actors 
involved.  

4.  Cooperation between authorities in the Union and third country authorities  

Cooperation  and  exchange  of  information  between  Member  States'  anti-money 
laundering/countering  the  financing  of  terrorism  supervisors  and  their  counterparts  in 
third  countries  is  not  regulated  under  the  Anti-Money  Laundering  Directive.  Instead, 
supervisory  cooperation  takes  place  on  the  basis  of  Financial  Action  Task  Force 
Standards  (in  particular,  Recommendation  4023    and  its  Interpretative  Note)  almost 
exclusively  on  a  bilateral  basis.  Prudential  authorities  in  the  Union  may  use  prudential 
colleges to discuss anti-money laundering/countering the financing of terrorism concerns 
with  their  third  country  counterparts,  yet  this  does  not  involve  participation  of  anti-
money  laundering/countering  the  financing  of  terrorism  supervisors.  Both  supervisory 
authorities  are  expected  to  observe  principles  spelt  out  in  the  Basel  Committee’s 
guidelines on the sound management of risks related to money laundering and financing 
of terrorism. 

Around  half  of  the  cases  within  the  scope  of  the  post-mortem  exercise  involved 
supervisory  interaction  with  third  country  authorities.  Stakeholders  mentioned  the 
following  issues  underpinning  challenges  of  cooperation  with  certain  third  country 
authorities: lack of willingness on both sides to  exchange confidential information with 

23http://www.fatf-
gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf 

15 

 
 
 
                                                           
certain authorities, lack of mutual trust and concerns that information exchanges, in the 
rare cases where they included the transfer of personal data, would not be in compliance 
with the General Data Protection Regulation.24  

In  some  cases  analysed,  authorities  reported  that  they  had  regular  and  broadly 
satisfactory  cooperation  and  exchange  of  information  with  third  country  anti-money 
laundering/countering the financing of terrorism and prudential authorities, although in a 
few cases there were indications of an asymmetry in information sharing. In other cases, 
authorities  highlighted  deficiencies  in  cooperation  with  third  country  authorities, 
particularly in terms of timing and extent of information sharing or coordinating action. 
In a few cases, where third country authorities announced legitimate measures against a 
credit  institution  established  in  the  Union,  the  prudential  authorities  and/or  anti-money 
laundering/countering the financing of terrorism supervisors in the Union appear to have 
lacked  insight  about  the  imminence  and  background  of  such  measures.  Such  measures 
had  a  high  impact  on  the  respective  banks,  but  were  taken  without  sufficient  prior 
warning to enable the relevant authorities in the Union to take preventive actions against 
the  institutions  concerned  and  other  measures  to  safeguard  financial  stability  before 
publication  of  those  measures.  Those  cases  involved  situations  where  measures  were 
taken  especially  by  third  country  law  enforcement  authorities,  not  by  supervisory 
authorities in such countries.   

In  addition,  in  several  cases  where  following  supervisory  findings  law  enforcement 
authorities  launched  investigations,  these  authorities  faced  cooperation  problems  with 
some  third  countries.  More  specifically,  the  authorities  of  third  countries  failed  to 
respond  to  requests  for  mutual  legal  assistance  from  Member  States’  law  enforcement 
authorities.  This  prevented  the  latter  from  obtaining    evidence  capable  of  proving  the 
criminal origin of money, and eventually led to failures of prosecution.  

Only in few cases did the authorities in the Union in charge of the supervision of various 
group  entities  coordinate  their  interaction  with  third  country  authorities.  However,  in 
most cases analysed no such evidence could be found. Nor could the analysis ascertain 
that authorities in the Union have forwarded in all cases to their European peers all the 
relevant information received from third country authorities.   

Case study: Interaction with third country authorities 

In  two  cases,  the  national  authorities  were  not  able  to  intervene  or  to  ascertain  the 
breaches  that  undepinned  the  actions  of  third  country  authorities,  given  that  the  latter 
gave notice of the proposed measures to the authorities of the Member States only very 
shortly before they were published. Following the publication of the proposed measures, 
two European credit institutions had to terminate their business. 

IV.  RECENT PROGRESS MADE IN THE UNION 

During  the  last  years,  credit  institutions  and  public  authorities  responsible  for  fighting 
money  laundering  and  terrorist  financing  have  taken  measures  to  improve  their  anti-
money  laundering/countering  the  financing  of  terrorism  defences.  Such  progress,  along 
with remaining challenges, is documented in the Country Specific Recommendations and 

24  Regulation  (EU)  2016/679  of  the  European  Parliament  and  of  the  Council  of  27  April  2016  on  the 
protection of natural persons with regard to the processing of personal data and on the free movement of 
such data, and repealing Directive 95/46/EC (General Data Protection Regulation), OJ L 119 4.5.2016, p. 1 

16 

 
 
 
                                                           
the accompanying country reports.25 Moreover, several developments have taken place at 
Union level. 

1.  Developments  of  the  Anti-money  laundering/Countering  the  financing  of 

terrorism regulatory framework 

Since  the  introduction  of  the  Anti-Money  Laundering  Directive,  the  Union’s  legal 
framework  has  been  substantially  enhanced  with  the  4th  Anti-Money  Laundering 
Directive which had to be transposed in Member States by June 2017, while the 5th Anti-
Money  Laundering Directive makes  further  enhancements and should be transposed by 
January 2020. This new framework is an improvement on the previous rules, in particular 
because it:  (i) clarifies  the need for credit institutions to  carry out  risk assessments and 
have  adequate  policies  and  procedures  in  place  to  prevent  money  laundering/terrorist 
fianncing; (ii) sets up registries of beneficial ownership, of credit institution accounts and 
of  lists  of  politically  exposed  persons,  which  will  greatly  enhance  the  ability  of 
institutions  to  carry  out  effective  customer  due  diligence;  (iii)  clarifies  the  role  of  the 
parent  institution  in  implementing  anti-money  laundering/countering  the  financing  of 
terrorism  policies  for  the  whole  group;  (iv)  clarifies  the  role  of  the  anti-money 
laundering/countering  the  financing  of  terrorism  supervisor  of  the  parent  institution  to 
supervise  the  group  for  such  purposes;  (v)  substantially  enhances  the  powers  of 
supervisors  to  impose  sanctions  and  administrative  measures  for  breaches  of  relevant 
obligations, while requiring that such sanctions and administrative measures are public; 
(vi) substantially enhances the exchange of information between the relevant competent 
authorities, notably by removing the confidentiality obstacle to exchange of information 
between supervisors and through the conclusion of a memorandum of understanding for 
exchanges  between  the  supervisors  and  the  European  Central  Bank;  and  (vii)  enables 
Member  State  supervisory  authorities  to  conclude  memoranda  of  understanding  with 
third  country  counterparts  for  purposes  of  collaborating  and  exchanging  confidential 
information.  

Directive 2018/1673 on combating money laundering by criminal law complements this 
preventive  framework  by  harmonising  the  definition  of  the  crime  of  money  laundering 
and related sanctions.  The Directive entered into force in  December 2018 and Member 
States  have  two  years  to  transpose  it.  This  new  framework  is  an  improvement  on  the 
previous  rules,  in  particular  because  it  (i)  makes  money  laundering  punishable  with  a 
maximum of no less than four years of imprisonment; (ii) considers cases as aggravated 
when the offender is an obliged entity and has committed the offence in the exercise of 
their professional activities; (iii) ensures that law enforcement can make use of effective 
investigative  tools,  such  as  those  used  in  combating  organised  crime  or  other  serious 
crimes; ((iv) allows Member States to criminalise also money laundering committed with 
recklessness or serious negligence.    

2.  Developments of the prudential regulatory framework 

The  prudential  framework  was  substantially  updated  in  2018  with  changes  due  to  be 
applied  by  the  end  of  2020.26  In  relation  to  anti-money  laundering/countering  the 

https://ec.europa.eu/info/publications/2019-european-semester-country-specific-recommendations-

25 
council-recommendations_en 
26  Directive  (EU)  2019/878  of  the  European  Parliament  and  of  the  Council  of  20  May  2019  amending 
Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding 
companies, remuneration, supervisory measures and powers and capital conservation measures, OJ L 150, 
7.6.2019 

17 

 
 
 
 
                                                           
tools 

to  use  available  prudential 

financing  of  terrorism,  amendments  introduced  an  explicit  cooperation  obligation 
between  prudential  authorities  and  anti-money  laundering/countering  the  financing  of 
terrorism  authorities  and  Financial  Intelligence  Units  and  removed  confidentiality 
barriers  to  effective  information  exchange  between  those  authorities.  The  European 
Banking Authority has been mandated to develop guidelines detailing various aspects of 
the cooperation requirement.  
Furthermore,  the  5th  Capital  Requirements  Directive  clarified  the  possibility  for 
prudential  supervisors 
to  address  anti-money 
laundering/countering the financing of terrorism concerns from a prudential perspective. 
The  5th  Capital  Requirements  Directive  provides  more  details  on  the  assessment  of  the 
internal  controls  and risk management systems  during the authorisation process.  It also 
introduces  an  explicit  power  to  remove  members  of  the  management  board  in  case  of 
concerns related to their suitability, including from an anti-money laundering/countering 
the financing of terrorism perspective.  
Moreover,  the  5th  Capital  Requirements  Directive  mentions  explicitly  the  anti-money 
laundering/countering  the  financing  of  terrorism  dimension  in  the  context  of  the 
supervisory  review  and  evaluation  process,  requiring  competent  authorities  to  take 
necessary  measures  using  the  tools  and  powers  at  their  disposal  should  money 
laundering/terrorist  fianancing  concerns  be  significant  from  a  prudential  perspective. 
There  is  also  an  obligation  for  competent  authorities  to  notify  the  European  Banking 
Authority  and  the  authority  responsible  for  anti-money  laundering  supervision  where 
they identify weaknesses in the governance model, business activities or business model, 
which give reasonable grounds to suspect money laundering or terroris financing. 

3.  Developments of the European Supervisory Authorities' role with regards to 

Anti-money laundering/Countering the financing of terrorism 

At Union level the current mandates of the three European Supervisory Authorities - the 
European  Banking  Authority,  the  European  Insurance  and  Occupational  Pensions 
Authority  and  the  European  Securities  and  Markets  Authority  –  extend  to  the  area  of 
anti-money  laundering/countering  the  financing  of  terrorism.  They  are  empowered  to 
develop  rules  and  guidance  in  this  area,  and  to  promote  cooperation  and  information 
sharing  among  authorities,  supervisory  convergence  and  to  ensure  that  the  anti-money 
laundering/countering  the  financing  of  terrorism  legislation  is  properly  applied.  
However, the European Supervisory Authorities are not themselves supervisors with their 
own set of binding powers and tools to ensure compliance and enforcement of rules and 
recommendations  or  to  be  adequately  involved  in  cooperation  with  third  country 
authorities. They instead have to work with relevant national authorities using the powers 
conferred upon them by their founding Regulations.27     

In the past years, the focus of the European Supervisory Authorities with regard to anti-
money  laundering/countering  the  financing  of  terrorism  has  been  on  delivering  on  a 
number of mandates of a regulatory nature delegated to them under the  4th Anti-Money 

27 Regulation (EU) No 1093/2010 of the European Parliament and of the  Council of 24  November 2010 
establishing  a  European  Supervisory  Authority  (European  Banking  Authority),  amending  Decision  No 
716/2009/EC  and  repealing  Commission  Decision  2009/78/EC,  Regulation  (EU)  No  1094/2010  of  the 
European  Parliament  and  of  the  Council  of  24  November  2010  establishing  a  European  Supervisory 
Authority  (European  Insurance  and  Occupational  Pensions  Authority),  amending  Decision  No 
716/2009/EC  and  repealing  Commission  Decision  2009/79/EC;  Regulation  (EU)  No  1095/2010  of  the 
European  Parliament  and  of  the  Council  of  24  November  2010  establishing  a  European  Supervisory 
Authority  (European  Securities  and  Markets  Authority),  amending  Decision  No  716/2009/EC  and 
repealing Commission Decision 2009/77/EC OJ L 331, 15.12.2010 

18 

 
 
 
                                                           
Laundering Directive. However, more recently there has been more focus on carrying out 
convergence work, including focusing on the proper application of the relevant rules.   

For example, last year in July in the case of one bank, the European Banking Authority 
Board of Supervisors adopted recommendations to the anti-money laundering/countering 
the  financing  of  terrorism  supervisory  authority  to  take  measures  to  ensure  compliance 
with the Anti-Money Laundering Directive. The Commission followed up by issuing an 
Opinion addressed to that supervisory authority on the action necessary to comply with 
Union law.28   

Earlier  this  year,  following  a  request  by  the  Commission,  the  European  Banking 
Authority  also  investigated  supervisory  authorities  in  two  Member  States  in  relation  to 
circumstances of the operation by a bank of a high-risk portfolio of non-resident clients 
through  its  overseas  branch.  In  that  case,  the  European  Banking  Authority  opened  in 
February  2019  a  formal  breach  of  Union  law  investigation  under  Article  17  of  the 
Regulation  (EU)  No  1093/2010  (the  European  Banking  Authority  Regulation)29.  
Following  the  opening  of  the  investigation,  and  extensive  analysis  by  the  European 
Banking Authority staff, the European Banking Authority’s independent breach of Union 
law panel proposed a draft recommendation to its Board of Supervisors in relation to  a 
number  of  breaches  of  Union  law  by  both  supervisory  authorities  with  respect  to 
effective  supervision  and  cooperation.  The  European  Banking  Authority’s  Board  of 
Supervisors  (composed  of  heads  of  Member  States’  prudential  authorities)  rejected  the 
recommendation on 16 April 2019. 

The  final  decision  of  the  European  Banking  Authority’s  Board  of  Supervisors  in  the 
breach of Union law process related to the respective bank may have been driven by the 
following issues:  

  Board  of  Supervisors  members,  while  agreeing  that  there  may  have  been 
deficiencies  in  supervision,  appear  to  have  considered  that  the  obligations  on 
supervisors in the relevant directives were not sufficiently clear and unconditional 
and  so  could  not  be  used  to  fund  a  breach  of  Union  law  recommendation. 
Moreover, the Board of Supervisors members took into account the fact that the 
legislative framework changed during the time-period covered by the Authority’s 
investigation. 

  Board of Supervisors members also considered that this case concerned the past 
and that Article 17 on breach of Union law proceedings in the European Banking 
Authority Regulation is not the right tool for remedying past issues.30  

The  above  findings  raise  questions  for  the  future,  including  on  how  to  ensure  that 
supervisors  can  be  held  accountable  for  their  actions  to  ensure  financial  institutions’ 
compliance  with  Union  law,  especially  when  working  with  minimum  harmonisation 
Directives. At the same time they also highlight the need to use the full range of tools by 
the  European  Supervisory  Authorities,  including  forward  looking  implementation 
reviews,  to  strengthen  anti-money  laundering/countering  the  financing  of  terrorism 
supervision  in  practice  across  the  EU.  It  is  noted  that  the  decision  of  the  European 

28 C(2018) 7431 final, 08.11.2018 
29 Regulation (EU) no 1093/2010 of the European and of the Council of 24 November 2010 establishing a 
European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and 
repealing Commission Decision 2009/78/EC, OJ L 331 15.12.2010, p. 12. 
30 Specifically, members considered that while the scope of investigations under Article 17 is not restricted 
to  current  breaches,  the  remedy  of  issuing  recommendations  “setting  out  the  action  necessary  to  comply 
with Union law“ may not be well-suited to cases relating to past supervisory activities. 

19 

 
 
                                                           
Banking  Authority  does  not  affect  the  right  of  the  Commission  to  launch  infringment 
proceedings on the basis of the same facts. 

The recent European Supervisory Authorities review has brought more emphasis on anti-
money laundering/countering the financing of terrorism matters. As of January 2020, the 
current  anti-money  laundering/countering  the  financing  of  terrorism  mandate  residing 
with each of the three European Supervisory Authorities will be concentrated within the 
European  Banking  Authority,  which  shall  take  a  leading,  coordinating  and  monitoring 
role in promoting integrity, transparency and security in the financial system in order to 
prevent    and  counter    money  laundering  and  terrorist  financing.    New  rules  on 
information  sharing and  dissemination should significantly improve cooperation among 
prudential and anti-money laundering/countering the financing of terrorism  supervisors, 
and  strengthen  the  European  Banking  Authority’s  role  in  ensuring  that  breaches  of 
relevant 
anti-money 
investigated 
laundering/countering  the  financing  of  terrorism  supervisors  comply  with  Union  rules.  
Moreover,  the  European  Banking  Authority  will  have  a  role  in  facilitating  cooperation 
with third country authorities in cases where there are indications of breaches of the Anti-
Money Laundering Directive.   

that  national 

consistently 

rules 

and 

are 

V.  CONCLUSION  

The  prevention  and  fight  against  money  laundering/terrorist  financing  is  crucial  in 
preserving  the  integrity  of  the  internal  market  and  in  fighting  crime.  Different  entities 
have a different role to play in this task, starting from credit institutions, the anti-money 
laundering/countering  the  financing  of  terrorism  and  prudential  supervisors  (including 
the  European  Central  Bank  acting  in  its  supervisory  capacity),  Financial  Intelligence 
Units, law enforcement authorities (police, prosecutors and courts). It is imperative that 
these entities give sufficient prioritisation to their tasks in preventing and fighting money 
laundering/terrorist  financing.  It  is  also  essential  that  the  laws  are  fully  and  effectively 
applied  by  credit  institutions  and  consistently  enforced  by  public  authorities  endowed 
with  sufficient  investigatory  and  supervisory  powers  and  disposing  of  effective  and 
dissuasive  sanctions.  Cooperation  and  effective  information  sharing  between  the 
multitude  of  relevant  authorities  are  key  in  addressing  ever-growing  cross-border  anti-
money laundering/countering the financing of terrorism concerns, including outside the 
Union.  The  analysis  showed  that  often  in  practice  these  essential  aspects  were  not 
sufficiently taken into account.  

1.  Findings related to credit institutions Anti-money laundering/Countering the 

financing of terrorism defences 

The  analysis  of  the  selected  cases  revealed  substantial  incidents  of  failures  by  credit 
institutions to comply with core requirements of the Anti-Money Laundering Directive, 
such as risk assessment, customer due diligence, and reporting of suspicious transactions 
and  activities  to  Financial  Intelligence  Units.  Cases  showing  prolonged  anti-money 
laundering/countering  the  financing  of  terrorism  compliance  deficiencies  often  also 
displayed  broader  anti-money  laundering/countering  the  financing  of  terrorism  related 
governance  flaws,  especially  in  the  control  function  as  well  as  in  some  cases  in  the 
attitude of senior management.  

Many  of 
from  an  anti-money 
laundering/countering  the  financing  of  terrorism  perspective,  without  establishing 

the  banks  examined  pursued 

risky  business 

20 

 
 
 
 
commensurate controls and risk management. Often, risks materialised long before credit 
institutions  identified  shortcomings.  Even  when  shortcomings  were  identified,  some 
banks took a long time to address them. 

Many  of  the  cross-border  banking  groups  analysed  organised  their  anti-money 
laundering/countering the financing of terrorism functions locally, with  an emphasis on 
compliance  with  local  rules,  without  supplementing  such  approach  with  a  rigorous  and 
consistent implementation of a group policy and control processes.   

While  some  of  the  shortcomings  identified  seem  to  have  been  mainly  driven  by 
negligence,  there  were  also  instances  where  employees  or  the  management  of  credit 
institutions seem to have supported money laundering/terrorist financing or deliberately 
lowered defences, in quest of profitable but highly suspect business. In a few instances, 
deficiencies were so severe that they ultimately led to the failure or closure of the credit 
institution or specific business.  

In  the  past  years,  however,  thanks  to  the  gradual  development  of  the  anti-money 
laundering/countering  the  financing  of  terrorism  legal  framework,  many  of  the  credit 
institutions  reviewed  have  taken  substantial  measures  to  improve  their  anti-money 
laundering/countering  the  financing  of  terrorism  compliance  systems.  They  have 
increased  their  risk  management  and  compliance  teams  and  are  working  on  their 
procedures and internal controls. Some of the related obligations are also expected to be 
clearer once the 5th Anti-Money Laundering Directive and the 5th Capital Requirements 
Directive  will 
anti-money 
laundering/countering  the  financing  of  terrorism  action  plan  adopted  by  the  Council  in 
December 2018, the European Banking Authority is currently working on more detailed 
guidance  for  the  application  of  the  relevant  rules.  These  actions  are  intended  to  clarify 
expectations vis-a-vis credit institutions and help them to better prepare for playing their 
part in fighting money laundering and terrorist financing. Yet, several aspects of the anti-
money  laundering/countering  the  financing  of  terrorism  framework  might  require  to  be 
reinforced through binding rules that leave little room for divergent interpretation. 

transposed.  Moreover, 

pursuant 

the 

be 

to 

2.  Findings related to actions by public authorities  

The analysis examined actions and responses by supervisory and other public authorities 
in  each  of  the  cases.  In  some,  public  authorities  were  effective  in  pre-emptively 
identifying  shortcomings  in  credit  institutions  and  requiring  remedial  action,  but  in  a 
number  of  other  cases,  public  authorities  only  intervened  after  significant  risks  had 
materialised  or  in  the  face  of  repeated  compliance  and  governance  failures.  The 
timeliness  and  effectiveness  of  subsequent  supervisory  measures  imposed  on  credit 
institutions varied greatly.  

A number of factors seem to have driven the effectiveness of supervisory action. Public 
authorities attributed different degrees of priority and resource allocation to anti-money 
laundering/countering the financing of terrorism related activities, which may explain the 
divergences in the degree of intrusiveness and intensity of supervision. Supervision was 
often  not  carried  out  with  sufficient  frequency,  while  in  other  cases  the  staff  of  the 
authorities  suffered  from  from  a  lack  of  relevant  experience.  An  additional  focus  of 
supervisory  implementation  and  convergence  in  anti-money  laundering/countering  the 
financing  of  terrorism  supervision  through  reviews  annd  training  by  the  European 
Banking Authority will be important in this respect. Several prudential authorities were 
also  uncertain  about  the  extent  and  the  modalities  of  factoring  in  anti-money 
laundering/countering  the  financing  of  terrorism  concerns  into  their  toolboox.  The 
European  Banking  Authority’s  work  on  guidelines,  as  well  on  the  integration  of  such 
concerns in prudential supervision is expected to inform supervisors’ work in the future.  

21 

 
 
 
the 

financing  of 

the  financing  of 

in  each  Member  State, 

their  cross-border  activities. 

In 
terrorism  supervisor  appeared 

The  decentralised  anti-money 
terrorism 
laundering/countering 
supervisory  framework  based  predominantly  on  a  host  country  approach  focused  on 
supervising  domestic  entities’  compliance  with  local  frameworks,  without  necessarily 
fact,  no  anti-money 
paying  attention 
to 
laundering/countering 
take 
responsibility  for  the  supervision  at  group  level,  relying  only  on  the  supervision  of  the 
local  business 
leaving  group  anti-money 
laundering/countering  the  financing  of  terrorism  policies  unsupervised.  Although  anti-
money  laundering/countering  the  financing  of  terrorism  group  supervision  has  been 
introduced  more  clearly  in  the  4th  Anti-Money  Laudering  Directive,  it  remains  to  be 
effectively  applied  in  practice  by  the  authorities.  The  framework  still  lacks  clear  group 
supervision  tasks,  any  specific  coordination  mechanism  and  joint  decision-making 
process  with  all  relevant  anti-money  laundering/countering  the  financing  of  terrorism 
authorities,  which  stays  in  contrast  with  the  effective  mechanisms  characterising  cross-
border  prudential  supervision  since  the  4th  Capital  Requirements  Directive  and  the 
establishment  of  the  Single  Supervisory  Mechanism.  The  formation  of  anti-money 
laundering/countering  the  financing  of  terrorism  colleges  and  their  oversight  by  the 
European Banking Authority will be important in this respect. 

therefore 

to 

In relation to cooperation and information exchange between relevant authorities, some 
cooperation and information exchange did  take place, but it was not  always timely nor 
effective.  Underlying  drivers  seem  to  have  included  lack  of  direct  contacts  between 
prudential  and  relevant  anti-money  laundering/countering  the  financing  of  terrorism 
supervisors and Financial  Intelligence Units, diversity of institutional setups throughout 
the  Union  and  related  complexity  of  coordination,  lack  of  resources  and  legal 
impediments to information sharing.  

Cooperation  with  third  country  anti-money  laundering/countering  the  financing  of 
terrorism authorities and enforcement authorities has proven difficult in some cases, and 
actions by third  country  authorities remain largely  unpredictable, despite  their potential 
major effects in the Union’s jurisdictions. Although the European Banking Authority has 
been attributed a strengthened role in coordination with third countries, such role is likely 
to remain limited given the nature of their powers.  

In  the  context  of  the  evolving  Anti-Money  Laundering  framework,  supervisory 
authorities  have  greatly  increased  attention  on  anti-money  laundering/countering  the 
financing  of  terrorism  issues,  particularly  in  the  last  two  years.  The  wave  of  recent 
incidents  also  led  to  some  targeted  amendments  of  the  relevant  legal  framework, 
particularly  with  respect  to  the  prudential  framework  and  the  enforcement  through  the 
European  Banking Authority. Many authorities  have been or are being reorganised and 
are  acquiring  additional  resources  and  new  expertise.  This  is  expected  to  continue  and 
should  be  supported  by  implementation  assistance  and  also  with  effective  information 
flows across the EU based on the future database of the European Banking Authority.  

3.  Outstanding structural issues 

Whereas  some  of  the  causes  underlying  the  events  analysed  have  already  been  or  will 
shortly  be  addressed  thanks  to  the  recent  changes  in  the  regulatory  framework,  the 
analysis underlines a number of outstanding structural issues. The findings in this report 
are  intended  to  inform  the  debate  about  how  the  anti-money  laundering/countering  the 
financing of terrorism framework could be further improved and to provide the basis for 
further discussions with  relevant stakeholders. 

Some  of  the  shortcomings  highlighted  in  this  Report  are  structural  in  their  nature  and 
anti-money 
have  not  yet  been 

addressed.  The  different 

approaches 

to 

22 

 
 
 
laundering/countering the financing of terrorism compliance by credit insitutions and to 
its supervision by national authorities are the consequence of minimum harmonisation at 
Union  level.  The  integration  of  anti-money  laundering/countering  the  financing  of 
terrorism  concerns  in  prudential  supervision  especially  in  cross-border  situations  is  not 
yet sufficiently well articulated in the prudential framework.  

This  results  in  a  degree  of  regulatory  and  supervisory  fragmentation  in  the  anti-money 
laundering/countering the financing of terrorism area that appears ill adapted in light of 
ever increasing cross-border activity in the Union and centralised prudential supervision 
in  the Banking Union. Weak links pose threats  to  the integrity of the Union’s financial 
system  as  a  whole  and  will  continue  to  exist  unless  it  is  ensured  that  all  entities 
implement  in  a  coherent  and  effective  manner  common  rules  and  are  subject  to 
supervision of the highest quality.  

This implies that the tasks of the various relevant authorities involved in the fight against 
money laundering and terrorist financing should be clearly spelled out and appropriately 
attributed,  while  ensuring  that  no  activities  involving  money  laundering/terrorist 
financing  risks  are  left  unsupervised.  Furthermore,  at  international  level,  cooperation 
with  key  third  country  authorities  should  be  more  structured  and  systematic,  ensuring 
concerted positions in the cooperation with third countries.  

to 

be 

the 

could 

given 

further 

harmonising 

anti-money 
Consideration 
laundering/countering the financing of terrorism rulebook both as regards the obligations 
of  credit  institutions  as  well  as  the  powers,  duties  and  tools  necessary  for  effective 
supervision. In particular, transformation of the Anti-Money Laundering Directive into a 
Regulation, which would have the potential of setting a harmonised, directly applicable 
Union regulatory anti-money laundering framework should be considered. Moreover, the 
anti-money  laundering/countering  the  financing  of  terrorism  cross-border  dimension 
would merit further development to bring it in line with the current degree of integration 
in the banking market. Different alternatives could also be envisaged in order to ensure 
high  quality  and  consistent  anti-money  laundering  supervision,  seamless  information 
exchange  and  optimal  cooperation  between  all  relevant  authorities  in  the  Union.  This 
may  require  conferring  specific  anti-money  laundering  supervisory  tasks  to  a  Union 
body. 

23