.
R

ussia’s invasion of Ukraine has forced the world to take a harder look at the mechanisms of international money laundering and, in particular, the role played by Europe. As the European Union is trying to mitigate Russian influence and assert its economic sovereignty, Brussels should take serious steps to ramp up its anti-money laundering efforts. Europol estimates the value of suspicious transactions in Europe to be equivalent to 1.3% of the EU’s gross domestic product (GDP). For too long, Brussels has been lenient and has relied on the United States to be the sole regulator of the global banking network. Brussels should now regain ownership and clean-up the European financial system.

In a damning 2021 special report, the European Court of Auditors found that there “is institutional fragmentation and poor co-ordination at EU level when it came to actions to prevent money laundering and terrorism financing and take action where risk was identified.” It also went on to affirm that “there is no single EU supervisor for money laundering and terrorism financing and the EU’s powers are split between several bodies and co-ordination with Member States is carried out separately.”

This report was published following two massive and unprecedented instances of European failures to tackle the issue. In what is known as the largest European money laundering scandal ever, Danske Bank—the largest bank in Denmark—allowed more than €200 billion in suspicious transactions from Russia, Estonia, Latvia, Cyprus, and the United Kingdom to take place between 2007 and 2015. A series of dramatic failures by the Danish and Estonian supervisory authorities, as well as the European Banking Authority, allowed the scheme to continue despite numerous warnings and whistleblower reports.

Another spectacular failure of EU anti-money laundering policies was made apparent in the Russian Laundromat case—a Moldovan scheme to move about $70 billion between 2010 and 2014 out of Russia through a network of banks in 96 countries.

The main reason behind these dramatic European failures is that Brussels has de facto handed over its anti-money laundering responsibilities to Washington. Historically, the United States has been the lead regulator in dollar-dominated global banking transactions. The challenge, however, is whether U.S. financial authorities are equipped to fulfil this task. As David Lewis, then the Executive Secretary of the Financial Action Task Force, put it, “Everyone is doing it badly.”

In 2020, the anti-corruption NGO, Global Financial Integrity (GFI), asked 19 money laundering experts to discuss their views on the U.S. Financial Crimes Enforcement Network’s (FinCEN) performance. Their response was revealing. Describing FinCEN as a “struggling” agency, the group of experts explained that its “technology is outdated, innovation is limited, and morale is poor.” Furthermore, the experts complained that “their repeated attempts to provide ideas for critical improvements were rebuffed and the agency’s approach has changed little over the years to the detriment of its ability to fight money laundering.”

When it comes to other geographic areas, the challenges are even greater. Despite the fact that numerous transactions from the Danske Bank and the Russian Laundromat scandals were processed by U.S. banks, U.S. authorities did not act. In rare instances when FinCEN does take action in Europe, it often does not observe the kind of professional standards one would expect from a Washington institution.

This is particularly evident in the Banca Privada d’Andorra (BPA) scandal, a case that is currently making headlines in Spain and Andorra. In 2015, FinCEN singled out BPA and Banco Madrid in a public denunciation, alleging that they both facilitated a network of money laundering agents. Following the publication of FinCEN’s report, both banks, which had around €7 billion assets under management, were liquidated in Andorra and Spain—causing massive losses to investors.

However, a completely different story soon emerged. In 2016, FinCEN withdrew its money laundering notices, and in 2019, Spanish courts found BPA and Banco Madrid not guilty of money laundering. In fact, the judge ruled and that Banco Madrid had actually improved its anti-money laundering procedures since its acquisition by BPA. Adding to the confusion, in 2022, former Spanish officials alleged that FinCEN was given inaccurate, manipulative, and misleading information by the Spanish and Andorran authorities who conspired to destroy the bank as it was part of the secretive “Operation Catalonia” initiative where Madrid took aim at BPA because one of its clients was Jordi Pujol, a standard-bearer of the Catalonian separatist movement. Key witnesses have also alleged that FinCEN demanded that the Andorran government surrender BPA to show their commitment to fighting money laundering. Madrid set up an official parliamentary enquiry this year to investigate this national scandal.

It is clear that the time has come for the European Union to start taking the issue of money laundering seriously and not let Washington regulate—in a questionable way—the European financial system. It is also high time Brussels scrutinized the financial practices of non-EU countries like Andorra, Monaco, and Lichtenstein, which are well-known hotspots for financial intrigue—attracting hucksters and gangsters from all over the world. For the EU to get money laundering under control, it must play a meaningful role in governing this space.

About
Joel Ruet
:
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.

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The EU Should Stop Outsourcing the Fight Against Money Laundering

Photo via Pixabay.

August 12, 2022

As the European Union is trying to mitigate Russian influence and assert its economic sovereignty, Brussels should start taking the issue of money laundering seriously and not let the U.S. regulate the European financial system, writes The Bridge Tank’s Joel Ruet.

R

ussia’s invasion of Ukraine has forced the world to take a harder look at the mechanisms of international money laundering and, in particular, the role played by Europe. As the European Union is trying to mitigate Russian influence and assert its economic sovereignty, Brussels should take serious steps to ramp up its anti-money laundering efforts. Europol estimates the value of suspicious transactions in Europe to be equivalent to 1.3% of the EU’s gross domestic product (GDP). For too long, Brussels has been lenient and has relied on the United States to be the sole regulator of the global banking network. Brussels should now regain ownership and clean-up the European financial system.

In a damning 2021 special report, the European Court of Auditors found that there “is institutional fragmentation and poor co-ordination at EU level when it came to actions to prevent money laundering and terrorism financing and take action where risk was identified.” It also went on to affirm that “there is no single EU supervisor for money laundering and terrorism financing and the EU’s powers are split between several bodies and co-ordination with Member States is carried out separately.”

This report was published following two massive and unprecedented instances of European failures to tackle the issue. In what is known as the largest European money laundering scandal ever, Danske Bank—the largest bank in Denmark—allowed more than €200 billion in suspicious transactions from Russia, Estonia, Latvia, Cyprus, and the United Kingdom to take place between 2007 and 2015. A series of dramatic failures by the Danish and Estonian supervisory authorities, as well as the European Banking Authority, allowed the scheme to continue despite numerous warnings and whistleblower reports.

Another spectacular failure of EU anti-money laundering policies was made apparent in the Russian Laundromat case—a Moldovan scheme to move about $70 billion between 2010 and 2014 out of Russia through a network of banks in 96 countries.

The main reason behind these dramatic European failures is that Brussels has de facto handed over its anti-money laundering responsibilities to Washington. Historically, the United States has been the lead regulator in dollar-dominated global banking transactions. The challenge, however, is whether U.S. financial authorities are equipped to fulfil this task. As David Lewis, then the Executive Secretary of the Financial Action Task Force, put it, “Everyone is doing it badly.”

In 2020, the anti-corruption NGO, Global Financial Integrity (GFI), asked 19 money laundering experts to discuss their views on the U.S. Financial Crimes Enforcement Network’s (FinCEN) performance. Their response was revealing. Describing FinCEN as a “struggling” agency, the group of experts explained that its “technology is outdated, innovation is limited, and morale is poor.” Furthermore, the experts complained that “their repeated attempts to provide ideas for critical improvements were rebuffed and the agency’s approach has changed little over the years to the detriment of its ability to fight money laundering.”

When it comes to other geographic areas, the challenges are even greater. Despite the fact that numerous transactions from the Danske Bank and the Russian Laundromat scandals were processed by U.S. banks, U.S. authorities did not act. In rare instances when FinCEN does take action in Europe, it often does not observe the kind of professional standards one would expect from a Washington institution.

This is particularly evident in the Banca Privada d’Andorra (BPA) scandal, a case that is currently making headlines in Spain and Andorra. In 2015, FinCEN singled out BPA and Banco Madrid in a public denunciation, alleging that they both facilitated a network of money laundering agents. Following the publication of FinCEN’s report, both banks, which had around €7 billion assets under management, were liquidated in Andorra and Spain—causing massive losses to investors.

However, a completely different story soon emerged. In 2016, FinCEN withdrew its money laundering notices, and in 2019, Spanish courts found BPA and Banco Madrid not guilty of money laundering. In fact, the judge ruled and that Banco Madrid had actually improved its anti-money laundering procedures since its acquisition by BPA. Adding to the confusion, in 2022, former Spanish officials alleged that FinCEN was given inaccurate, manipulative, and misleading information by the Spanish and Andorran authorities who conspired to destroy the bank as it was part of the secretive “Operation Catalonia” initiative where Madrid took aim at BPA because one of its clients was Jordi Pujol, a standard-bearer of the Catalonian separatist movement. Key witnesses have also alleged that FinCEN demanded that the Andorran government surrender BPA to show their commitment to fighting money laundering. Madrid set up an official parliamentary enquiry this year to investigate this national scandal.

It is clear that the time has come for the European Union to start taking the issue of money laundering seriously and not let Washington regulate—in a questionable way—the European financial system. It is also high time Brussels scrutinized the financial practices of non-EU countries like Andorra, Monaco, and Lichtenstein, which are well-known hotspots for financial intrigue—attracting hucksters and gangsters from all over the world. For the EU to get money laundering under control, it must play a meaningful role in governing this space.

About
Joel Ruet
:
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.