In the news: Money laundering in Europe

Will the news of money laundering in banking institutions across Europe lead to new supervision powers? 
by Bethan Rees

Dutch multinational banking and financial services corporation ING is in the midst of a shakeup, as its chief financial officer, Koos Timmermans, announced on 11 September 2018 that he will step down from his role. According to DutchNews, this is in the wake of a money laundering scandal, which saw ING pay an out-of-court settlement of €775m for breaking the rules on suspicious transactions. Prosecutors say ING had not identified some of the ultimate beneficial owners of accounts and didn’t notice unusual transactions that ran through them.

The news site reports that Timmermans was responsible for ING when the rules were being broken. Chairman of ING’s supervisory board, Hans Wijers, said in a statement that “given the seriousness of the matter and the many reactions among stakeholders … we came to the conclusion it is appropriate that responsibility is taken at executive board level". 

The public prosecution department said that the money laundering took place between 2010 and 2016. The news site reports that after the scandal broke, MPs wanted to know why no ING staffers would face criminal proceedings for their role in the laundering.

DutchNews article
There’s moreING isn’t the only European institution to be associated with money laundering issues. A Financial Times podcast this week titled ‘Europe's widening money laundering scandal’, hosted by financial editor Patrick Jenkins, hears views from banking editor Martin Arnold and Brussels correspondent Jim Brunsden on the recent events in Europe and what regulators plan to do about it. 

Arnold relays the ING story, saying that the Dutch prosecutor “found massive inadequacies in the way that the bank monitored transactions of its clients”. Some examples of money laundering at ING as heard by the prosecutor include VimpelCom (now known as VEON), a Russian-owned mobile phone operator, which paid bribes (possibly as much as US$183.5m) to Gulnara Karimova, daughter of the former President of Uzbekistan. Another example is a women’s lingerie company based in Curacao that was laundering €150m through ING. Arnold adds: “Prosecutors expect that there was quite a bit of money laundering going on there and not very much women’s underwear sales.” 

Brunsden explains that for several months now, Brussels has moved money laundering high up on its agenda, nudged up by the allegation of institutional money laundering by Latvian bank ABLV. Prosecutors accused the bank of being involved in funnelling funds to the North Korean nuclear programme in February 2018. Brunsden explains that this was a trigger for action. “At that moment there was a sense that a big gap had been revealed in financial supervision,” he says. 

He goes on to question why the European Banking Authority (EBA) didn’t do more, to which Arnold responds: “The EBA will say ‘yes we’ve had these powers in theory, but we’ve only had one person and a dog trying to stay on top of all this’. In fact, a recent reflection paper estimates that EBA has the equivalent of 1.8 full time staff members working on anti-money laundering issues. In order to properly stay on top of the whole of the European banking system and try to stop dirty money flowing through, they’re going to need a lot more resources.”

Financial Times podcast
The European Commission recommendationIn light of the money laundering issues in European banks, the European Commission has recommended some changes to banking supervision, reports Francesco Guarascio for Reuters. 

EU officials say that the EBA should add ten officials to its team to help combat money laundering in the 28 EU states – it currently has just two officials on the team looking into these issues. It’s recommended that the EBA will have a bigger say on the activities of national banking supervisors, who could be subject to “stress tests” on their application of the money laundering rules, Guarascio reports. 

European Commission President Jean-Claude Juncker has proposed that the EBA be allowed to request investigations of a European country’s banks by national anti-money-laundering supervisors, and also create a new committee bringing those supervisors together into one place. Guarascio adds that this proposal needs approval of EU states and lawmakers. 

The phrase ‘money laundering’ is not a positive association for financial services in any country, but it looks as though the European Commission is on a mission to strengthen powers to combat this, using the EBA as a main source of authority.  

Reuters article 

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Published: 14 Sep 2018
  • Compliance, Regulation & Risk
  • The Review
  • Anti Money Laundering
  • Regulation
  • Europe
  • Banking

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