After Malta, Denmark and Latvia scandals, ECB boosts money laundering scrutiny

Following a string of moneylaundering scandals across Europe – including Malta’s Pilatus Bank debacle – the European Central Bank (ECB) yesterday said that it would be increasing its supervision of high-risk banks.

Addressing the European Parliament yesterday, ECB chief supervisor Danièle Nouy said that a network of intelligence-sharing watchdogs was set to be launched – the first concrete response by the ECB’s Single Supervisory Mechanism (SSM), the eurozone’s top banking watchdog.

She said the SSM was to set up its own anti-money laundering (AML) office that would collect and share information from its supervisors and other authorities.

The ECB has often said it lacks the necessary mandate to pursue money-laundering cases, which are normally dealt with by the authorities in individual member states.

Nouy said, however, that the SSM’s new initiative was “in full respect of the allocation of anti-money laundering responsibilities within the current legal framework.”

The move follows money laundering scandals in Malta, Denmark and Latvia that have embarrassed EU officials, with US authorities exposing the illegalities taking place right under their noses.

Nouy said that “the AML Office will set up and chair ‘an AML Network’ among Joint Supervisory Teams in charge of the banks whose business model leads to a high level of money laundering risks,”

Denmark’s Danske Bank was the most high-profile bank to become embroiled in a money laundering scandal this year after revelations from a whistleblower. Danske Bank has acknowledged that its money-laundering controls in Estonia were insufficient, but in a report issued in September said its board, chairman and chief executive had not breached their legal obligations.

Malta’s Pilatus Bank and Latvia’s ABLV were also accused of laundering money by US authorities, exposing how European watchdogs had failed to identify and tackle the problem.

Pilatus Bank was shut down by the ECB this month and its chairman is facing up to 125 years in a US prison for evading sanctions and money laundering.

ABLV, which denies wrongdoing, was declared failed by the ECB and put into liquidation after US authorities accused it of large-scale money laundering and facilitating the breach of sanctions against North Korea.

Pilatus Bank, meanwhile, was officially closed down on 5 November after the European Central Bank revoked its licence two years after it was first implicated in alleged money laundering breaches.

Last March, Pilatus chairman Ali Sadr Hasheminajad was arrested in the United States for alleged sanctions-busting and money laundering. After the arrest, the MFSA froze the assets of the bank and recommended the withdrawal of its licence.

The European Banking Authority subsequently found “general and systematic shortcomings” in the application of anti-money laundering directives.