1 00118601 Emerging themes 2019 A4 AW v31 combined - Page 29



EMERGING THEMES 2019
The Commission’s solution
The Commission’s response, published less than two
weeks later, acknowledged that its rules are “not always
supervised and enforced effectively across the EU”.
Its proposed solution comprises a set of sweeping
amendments to the regulations governing the three
European Supervisory Authorities, in particular the EBA
and the Directive on the prevention of the use of the
financial system for the purposes of money laundering
or terrorist financing. Centrally, the Commission has
proposed that the EBA be mandated to take the
leading role in combating AML/CTF across the EU’s
financial system and be given authority to do so.
Specifically, the draft amendments would make
the EBA a centralised data hub for the receipt and
dissemination of AML/CTF information between
authorities. It would also be responsible for carrying out
reviews and risk assessments to test the competence
of EU authorities whilst also fostering cooperation with
third country AML supervisors. Furthermore, where it has
information indicating a material breach of AML rules,
the amendments would give the EBA power to request
that national authorities start investigations, adopt
individual decisions addressed to the particular
financial institution, and impose sanctions on the same.
Where an authority does not comply with such a formal
request, the EBA itself would be able to adopt a
decision addressed directly to a financial institution
requiring it to comply with EU law, including ceasing
relevant conduct.
MUKUL CHAWLA QC
Chief Criminal
Counsel, London
Photo to be
updated
In summary
How effective would the proposed amendments
really be?
Undoubtedly, the Commission’s proposals would bring
about positive change by replacing the current
patchwork of supervision with a centralised body that
has the power to ensure more effective implementation
of AML rules. However, until the EBA has drafted common
standards for combating money-laundering and
terrorist financing in the financial sector that have been
approved by Member States, financial institutions may
find themselves exposed to the direct sanction of the
EBA if it disagrees with action taken by, or the inaction
of, their national authorities. Whilst efficiency is unlikely
to be something the EBA will be able to achieve, the
same is true of the implementation of the Commission’s
draft proposals. EU initiatives are famously slow and it
seems unlikely that Member States will rush to give a
supranational body such wide reaching powers at the
expense of individual state sovereignty. As such, the
EU is likely to remain burdened with many of the AML
lacunae from which it currently suffers, albeit with a more
centralised approach to information sharing. Against this
backdrop it, of course, remains to be seen how the UK
will be affected by these proposals following Brexit.
NAOMI MILES
Associate, London
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