Banks are the gatekeepers of the financial system, acting as the crucial access point to financial and payment services. As such, they are by far the largest contributors of suspicious activity/transaction reports to public authorities. With this in mind, a trade body called the European Banking Federation has set out its plan to help the European Union fight money laundering.

This month's report, entitled Lifting the Spell of Dirty Money, argues: "One of the main reasons why the framework has proven to be ineffective in many cases is that it is easier to address financial crime regulations through a tick-the-box rule-based exercise instead of an effective and well informed exercise in risk mitigation and suspicious activity reporting. This needs to change. The existing rules are disproportionate, inflexible and provide neither obliged entities nor supervisors with the appropriate tools, which should be financial crime risk-based."

The report uses the word 'framework' so loosely and broadly as to render it almost meaningless. It begins by mentioning the existence of a money-laundering framework. It says that it should be 'realigned.' It adds that it has shortcomings that people have so far disregarded and ought to be 'harmonised.' A "framework for public/private collaboration" exists somewhere in the EU, but the EBF does not say whether this is the same thing as the money-laundering framework that it dislikes, or something different. The EBF has proposals for a "robust future AML/CFT framework" and decries the "fragmentation of the legal framework" that exists today.

Centralisation - the eternal watchword

Despite the incoherence of its terminology, the EBF allows one thing to shine through the whole document: its love of EU-wide centralisation. One obvious token of this is its insistence on all six Money Laundering Directives being rolled up into a 'regulation' - which in EU parlance is a piece of legislation that enshrines itself directly into the laws of all EU countries with no room for governmental interpretation. It wants, moreover, to "support efficient EU/EEA co-ordination of national AML/CFT supervisors," the better to make the EU "a credible counterpart in international co-operation, in particular towards the US."

Muttering vaguely about "direct supervisory powers over banks," the EBF seems to suggest that EU banks ought to be supervised directly from Brussels. The flowery language that it uses, however, leaves some room for doubt on this score.

When criminal gangs read STRs

Ever since 2003, British policemen have been worried about the Italian Mafia being able to read all the suspicious transaction reports generated in the UK. This is because the Italian police - many of whom are Mafiosi - have this right. The EBF wants to exacerbate this problem by rendering national financial intelligence units "interconnected to avoid duplication," with the formation of an EU-wide FIU. Part of its motivation for wanting this appears to be political; it looks forward to "a strong EU united voice in the Egmont Group," although it does not say why this would be a good thing.

Despite the opportunities that this policy would offer to criminal gangs that dominate or infiltrate the police forces of many EU countries, the EBF believes that it would "reduce the risk of criminals exploiting weaknesses across jurisdictions," just at the point when British police think the exact opposite.

Also in the sceptical camp is David Hotte who, as head of financial security at Banque Populaire, told a gathering of the AMLP Forum some years ago that the gypsies were a powerful force in France with access to all public records on individuals. (Wikipedia states that the Hornec Brothers Gypsy gang, also called 'the H' or the 'Montreuil gang,' is the most influential criminal group in the French capital.) He said that anyone who crossed them - such as any money-laundering reporting officers (MLROs) who might mention them in suspicious transaction reports - had no place to hide in France. He regaled the audience with stories about French MLROs being sent to New Caledonia in the South Seas to start life afresh in safety.

EU legal and organisational initiatives

The EU is setting up a European Public Prosecutor’s Office and hopes to make it operational at the end of this year. It is presently searching for a security assistant (deadline for applications: 27 April) and a financial investigator (6 May). The EBF is positively tongue-tied in its enthusiasm for this, calling it "a potential way forward to explore in the context of AML." It will start off by tackling cross-border crime against the EU budget (i.e. corruption, cross-border value-added-tax fraud and other types of fraud). The EBF is looking forward to EU-wide money-laundering prosecutions as well.

On the subject of clashes between the Money Laundering Directives and the General Data Protection Regulation, the EBF notes that it is unclear about the degree to which firms can rely on ‘legitimate interests’ (see GDPR Article 6(1)(f)) to share AML intelligence with each other.

At one point the EBF seems to call for the informal blacklisting of HNW clients.

"Banks would welcome being able to share between regulated entities, at a minimum within Europe, a list of clients with whom relationships have been terminated or who have been refused banking services based on specific financial crime reasons."

At another point the EBF indulges in a pure fantasy: "The EBF fully supports the principles of data protection and privacy that safeguard the protection of customer data, therefore ensuring trust towards regulated financial entities." In fact the EU's General Data Protection Regulation ensures nothing of the kind; banks are widely distrusted throughout the EU and have been ever since 2008.

The EBF likes the idea of banks sharing their transactional data with each other by means of a trustworthy network run by a separate organisation at arm's length. In Holland, the biggest banks (under the direction of various government departments) have been persuaded to collaborate with each other to create "the first shared transaction monitoring utility on payment data." This mechanism is still being tested. It aims to cross-check transaction data between the different databases of the participating banks, identifying criminal patterns without those banks having access to the data of each others’ clients. The platform is called the Transaction Monitoring Netherlands (TMNL) and it sits on top of each bank’s know-your-customer (KYC) reporting systems.

The EBF believes that the sharing of aggregated data with the objective of fighting against criminals 'should' be possible under existing laws, including the GDPR. The exchange of operational data is, however, only possible at this stage in the field of terrorist finance or where national public-private partnerships have supplemented EU law with national legal 'gateways.' The EBF wants to see this change.

UBO data

Another bugbear for the EBF is the poor quality of national registers of ultimate beneficial owners, the efficacy of which it wants public authorities to check. The fourth and fifth Money Laundering Directives force banks to report any discrepancies that they spot information about beneficial ownership held on public registers and their own information. The EBF thinks that this is not an efficient use of resources and it would be more effective if national authorities were to verify information about beneficial ownership themselves.