Europe’s dirty money defenses not up to the task, says Nordea

Bloomberg

Next month, the euro zone will get its eighth global systemically important bank, Nordea Bank AB. Its management is now asking authorities in the bloc to consolidate anti-money
laundering defenses after a spate of scandals rocked confidence in the finance industry and its regulators.
Julie Galbo, chief risk officer at Nordea and a former regulator at the Danish Financial Supervisory Authority, says the problem with the current setup is that it relies on too many different legal interpretations and national agencies.
As an example of holes in the system, Galbo notes that if one bank stops doing business with an entity it has identified as suspicious, there’s very little in Europe right now preventing another bank from picking up that business.
“You don’t have a body in Europe that harmonises these things, you don’t have a body in Europe that supervises anti-money laundering implementation,” Galbo said in an interview. The “biggest effect” from coordinating regulation and monitoring at a European level would be “that you avoid arbitrage.”
Europe has seemed unprepared for the stunning revelations of large-scale money laundering apparently committed under its watch. Danske Bank A/S, Denmark’s biggest bank, is currently the target of criminal investigations in its home country and Estonia amid allegations it was used to launder between $8 billion and
$9 billion in illicit funds between 2007 and 2015, mostly from Russia. A Wall Street Journal report said total flows through Danske’s Estonian unit may have reached $150 billion over the period, though Danske and Estonian authorities have cautioned against reading too much into that figure.
Nordea, which has itself been fined for money-laundering breaches in recent years, is just the latest voice calling for a rethink of Europe’s anti-money laundering measures. In May, EU First Vice President Frans Timmermans, Vice President Valdis Dombrovskis and Commissioner Vera Jourova asked Europe’s three supervisory agencies and the European
Central Bank to find ways to
improve cooperation between bank supervisors and anti-money laundering authorities.
An August 31 EU analysis obtained by Bloomberg highlights some of the problems and underlines the need for greater centralisation of powers to fight financial crime.
“As a supervisor working across many different national jurisdictions, the ECB must apply differently transposed EU legislation, potentially resulting in differences as to what input the ECB is entitled to receive from the AML supervisors and how such input can be integrated into the prudential supervisory processes.”