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The EU should use regulations in preference to directives wherever possible, given the need for money laundering and terrorist financing policy legislation to be implemented coherently at Member State level, says Mihails Kozlovs, the member of the European Court of Auditors responsible for the report.  

A special report from the European Court of Auditors published on Monday has concluded that the EU’s efforts to combat money laundering and terrorist financing is fragmented, poorly coordinated and shows weaknesses. It fails to ensure a coherent approach and a level playing field.

“EU-level weaknesses with regard to money laundering and terrorist financing need to be addressed, and the EU’s supervisory role significantly strengthened”, said Mihails Kozlovs, the member of the European Court of Auditors responsible for the report. “Much more needs to be done to ensure that the EU law is implemented promptly and coherently. For a start, the EU should use regulations in preference to directives wherever possible, given the need for legislation to be implemented coherently at Member State level”.

The report audited the Commission (mainly the department for financial stability and capital markets), the European Banking Authority and the European Central Bank. 20 members states out of 27 also provided answers to an electronic survey from the Expert Group on Anti-money Laundering and Counter Terrorist Financing. The survey touched on aspects of money laundering and terrorist financing policy implementation at national level, such as risk assessment and transposition.

“Although our audit focus is the banking sector, the conclusions may be relevant to money laundering and terrorist financing policy for other sectors too,” the authors wrote.

Europol estimates that the value of suspicious transactions in the EU amounts to the equivalent of about 1.3% of EU GDP. Globally, the figure is estimated to be close to 3% of world GDP. Recent data shows that over 75% of suspicious transactions reported in the EU came from credit institutions in more than half of the member states.

The report included a series of recommendations that it suggests should be implemented by the end of 2021 or early in 2022. These include the European Commission improving its risk assessments and ensuring the consistent and immediate effect of anti-money laundering and countering the financing of terrorism legislation.

The European Banking Authority and European Commission should make better use of their breach of union law powers for money laundering and terrorist financing, the report states. And finally, the report suggests that the banking authority and the European Central Bank should work to better incorporate money laundering and terrorist financing risk into prudential supervision.