Is the European Union Doing Everything It Can to Force the Banks and the Financial Institutions to Comply With the Law?

By Roberto Miguel Rodriguez

This paper makes a contribution to research on the European anti-money laundering law by analyzing the manner in which the anti-money laundering legal regime in Europe. Such regulations are not implemented with the same rigor throughout the entire European Union and that this anti-money laundering mechanism is only as strong as its implementation in the weakest Member State. It also discusses the fines imposed the governmental authorities on the banks and financial institutions for their failure to apply the anti-money laundering rules and directives and concludes that as presently implemented such fines are not having the intended effects, but resulting in the affected institutions creating reserves to pay for such fines as if it were another cost of doing business.
Lastly, the paper recommends measures which the EU can use to strengthen the anti-money laundering mechanism such as increasing substantially the fines imposed on banks and financial institutions which fail to implement the regulations.

• Language: English
• Publisher: Lulu.com
• Release date: Jul 1, 2015
• ISBN: 9781329305052

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Is the European Union Doing Everything It Can to Force the Banks and the Financial Institutions to Comply With the Law?

Is the European Union Doing Everything It Can to Force the Banks and Financial Institutions to Comply With the Law?

By

Roberto M. Rodriguez

28 October 2013

ABSTRACT

This paper makes a contribution to research on the European anti-money laundering law by analyzing the manner in which the anti-money laundering legal regime in Europe, including the 1990 Strasbourg Convention and the EU First, Second and Third Directives, is implemented. The paper demonstrates that such regulations are not implemented with the same rigor throughout the entire European Union and that this anti-money laundering mechanism is only as strong as its implementation in the weakest Member State. It also discusses the fines imposed the governmental authorities on the banks and financial institutions for their failure to apply the anti-money laundering rules and directives and concludes that as presently implemented such fines are not having the intended effects, but resulting in the affected institutions creating reserves to pay for such fines as if it were another cost of doing business.

Lastly, the paper recommends measures which the EU can use to strengthen the anti-money laundering mechanism such as increasing substantially the fines imposed on banks and financial institutions which fail to implement the regulations, prosecuting criminally any officer or employee of a bank or financial institution who has cooperated with the money launderers and making a stronger effort to harmonize the implementation of the anti-money laundering directives throughout all the Member States.

Keywords: Anti-money laundering law, Enforcement, Harmonization

Table of Contents

Is the European Union Doing Everything It Can to Force the Banks and Financial Institutions to Comply With the Law?

1.INTRODUCTION

1.1 Objectives

1.2 Research Questions

2.LACK OF HARMONIZATION IN THE EUROPEAN UNION

3.THE REGULATIONS OF BANKS AND FINANCIAL INSTITUTIONS

4.THE CRIMINALITY OF MONEY LAUNDERING

5.THE ANTI-MONEY LAUNDERING LEGAL REGIME

5.1 First Directive

5.2 Second Directive

5.3 Third Directive

5.4 The 1990 Strasbourg Convention

5.5 Talks about the Future Fourth Directive

5.6 The Pre-Accession Pact

5.7 The implementation of the Directives at the National Level

6.CONCLUSIONS AND RECOMMENDATIONS

7.REFERENCES

1.    INTRODUCTION

This paper presents an analysis of the anti-money laundering system in the European Union and has been written with the following:

1.1 Objectives

To demonstrate that the current anti-money laundering regulation in the European Union (EU) is not enforced equally or with the same degree of rigor by all the Member States. In some countries, such as in the United Kingdom (U.K.), the directives and regulations issued by the EU are efficiently and rigorously enforced but in other countries they are either just starting to be applied or are not implemented with the necessary zeal. In a few countries there is no legislation making money laundering an offense and judges only can impose sanctions for those offenses which have been criminalized. Given the specific characteristics of the EU, the anti-money laundering mechanism is only as strong as its implementation in the weakest Member State, because if money launderers can successfully deposit their dirty moneys in a jurisdiction with weak enforcement, these moneys then can be wired at will throughout the banking system in the region without major consequences.

To demonstrate that banks and financial institutions are not applying current anti-money laundering regulations in the intended manner and that in many instances they are willing to pay a heavy fine instead of applying the laws. A few banks have already taken the step of putting moneys aside on a regular basis to create a reserve which could be used in the future to pay fines to the government because of their failure to implement the anti-money laundering regulations.

To recommend measures which the EU can use to strengthen the anti-money laundering system, such as substantially raising the amount of the fines imposed on the banks and financial institutions that neglect to enforce the regulations or violate the laws, criminally prosecuting the officers of these institutions who willingly cooperated with the money launderers or refused to report transactions which should have been reported and by harmonizing the enforcement of the anti-money laundering regulations and laws in all the Member States.

1.2 Research Questions

This study will address the broad issue