Rethinking anti-money laundering supervision: The Single Supervisory Mechanism - a model for a European anti-money laundering supervisor?
| Author | Dominik D Schlarb |
| DOI | 10.1177/20322844221085949 |
| Published date | 01 March 2022 |
| Date | 01 March 2022 |
| Subject Matter | Articles |
Article
New Journal of European Criminal Law
2022, Vol. 13(1) 69–90
© The Author(s) 2022
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DOI: 10.1177/20322844221085949
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Rethinking anti-money
laundering supervision: The
Single Supervisory Mechanism -
a model for a European
anti-money laundering
supervisor?
Dominik D Schlarb
University of Luxembourg, Esch-sur-Alzette, Luxembourg
Abstract
Whereas the prudential supervision of credit and other financial institutions has been a core policy
concern of the EU legislator in the aftermath of the 2008 Financial Crisis, the supervision of private
sector entities within the European Anti-Money Laundering framework has been subject to less
attention. However, on 20 July 2021, the European Commission intervened and published legislative
proposals for two regulations and one directive, meant to boost the European response to the
phenomenon of MoneyLaundering. This contribution –after havingpointed out the shortcomings of
the current legislative framework –pursues a twofold objective: first, offering an in-depth analysis of
whether the Single Supervisory Mechanism, set up within the banking union for the purposes of
prudential supervision, might be a useful precedent of Europeanisationto build up upon in matters of
Anti-Money Laundering supervision, and second, commenting the possible approaches to be taken
when setting up an EU level Anti-Money Laundering supervisor. The systemic cross-border im-
portance of AML–beyond the euro area –warrants the establishment of a new EU agency specialised
on AML, invested with more supervisory powers than EBA, ESMA and EIOPA and taking over the
direct supervision of high-risk obliged entities, while indirectly supervising the remaining entities. It is
argued furthermore that such institutional reform should necessarily be accompanied by the es-
tablishment of a Single Rulebook, which enjoys direct applicability across the EU.
Corresponding author:
Dominik D Schlarb, University of Luxembourg, 2 Avenue de l’Universit´
e, Esch-sur-Alzette 4364, Luxembourg.
Email: dominik.schlarb@aol.fr
Keywords
Anti-money laundering, supervision, European integration, maximum harmonisation, single
supervisory mechanism, banking and financial regulation
Introduction
Headlines such as ‘Wirecard processed payments for mafia-linked casino’
1
or ‘Azerbaijani
laundromat: Grand corruption and how to buy influence’
2
hit the news regularly, underscoring the
paramount importance of the global fight against money laundering, the latter being defined as the
concealment, disguise, conversion, or transfer of property deriving from criminal activity.
3
Ac-
cording to the Commission, approximately EUR 160 billion of proceeds of crime are laundered
every year,
4
originating from serious crimes, often with links to organised crime groups.
5
In re-
sponse, the core aims of anti-money laundering (AML) regulation are to facilitate the sanctioning of
criminal offences and to protect the legal economy, as a gatekeeper, against criminal actors.
6
Nevertheless, without proper supervisory scrutiny it is unlikely that the relevant AML obli-
gations will be applied thoroughly throughout the private sector.
7
Supervision, in that sense, can be
defined as the steps taken by competent authorities to ensure compliance by the private sector with
legal obligations having as their objective the prevention of the use of the financial system for
purposes of money laundering.
8
Risk-based supervision broadly relies on a four-stage cyclical
process: As a first step, competent authorities identify the risks of money laundering prevalent in
a given country and on the relevant markets. In a second phase, it is assessed to what extent each
private sector entity is exposed to the identified risks, which allows to gain a holistic view of the
exposure to risks of money laundering. At a third stage, informed by the risk assessment, the
supervision –on-site and off-site –of each obliged entity is planned in terms of adequate staffing and
resources, and carried out to mitigate the identified risk exposure. A last step is the constant review
of supervisory action in the light of its outcomes, which in turn regularly leads to the identification of
new risks of money laundering –thereby triggering a new cyclical supervisory process.
9
Yet, whereas the prudential supervision of credit and other financial institutions has been a core
policy concern of the EU legislator in the aftermath of the 2008 financial crisis, the supervision of
private sector entities within the EU AML framework has been subject to less attention. Not-
withstanding Article 8 of Directive (EU) 2015/849 introducing an assessment of the risks of money
1. Financial Times, Johnson and McCrum (2020), https://www.ft.com/content/b3eb9a37-ed8a-4218-9064-685b181740f0.
2. Transparency Internati onal (2017), https://www.transpar ency.org/en/news/azerbaijani-la undromat-grand-corruption -
and-how-to-buy-in fluence.
3. Actus reus elements of the money laundering offence, Art. 3(1)(a) and (b), Directive (EU) 2018/1673.
4. European Commission, COM(2021) 421 final, p. 1.
5. European Parliament, Resolution of 10 July 2020 on a comprehensive Union policy on preventingmoney laundering and
terrorist financing –the Commission’s Action Plan and other recent developments (2020/2686(RSP)), p. 4.
6. Benjamin Vogel and Jean-Baptiste Maillart, National and International Anti-Money LaunderingLaw: Developing the
Architecture of Criminal Justice, Regulation and Data Protection (Intersentia, Cambridge, 2020), p. 1025.
7. Ibid., p. 1004.
8. Melissa Vanden Broek, Preventing money laundering: A legal study on the effectiveness of supervision in the European
Union (Eleven International Publishing, Den Haag, 2015), p. 469.
9. Joint Committee of the European Supervisory Authorities, Joint Guidelines on the characteristics of a risk-based
approach to anti-money laundering and terrorist financing supervision, and the steps to be taken when conducting
supervision on a risk-sensitive bases: The Risk-Bases Supervision Guidelines (ESAs 2016 72), pp. 5-6.
70 New Journal of European Criminal Law 13(1)
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