On 3 May 2018, the European Central Bank (ECB) published a letter from its chair, Daniele Nouy, to Sven Giegold MEP. In the letter Ms Nouy discusses money laundering incidents, information exchange regarding money laundering risks and the integration of those risks in ECB prudential supervision.

Ms Nouy notes among other things that:

  • there is a possible misalignment between the EU framework for crisis management in the financial sector (the Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation) and national insolvency laws. Under the EU framework, not only present illiquidity but also likely illiquidity in the near future are reasons that a bank might be declared as ‘failing or likely to fail’. By contrast, insolvency laws typically require present and actual illiquidity before insolvency proceedings can commence on liquidity grounds. This creates the risk of a “limbo” situation in which it is unclear how to proceed, such as in the event that a bank is declared as ‘failing or likely to fail’ but no resolution scheme has been adopted owing to a lack of public interest. For this reason, the ECB considers it necessary to amend the EU framework in order to ensure that liquidation is automatically triggered when a bank is declared as ‘failing or likely to fail’ but there is no public interest to start a resolution action;
  • looking forward, a more European approach to combatting money laundering should be considered, for example, through enhanced cooperation and exchanges of information between supervisory and anti-money laundering authorities. As anti-money laundering concerns both the supervisory and criminal/judicial spheres, reviewing existing EU anti-money laundering legislation may not suffice to ensure cooperation is smooth and all-encompassing. Establishing an EU anti-money laundering authority could bring about such a degree of improved cooperation; and
  • money laundering risks are incorporated into ECB prudential supervision via the supervisory assessment. In principle the single supervisory mechanism supervisory review and evaluation process methodology includes the components necessary for a comprehensive prudential treatment of anti-money laundering risk.