Austria, one of Europe’s major financial hubs, is aiming to turn the page on a series of money laundering scandals that have rocked the country’s banking sector.
Peter Weinzierl, the former CEO of Bank Meinl, a leading Austrian bank, was arrested in May after US authorities alleged he had helped facilitate the laundering of $170m. The money was thought to have been used by Odebrecht, a Brazilian construction firm, for bribes. In total, the global bribery and fraud scheme is said to have defrauded Brazil’s government out of over $100m in tax revenues.
Bank Meinl ultimately filed for insolvency, having had its banking license withdrawn by the European Central Bank (ECB) due to multiple anti-money laundering (AML) scandals. Appeals by the bank to retain its license while it appealed the ECB’s decision were rejected.
Raiffeisen Bank International, one of Austria’s biggest lenders, had also faced an investigation by the Financial Market Authority (FMA), which in 2018 led to a fine of more than $3m. This was imposed due to a breach of due diligence requirements on money laundering and terrorist financing.
The pattern of damning allegations against Austrian banks comes after its mutual evaluation by the Financial Action Task Force (FATF) in 2016 rated its money laundering investigation and prosecution effectiveness as ‘low’. Supervisory and preventative measures were judged to be ‘moderate’. In its executive summary, FATF stated that “Austria does not pursue ML as a priority and in line with its profile as an international financial center.”
Following this evaluation, Austria was subject to two enhanced follow-up reports aimed at assessing the country’s progress improving “technical compliance deficiencies”. Beneficial ownership policies were enhanced alongside a clearer approach to trustees. However, FATF noted Austria “has not yet comprehensively assessed the ML/TF risks associated with all types of legal persons created in Austria.”
Scandals like these have prompted the European Union to launch a new anti-money laundering watchdog. The Anti-Money Laundering Authority (AMLA) will supervise and take direct decisions on high risk entities, as well as monitoring national regulators. Alongside Austria, the Baltic states, Cyprus, Luxembourg, and Malta have all been called out as potential entry points for illicit money into Europe’s banking system.
Firms operating in Austria should develop and implement a risk-based program that accounts for national and international regulatory frameworks. Our article explains more about AML regulation in Austria.