Central bank too soft on fines for money laundering, OECD report says

The Bank of Greece (BoG) continues to be especially lenient toward banks breaking money-laundering legislation, despite solid signs that the system to fight the legalization of income from criminal activities is grossly ineffective. In its consideration to raise the penalties imposed on banks for money-laundering activities, the Bank of Greece says that it took into account an increase in GDP, as well as the need to enhance the preventive nature of the sanctions imposed. However, it is quite doubtful whether higher penalties would actually improve prevention, especially if BoG retains its soft stance against law-breaking banks. Such a stance by BoG has resulted in some tough criticism and negative comments from the Organization for Economic Cooperation and Development (OECD). In a report on anti-money-laundering measures, the OECD notes that «the Bank of Greece has imposed certain fines but these are often in the form of non-interest deposits and are imposed in all cases of violations, irrespective of severity.» It added that no details about penalties are ever made public. «In practice, the fines imposed are the lowest stipulated by the law.» A few examples were provided in the report by an OECD task force looking into ways to combat money laundering: In 2006, a domestic bank was fined with a non-interest deposit of -266,500 for not having recorded the identity details of the owner of a safe-deposit box. Another bank was also fined the same amount for not fully complying with provisions on money laundering. The same bank was found to have violated the law in three separate cases, but was only fined once, with a non-interest deposit. Data provided by BoG, said OECD auditors, point to the fact that the penalty in the form of a non-interest deposit (the least severe fine) has been imposed on all cases of violations uncovered in the last three years. «Auditors doubt whether the fines imposed are appropriate for the seriousness of such violations.» But BoG believes that its fines are heavy enough and that the results are satisfactory. «Auditors are still in doubt about their effectiveness,» the report noted. The OECD underlined that Greek banks’ risk management systems are not sufficient, and that BoG has not provided them with concrete instructions as to identifying suspicious transactions that should be reported. Ineffective cooperation OECD auditors found that there are few signs of effective collaboration between BoG and foreign central banks, especially in Balkan states where a number of banks and other Greek businesses operate. The report said there is little evidence of BoG compliance with OECD standards. To this end, and based on OECD guidelines, a meeting was held yesterday in Thessaloniki between BoG Governor Nicholas Garganas and the governors of the central banks in Albania, Bosnia-Herzegovina, Bulgaria, Cyprus, Montenegro, the Former Yugoslav Republic of Macedonia, Romania and Serbia.