The EU is to set up a stand-alone agency to crack down on money laundering across Europe where major banks have been hit by a wave of dirty money scandals.
Many cases have involved northern countries such as Denmark, Sweden and Finland with a reputation for playing by the rules, but criminal gangs and terrorism are also a central concern.
Revelations often involve bank subsidiaries based in the EU's Baltic states, through which rich Russians evading taxes and sanctions have allegedly illegally funneled money.
The European Commission said the patchwork of regulation by national authorities was no longer effective and called for the creation of a new central entity, the Anti-Money Laundering Authority (AMLA).
"It's no longer enough for member states to do separately what they are doing (to fight money laundering). We need active supervision and coordination," said Mairead McGuinness, the EU commissioner for financial services.
"Behind that money there is also incredible criminal activity, which damages society, whether it's drug trafficking or prostitution or whatever is involved with the dirty money," she told reporters.
According to the European police agency Europol, suspicious financial activities account for about one percent of the EU's more than €13 trillion gross domestic product.
The new agency is to be fully staffed with 250 people by 2026, the EU said.
It would also have real teeth as it will directly supervise financial sector entities that face the highest risk of money laundering and terrorism financing.
The agency also aims to tighten and more closely align EU-wide money-laundering rules after several member states failed to implement previous changes in EU laws.
The draft laws will also propose to increase scrutiny on cryptocurrencies such as bitcoin that have become a privileged conduit for financial crime.
The proposals will now be taken up and negotiated by the EU's 27 member states, where the plan has strong backing, and the European Parliament.
"The biggest risk is that we are adding just one additional layer of complexity and creating a new conflict of competences," said German MEP Markus Ferber of the centre-right EPP group.
"To avoid that, it must be crystal clear that the new authority firmly calls the shots," he added.
The biggest recent scandal involved Denmark's Danske Bank, which is under investigation in Estonia, Denmark, the US, Britain and France, accused of helping launder about $230 billion, primarily by Russians, through its branch in Estonia.
In another case, Latvia's third-largest bank ABLV was shuttered in 2018 after US accusations of laundering for Russians and flouting sanctions against North Korea.
Without the change in laws, the commission has very limited enforcement powers.
McGuinness said 23 member states are under watch by Brussels for falling short in enforcing existing anti-money-laundering laws.