The European Union may target banks with fines as high as 10 percent of their annual revenue if they fail to combat money laundering and terrorist financing.

Bank staff may also face penalties as high as 5 million euros ($6.8 million) under proposals adopted today by the European Commission, the 27-nation EU's executive arm. The rules would extend requirements for businesses to check the identity of clients and monitor their transactions, according to an e- mailed copy of the measures. They would also apply to lawyers, accountants, dealers in precious stones and gambling firms.

Current EU rules suffer from "inadequacies and loopholes," according to the draft law. Money laundering and terrorist financing present "a high risk to the integrity, proper functioning, reputation and stability of the financial system, with potentially devastating consequences for the broader society."

The Brussels-based commission warned last year that the EU faces "evolving threats" that required an upgrading of its rules against financial crime. The Financial Action Task Force, an international organization tasked with co-ordinating the fight against money laundering, has also called on governments to toughen their laws.

The draft EU rules would force companies such as banks and law firms to carry out checks on their customers if they carry out transactions worth at least 7,500 euros, compared with a 15,000 euro threshold under existing EU law.

The commission plans must be approved by national governments and by lawmakers in the European Parliament before they can take effect.

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