If the U.S. financial sector is reeling from recent events such as the debacle at Fannie Mae - where the mortgage financing concern recently paid $400 million in penalties to settle charges of faulty accounting - and numerous examples of fraudulent backdating of executive stock options contracts, it's not alone.Across the Atlantic, Europe is now seeing many of its white-collar colleagues put in the spotlight.

In May, a Dutch court handed down fines over the Royal Ahold supermarket accounting fraud - which reached $30 billion - and more recently, investigations continue into Great Britain's Equitable Life Assurance Society, where a policy scandal nearly brought down the 244-year-old institution.

Following an exhausting inquiry that spanned more than two years and was subsequently compiled in an 818-page report, the ELAS, which was founded in 1762, was found to have made exorbitantly large payments to holders of its with-profits policies (an insurance contract that shares in the profits of the insurance company) and nearly collapsed in 2000.

To remain solvent, the company was forced to cut the pensions and retirement savings of policyholders. As a result, more than 1 million policyholders in the U.K. and more than 15,000 in other EU countries, notably Ireland and Germany, incurred massive losses to their pensions, savings and investments.

Equitable Life launched a £4 billion ($7.4 billion) legal action, seeking £2 billion from 15 ex-directors whom it claimed were negligent, and demanding a similar sum from former auditor Ernst & Young, claiming that it signed off on the company's accounts without warning of the problems that led to its collapse.

Over the past few months, the European Parliament's Committee of Inquiry into the Collapse of Equitable has been conducting active investigations on the state of oversight and standards in the insurance industry.

Ireland's Mairead McGuinness, of the European People's Party/Christian Democrats and chair of the Inquiry Committee, has noted the "difference between victims ... in different countries, with a perception that Irish policyholders and other non-U.K. policyholders were discriminated against."

Elemér Terták, director for financial institutions in the Internal Market Section of the European Commission, reported on the EU's aim for a single market for insurance, using directives intended to give consumers confidence to shop across borders by knowing that all insurers were subject to minimum standards.

He explained that the Third Life Directive of 1992 established a common framework for supervision, and two years later, the U.K. notified Brussels of its implementation. A law firm charged with inspecting the implementation process had approved the progress.

However, the directive did allow EU states a fairly wide margin of maneuver as to how to supervise and regulate their insurance industries, said Terták, in reference to a letter, dated August 2001, from the then-EU commissioner Frits Bolkestein. The letter confirmed that, "The European Commission has no direct role in the supervision of individual insurance undertakings in member states. The EU insurance directive does not confer specific supervisory powers upon the commission ... which falls to the responsibility of each member state ... to effect this national supervisory responsibility."

Terták pointed out that "any problems appear to be ... of practical application [of the relevant directive], rather than of transposition." The European Commission was currently considering whether to table a proposal for a directive to require each EU state to establish insurance guarantee plans covering both domestic and other EU customers.

A decision was expected in the coming months, Terták said.

The parliamentary committee rapporteur, Diana Wallis, will issue her recommendations in her interim report, which is due after the summer break. Other options open to the committee could be to push for legislation from Brussels requiring compensation from governments in any future cases of lax regulation that damage the single market for financial services but cover a wider field of victims.

Another option could be to try to force the British government to pay compensation, at least to the Equitable's non-British victims. Ultimately, the European Parliament could actually instruct the European Commission to open international court proceedings to seek damages against any relevant institutions or individuals within the British authorities.

If sued, the stakes for the British appear to be high. Potential liability could be as high as $10 billion, or even more. However, the chance of the EU going to court against one of its own member states is thought to be highly unlikely.

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