Europe's police agency unveiled Tuesday a bleak report showing organised crime gangs and terror groups may be laundering billions of euros a year unchecked, despite banks trying to raise the alarm.

Banks and other private financial institutions reported just under a million suspicious transactions to authorities in the 28 EU member states in 2014, Europol said.

While the figures do not go beyond 2014, there has been a "steady increase in reporting volumes," the report said.

Warning "the scale of financial crime is enormous, yet largely unquantifiable," the agency revealed transactions highlighted by just 10 national financial crime units had involved a staggering 178.8 billion euros ($212.9 billion) in 2014.

"Based on an EU GDP of around EUR 14 trillion, these equate to between 0.7-1.28 percent of annual EU GDP," the report noted.

Most of the money was believed to have come from organised crime groups, with terror organisations accounting for less than one percent of all the suspicious transactions.

And some 65 percent of all cases were reported by Britain and The Netherlands.

Yet, less than 10 percent were subjected to any further investigation, and in only one percent were the funds finally confiscated by European authorities.

"These stark findings make it impossible not to question why the success rate of the system is so poor and what can be done about it," said Europol executive director Rob Wainwright.

In a bid to hone the bloc's anti-money laundering abilities, he advocates setting up centralised bank registers as well as establishing one central EU financial intelligence unit.

Part of the problem was that "the anti-money laundering regime still operates at a domestic level, and has not yet fully adjusted to the reality" of what is an international battle, he argued.

And even though there is increasing cross-border cooperation between national police forces "significant barriers in international cooperation and information exchange remain, revealing the urgent need for supranational overview in increasingly global markets," Wainwright said.

The increasing popularity of online services and internet payment schemes means the reaction of authorities is "simply too slow to stem the flow of funds which move globally almost instantly," he added.

The report proposed that Europol, based in The Hague, could act as "a pan-European hub for financial intelligence" by integrating information from multiple sources across Europe and beyond.

It also suggested among its 10 recommendations that there should be a close monitoring of 500-euro bills, which are a believed to be a favourite of criminals. The pink-coloured notes, the highest denomination in the eurozone, will no longer be issued after the end of 2018.