EBA AML/CFT Newsletter Issue 7

Our findings suggest that de-risking, if unwarranted, has a detrimental impact on the achievement of EU’s objectives, in particular in relation to fighting financial crime effectively and promoting financial inclusion, competition and stability in the single market.

We organised an online event on 11 March to mark the publication of our Opinion and report, that attracted more than 200 participants.

To address these issues, the ESAs set out a series of recommendations, including the need for further convergence in addressing ML/TF risks in a digital context (see recommendation 6).

In January we launched our central EU AML/CFT database, EuReCA, the European Reporting system for material AML/CFT weaknesses. EuReCA is based on the draft Regulatory Technical Standards (RTS) published in December 2021 that define key terms and type of information to report to EuReCA. EuReCA brings together in one place information from competent authorities (CAs) across the EU that relates to serious AML/CFT shortcomings in individual financial institutions, and the measures CAs have taken to rectify those shortcomings.

EuReCA will be key to strengthening AML/CFT supervision and coordinating supervisory efforts across the EU.

In February we published the findings of our assessment of competent authorities’ responses to the 2020 Luanda Leaks. We found that competent authorities across the EU adopted significantly different approaches for identifying and tackling the risks highlighted by the information contained in the leaks, and that these approaches varied beyond what the EBA would have expected under a risk-based approach.

However, we also identified good practices, including steps by competent authorities to put in place dedicated processes to identify and swiftly react to instances of crystallised ML/TF risk. The EBA Risk-Based AML/CFT Supervision Guidelines can also support competent authorities to better identify, assess and manage emerging ML/TF risks holistically and across all areas of supervision.

Considering the potential detrimental effect of ML/TF risks on the institutions’ financial soundness, the revised framework proposes an integrated approach to factor ML/TF risks from a prudential perspective in the relevant SREP areas and to foster cooperation between prudential and AML/CFT authorities, while avoiding duplications or interference between supervisory measures. Such framework has been set up to enhance the overall supervisory view on institutions, their viability, and risks.

The final revised SREP Guidelines will enter into force on 1 January 2023.

The public consultation ended on 10 March. The EBA received 57 written comments. 42 responses are public and can be consulted on the EBA website. A public hearing took place on 24 February with more than 150 people on the call.

We are currently working on the assessment of the contributions and aim to publish the final Guidelines in Q4, 2022.

In March, we published a first statement on the situation in Ukraine, calling all competent authorities to ensure all financial institutions properly implement restrictive measures adopted by the Council of the EU. We highlighted the importance of sanctions compliance and of institutions taking advantage of the flexibility enshrined in EU AML/CFT law to provide refugees with access to at least basic financial products.

EBA asked financial institutions to follow a risk-based approach when providing financial products to refugees from Ukraine, using the EBA’s 2021 ML/TF Risk Factors Guidelines and the EBA’s 2016 Opinion on the Application of Customer Due Diligence Measures for Asylum Seekers.

In April we published a statement on financial inclustion in the context of the invastion in Ukraine. The statement sets out what financial institutions and their AML/CFT supervisors can do to facilitate access by refugees from Ukraine to the EU’s financial system and what financial institutions and AML/CFT supervisors can do to protect vulnerable customers from abuse by criminals and to tackle emerging financial crime risks.

This report forms part of the EBA’s multiannual programme of in-depth, qualitative assessments of competent authorities’ approaches to AML/CFT supervision. The purpose of these assessments is to support individual competent authorities’ AML/CFT efforts, and to strengthen the EU’s AML/CFT supervisory framework by sharing overall findings and recommendations on a regular basis.

In March, the EBA's chairperson, Jose Manuel Campa, wrote to the European Parliament, the Council and the Commission co-legislators about the importance of cooperation in the future EU AML/CFT framework, a holistic approach to tackling ML/TF and the criteria for selecting institutions that will be directly supervised by the future AMLA.

The Chairperson emphasised that ML/TF cannot be fought effectively in isolation, and that building on the synergies that exist between the AML/CFT, prudential and conduct frameworks will remain important to protect the European Union from financial crime.