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    EBA Explains Methodology for Assessing AML/CFT Risks

    December 17, 2020

    EBA published its first report on progress made by competent authorities with the setting up of colleges to enhance supervisory cooperation of anti-money laundering and countering the financing of terrorism (AML/CFT) purposes. EBA also published the methodology for conducting risk assessments under Article 9a of the revised EBA Regulation. This methodology sets out how EBA will identify emerging money laundering/terrorist financing (ML/TF) risks and how it will conduct the risk assessment. The methodology also explains the review and publication process of the outcome of each risk assessment. Going forward, EBA will use this methodology to assess whether the use of its powers under Article 9a is warranted. Monitoring of colleges and performing risk assessments are part of the new role of EBA to lead, coordinate, and monitor the fight against ML/TF in all EU member states.

    The EBA methodology for conducting risk assessments will be approved by the EBA Standing Committee on AML/CFT. The main objective of a risk assessment under Article 9a is to establish how well-equipped competent authorities are to tackle the emerging ML/TF risks, in terms of their capabilities and resources to respond to future risks that may arise as well as to intervene early and in a coordinated manner to manage those risks across the single market.  In the risk assessment process, EBA staff will follow the principles of proportionality, particularly when requesting the information from competent authorities. This means that, before asking for information, EBA staff will examine the information already available to it from the EBA database or other sources. EBA provides a detailed explanation of how EBA will identify and assess risks as part of this assessment. EBA staff will follow a five-stage process which includes identification of emerging risks for the assessment; setting the scope for the assessment; identification of competent authorities for the assessment; conducting the Article 9a risk assessment; and outcomes of the risk assessment.

    The report on progress of competent authorities provides examples of good and poor practices, drawing on the lessons learned from the first colleges, with the aim of supporting the effective and efficient setting up and operation of new colleges going forward. EBA also identified challenges and observed limited or no participation by third-country authorities or prudential supervisors  in some colleges. Overall, EBA observed a number of good practices that may have contributed to the effectiveness and efficiency of some of the AML/CFT colleges attended:

    • Mapping of financial institutions operating on a cross-border basis was completed by competent authorities by using multiple sources of information. This ensured that all required members and observers were identified and invited to the college contributing to the completeness of the information that was exchanged within the college.
    • The lead supervisor shared with other members within the college a list of third-country AML/CFT authorities identified by the lead supervisor as potential observers. The list, together with the confidentiality requirements applicable in these authorities, was then discussed within the college meeting. As a result, the members agreed to invite these observers to the next meeting of the college.
    • Through careful planning of the agenda, the right balance was achieved between presentations and round‐table discussions within the meeting. Also, it meant that sufficient time was allocated for discussions. This meant that all members and observers had an opportunity to share their views and practices.
    • In addition to the scheduled meetings, some colleges made use of ad‐hoc college meetings in situations where a quick action or a quick decision from all members was required.
    • Terms of a written cooperation agreement were discussed between the members at the first meeting and the agreement was signed by all members soon after that. This ensured that information could be freely exchanged within the college
    • The agenda for the meeting was shared by the lead supervisor well in advance of the meeting, for the members’ comments. This meant that members could contribute to the agenda and ensure that they were available to attend the meeting
    • Minutes summarizing the key points discussed and actions agreed at the meeting were shared with the members and observers following the meeting. In some instances, minutes were supplemented with a table providing an overview of the supervisory actions and measures taken in each jurisdiction.

     

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    Keywords: Europe, EU, Banking, AML/CFT, ML/TF Risk, Supervisory Colleges, EBA

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