Featured Product

    EBA Publishes Opinion on Consideration of ML/TF Risks in SREP

    November 04, 2020

    EBA published an opinion that sets out how prudential supervisors should consider money laundering and terrorist financing (ML/TF) risks in the context of the Supervisory Review and Evaluation Process (SREP). EBA expects prudential supervisors to consider the ML/TF risks in certain key components of SREP, including the monitoring of key indicators, business model analysis, assessment of internal governance, risks to capital, and risks to liquidity and funding. This opinion forms part of the ongoing work of EBA to strengthen the fight against money laundering and terrorist financing in Europe.

    EBA expects prudential supervisors to consider the ML/TF risks in the following components of the SREP:

    • Monitoring of key indicators. Some prudential supervisors have developed a set of indicators based on quantitative or qualitative information from prudential reporting that may point to ML/TF risk. EBA invites prudential supervisors to share the outcome of the monitoring of these indicators with anti-money laundering/combating financing of terrorism (AML/CFT) supervisors if deemed relevant as it may inform their ML/TF risk assessment of the institution. 
    • Business model analysis. If in the context of the business model analysis, prudential supervisors identify indications that the business model or changes to the business model could give rise to increased ML/TF risk, EBA expects prudential supervisors to alert AML/CFT supervisors as necessary.
    • Assessment of internal governance and institution-wide controls. EBA expects prudential supervisors to assess, in cooperation with AML/CFT supervisors, if the institution has implemented an effective internal control framework, developed and maintained an integrated and institution-wide risk culture and that the risk management covers all the risks the institution faces, including ML/TF risks.
    • Assessment of risks to capital. EBA advises prudential supervisors to pay attention to ML/TF risks that could result in reputational or operational risk (including legal and conduct risks). Prudential supervisors are asked to pay attention to ML/TF risks within the context of the credit granting process of the institution. In particular, prudential supervisors are encouraged to assess that institutions have systems and controls in place to ensure funds used to repay loans are from legitimate sources. 
    • Assessment of risks to liquidity and funding. EBA advises prudential supervisors to remain alert to indications that could signal ML/TF risks when assessing the liquidity and funding profile of an institution. Such indications could include deposit taking in high risk jurisdictions, or a funding mix that cannot be explained by the business model or strategy of the institution. 

    EBA expects prudential supervisors to cooperate effectively and in a timely manner with AML/CFT supervisors to exchange information on ML/TF risks and to assess the implication of those risks for the safety and soundness of the institution they supervise. This applies to prudential and AML/CFT supervisors that form part of the same competent authority, as it does to prudential and AML/CFT supervisors from different competent authorities and in cross-border situations. In the event of potential increased risk of money laundering or terrorist financing, the prudential supervisor and the AML/CFT supervisor are required to liaise and notify their common assessment immediately to EBA and the prudential supervisor shall take, as appropriate, measures in accordance with Capital Requirements Directive IV (2013/36/EU). EBA will include a more detailed guidance on how ML/TF risks should be considered by prudential supervisors as part of their overall SREP assessment in the revised version of the SREP guidelines, which are planned to be published by the end of December 2021 as set out in the Pillar 2 roadmap.

     

    Related Links

    Keywords: Europe, EU, Banking, ML/TF Risk, SREP, Opinion, Credit Risk, Operational Risk, Governance, AML/CFT, CRD IV, Basel, Pillar 2, EBA

    Featured Experts
    Related Articles
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EBA Publishes Single Rulebook Q&A Updates in February 2021

    The EBA Single Rulebook question and answer (Q&A) tool updates for this month include answers to ten questions.

    February 26, 2021 WebPage Regulatory News
    News

    ESMA Releases Schema and Instructions for Securitization Reporting

    ESMA updated the set of questions and answers (Q&A), along with the reporting instructions and an XML schema for the templates set out in the technical standards on disclosure requirements, under the Securitization Regulation.

    February 26, 2021 WebPage Regulatory News
    News

    EU Rule Amends Requirement for European Single Electronic Format

    EU published Regulation 2021/337, which amends the Transparency Directive (2004/109/EC), regarding the use of the single electronic reporting format for annual financial reports.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6637