Featured Product

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    January 05, 2022

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking. To assess the scale and impact of de-risking across European Union and to better understand why institutions decide to de-risk particular categories of customers instead of managing the risks associated with such relationships, EBA reached out to relevant competent authorities across the European Union as well as to external stakeholders. The EBA findings suggest that de-risking has a detrimental impact on the achievement of objectives of European Union, in particular in relation to fighting financial crime effectively and promoting financial inclusion, competition and stability in the single market.

    Providing access to at least basic financial products and services is a prerequisite for the participation in modern economic and social life and de-risking, when unwarranted, can cause the financial exclusion of legitimate customers. It can also affect competition and financial stability. De-risking refers to decisions of financial institutions not to provide services to customers in certain risk categories. De-risking can not only be a legitimate risk management tool but it can also be a sign of ineffective money laundering (ML) and terrorist financing (TF) risk management, with at times severe consequences. EBA considers that its regulatory guidance on how to manage ML/TF risks, if applied correctly, should help avert unwarranted de-risking. To further complement this guidance, EBA identified a number of steps competent authorities and the European Commission and co-legislators could take:

    • EBA encourages competent authorities to engage more actively with institutions that de-risk and with users of financial services that are particularly affected by de-risking, to raise mutual awareness of their respective rights and responsibilities. Where innovative financial solution providers are being de-risked, competent authorities could work with the sector to strengthen institutions’ understanding of those solutions while taking steps to ensure that solution providers that are themselves obliged entities comply with their Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) obligations. EBA encourages competent authorities to remind credit and financial institutions that, if this is warranted by the outcome of their assessment of ML/TF risk associated with a customer, they can opt to offer only basic financial products and services to restrict the ability of users to abuse these products and services for financial crime purposes. 
    • EBA also advises the European Commission to clarify, in the Payment Account Directive (PAD), the interaction between AML/CFT requirements and the right to open and use a payment account with basic features and to take advantage of the forthcoming review of the Payment Services Directive (PSD2) to ensure more convergence in the way payment institutions access credit institutions’ payment accounts services.

    In the opinion, EBA commits to following up with competent authorities on the steps they have taken to tackle unwarranted de-risking to inform the next EBA Opinion on ML/TF risks under Article 6(5) of the Anti-Money Laundering Directive or AMLD, which is due to be issued in 2023. EBA considers that, to address unwarranted de-risking and promote sound ML/TF risk management, further action by competent authorities and the co-legislators is required to support the effective implementation of provisions in existing EBA instruments and to address provisions that may be conflicting across Level 1 instruments going forward. 

     

    Related Links

    Keywords: Europe, EU, Banking, Credit Risk, AML/CFT, ML/TF Risk, De-risking, Lending, Opinion, EBA

    Related Articles
    News

    EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS

    The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.

    February 23, 2024 WebPage Regulatory News
    News

    ECB to Expand Climate Change Work in 2024-2025

    Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.

    February 23, 2024 WebPage Regulatory News
    News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News
    News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News
    News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News
    News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Climate Risks, Issues Other Updates

    The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024.

    December 18, 2023 WebPage Regulatory News
    News

    US Government Moves to Regulate Development and Use of AI Models

    The U.S. President Joe Biden signed an Executive Order, dated October 30, 2023, to ensure safe, secure, and trustworthy development and use of artificial intelligence (AI).

    December 18, 2023 WebPage Regulatory News
    News

    MAS Launches Gprnt Digital Platform for ESG Reporting for SMEs

    The Monetary Authority of Singapore (MAS) launched an integrated digital platform, Gprnt, also known as “Greenprint.”

    November 29, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8949