EBA proposed revised guidelines on risk-based supervision of credit and financial institutions’ compliance with the anti-money laundering and countering the financing of terrorism (AML/CFT) obligations. The proposed changes address the key obstacles to effective AML/CFT supervision that EBA identified during its review of the existing guidelines, including the effective use of different supervisory tools to meet the supervisory objectives. The guidelines are central to the EBA mandate to lead, coordinate and, monitor the financial sector’s fight against money laundering and terrorist financing. The consultation period on the proposal ends on June 17, 2021.
The proposed amendments address the key challenges for supervisors when implementing the risk-based approach. They also consider changes in the EU legal framework that came into force since the guidelines were first issued and the new international guidance by the Financial Action Taskforce (FATF) on money laundering and BCBS on this topic. EBA is proposing practical step-by-step approaches to address the aspects of AML/CFT supervision that competent authorities have found particularly challenging. The revised guidelines:
- Emphasize the need for a comprehensive risk assessment at a sectoral and sub-sectoral level to support competent authorities’ identification of those risk areas that require more intense supervisory attention
- Explain different supervisory tools available to competent authorities and provide guidance on selecting the most effective tools for different purposes
- Emphasize the importance of a robust follow-up process and set out different aspects that competent authorities should consider when determining the most effective follow up action
- Provide further guidance on the implementation of a robust supervisory strategy and plan, to ensure that competent authorities allocate their supervisory resources according to the risk exposure of subjects of assessment under their supervision
- Clarify competent authorities’ obligations as regards to AML/CFT supervision of groups and emphasize the need for competent authorities, that are responsible for the supervision of the group’s head office, to develop a good understanding of ML/TF risks to which the group is exposed with a view to ensure that group-wide policies and procedures are implemented effectively
- Highlight the importance of cooperation among competent authorities and between competent authorities and other stakeholders including prudential supervisors, the Financial Intelligence Unit, tax authorities, law enforcement and AML/CFT authorities in third countries. In particular, the guidelines recognize that supervisory cooperation is important not only when supervising cross-border groups, but also in respect of domestic groups and subjects of assessments
- Provide further guidance on how competent authorities can determine the type of guidance needed within the sector and how to communicate this guidance in the most effective manner
- Include further clarifications on the type of training that the competent authorities should provide to their staff
The guidelines were originally published by ESAs in 2016 and had set out steps that competent authorities should take to ensure compliance by credit and financial institutions with their AML/CFT obligations. Since their publication, EBA observed that supervisors across EU were finding the implementation of the risk-based approach to AML/CFT supervision difficult, which meant that AML/CFT supervision was not always as effective as the legal framework set out in the AML Directive and the ESAs guidelines had envisaged. This consultation paper has been developed by EBA only because, since the entry into force of the revised EU Regulation 2019/2175 on January 01, 2020, the other two ESAs, ESMA and EIOPA, no longer have direct responsibility for AML/CFT.
Comment Due Date: June 17, 2021
Keywords: Europe, EU, Banking, AML/CFT, Risk-Based Supervision, ML/TF, AML Directive, ESAs, EBA
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