Good Tidings We Bring, To Your Compliance Wing - EBA Sets New Financial Crime Guidelines

December 23, 2021
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The European Banking Authority has released two new sets of guidelines seeking to encourage coordination between different authorities and to set new expectations for financial institutions.

The European Banking Authority (EBA) has released two new sets of guidelines seeking to encourage coordination between different authorities and to set new expectations for financial institutions.

As compliance teams from different regulatory jurisdictions across the EU prepare to leave their desks for the holiday period, they have received an early Christmas present in the shape of a set of new guidelines from the EU’s banking watchdog.

The two new sets of guidelines concentrate on two factors: risk-based supervision of credit and financial institutions’ compliance with anti-money laundering/counter-terrorism financing (AML/CTF) measures; and how prudential supervisors, AML/CTF supervisors and financial intelligence units (FIUs) should cooperate and exchange information in relation to AML/CTF.

The first of these guidelines aims to support supervisors in dealing with financial institutions, advising on how to choose the most effective tools to meet their supervisory objectives, including in situations when they have identified breaches and weaknesses in institutions’ systems and controls framework. It also emphasises the importance of cooperation between AML/CTF supervisors and other stakeholders, including prudential supervisors, FIUs and tax authorities.

The EBA decided to update and strengthen these guidelines in light of the findings from its ongoing work to review competent authorities’ approaches to AML/CTF supervision.

This work suggested that some competent authorities have found the implementation of the risk-based approach to AML/CTF supervision challenging.

Cooperation Key

The second set of guidelines focuses on improving cooperation of information exchange, seeking to aid coordination at the member state level and across the trading bloc.

In particular, the EBA’s new guidance is supposed to facilitate and support the cooperation and information exchange throughout what it calls the “supervisory life cycle”.

This includes the authorisation of new institutions, ongoing supervision, including risk assessments, and, where relevant, the imposition of supervisory measures and sanctions, including the withdrawal of authorisation.

Although each supervisory authority has its own role and responsibilities in the fight against money laundering and terrorist financing (ML/TF), the EBA stresses that there are areas where tasks can complement one another.

Therefore, cooperation and information exchange, done effectively, is essential to identify, address and mitigate ML/TF risks.

“Such effective cooperation and information exchange is fundamental to ensure the prudential soundness and viability of institutions and the stability of the financial system as a whole,” the EBA said.

The EBA consulted on these guidelines between May and August 2021, while the issue is one that has caught the attention of EU regulators this year.

In June, the European Court of Auditors called for enhanced guidance for the incorporation of ML/TF risk into prudential supervision and recognised the need to publish these guidelines as a matter of priority by the end of 2021.

In addition, the EU’s new AML package, which was also published over the summer, establishes a pan-EU anti-money laundering authority, known as the AMLA.

One of the AMLA’s objectives, according to the proposal, is to muster greater collaboration among the member state authorities.

The Council of Europe, which operates outside of the EU’s reach, also called for greater FIU collaboration at a meeting in April.

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