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The EBA publishes new guidance on money-laundering and terrorist financing risks for prudential supervisors in the EU; attempts to establish a common supervisory framework in the Union

By Vish Gain for AMLi

THE EUROPEAN BANKING AUTHORITY has published today an Opinion on how prudential supervisors should take into account money-laundering and terrorist financing in their Supervisory Review and Evaluation Process.

The Opinion statement, published on the EBA website, forms a part of the top EU regulatory body’s ongoing efforts to fight money-laundering and terrorist financing activities in Europe.

The EBA says that prudential supervisors, supervisors who assess financial risks for an institution and their compliance with regulation, need to considering money laundering and terrorism financing risks as part of their assessments.

The risks that are of particular concern for prudential supervisors are the ones that indicate broader deficiencies in the internal governance or internal control framework, such as ICT-related weaknesses, that criminals can take advantage of.

The specific components of the SREP that they want prudential supervisors to consider money-laundering and terrorist financing risks are monitoring of key indicators, business model analysis, assessment of internal governance and institution-wide controls, assessments of risk to capital, and assessments of risks to liquidity and funding.

The EBA expects prudential supervisors to maintain effective channels for cooperation and

information exchange with AML and CFT supervisors and other relevant stakeholders and liaising with them to obtain their input and share the outcomes of the prudential

assessment where relevant.

For cross-border institutions, the EBA advises prudential supervisors to leverage on the

information obtained through bi-lateral engagements with relevant AML and CFT supervisors.

Insisting that money-laundering and terrorist financing can have adverse effects on an institution’s viability and impact the stability of the financial system in which it operates, the EBA said it expects prudential supervisors to cooperate effectively and promptly with AML and CFT supervisors to exchange information on relevant risks and assess their implication for the institution they supervise.

This applies to supervisors in the same competent authority as well as those from different competent authorities and in cross-border situations.

The Opinion is per Article 29(1)(a) of Regulation (EU) No 1093/2010 which directs the EBA to establish a common supervisory culture and set of practices for the European Union. This includes uniform procedures and consistent approaches to AML and CFT supervision.

The EBA says the move reflects a ‘specific request’ in the Anti Money Laundering Action Plan 2018 by the Council of the European Union.

While guidance on AML and CFT supervisory cooperation has been published, more is being drafted on cooperation between supervisory and AML/CFT supervisors and will be published ‘shortly’.

Meanwhile, the EBA says it will include more detailed guidance on how prudential supervisors can consider money-laundering and terrorist financing risks as a part of their SREP guidelines due to be published by the end of December 2021.

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