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BANKS: EBF says AML Authority must bring ‘true value’ and calls for ‘paradigm shift’ in bloc’s battle against financial crime; opportunity missed to better share data between banks and LEAs

By AMLi Correspondents

THE European Banking Federation (EBF) today warned that the bloc’s new AML Authority must bring “true value” and does not become an after-the-fact reporting agency.

While welcoming most of the Commission’s new anti-financial crime measures the EBF demands better intelligence-led approaches to AML strategy in the EU.

The federation, led by CEO Wim Mijs, says the package announced last July misses the opportunity to address how information can be shared seamlessly between banks and law enforcement – using technology.

The federation says it believes “a paradigm shift is needed” in the bloc’s fight against financial crime.

“This consists in moving away from the existing legalistic and bureaucratic tick-the-box approach which generates massive flows of irrelevant data that Financial Intelligence Units cannot exploit in an efficient manner,” says the EBF.

PPPs

The EBF is also calling for greater use of Public Private Parternships in combating cross border and multi-layered money laundering. When crucial information is confined to one bank rather than being shared amongst entities and law enforcement it hindered efforts against organised crime.

“Being able to enrich this view with information from other private sector entities and competent authorities enhances the likelihood of effective detection for all parties involved in a public-private partnership. It also allows both obliged entities and public authorities to form a holistic overall view of the current trends,” the banking organisation concludes.

Overall the organisation says it fully supports the EU’s new AML package, including the establishment of the AML Authority.

The federation says the operation of AMLA is a crucial component in leveraging the fight against money laundering. But the EBF warns to be truly effective it is of “great importance that it brings true value to the effective fight against financial crime and does not simply introduce another layer of ex-post reporting.”

The EBF also demands “an intelligence-led approach to effectively mitigate money laundering risks and detect financial crime” across Europe.

GOLD PLATING

They warn however that “the package does not address some fundamental dimensions of information sharing which must leverage new technologies and involve all actors of the AML framework, including law enforcement and public-private partnerships.”

“Some of the steps proposed in the package are going in the right direction, notably by addressing the existing regulatory and supervisory fragmentation, as well as extending transparency requirements to crypto-assets and crypto-asset service providers,” the representative group of European banks says.

However, the EBF says that while the standardisation of key customer identity information for KYC purposes and beneficial ownership information is a positive move, “the approach is too prescriptive, and the discretion left to the Member States in adopting additional measures may lead to gold-plating, reintroducing fragmentation.”

“Besides, the proposed AMLD6 maintains the status quo about Beneficial Owner (UBO) registers. In the EBF’s view, UBO registers need to be not only harmonised and interlinked, but also significantly strengthened,” the EBF believes.

Overall, the European Banking Federation (EBF) says it is fully supportive of the Commission’s overarching objective to address the ineffectiveness of the current EU AML framework.

“Bearing in mind the necessary lead-time and efforts to get the AML Package adopted and implemented, this momentum is a unique opportunity to improve the framework,” say Europe’s banks.

The federation meanwhile has also responded to the Commission’s consultation on guidance on rules for Public-Private Partnerships in the AML/CFT domain.

CRIMINALS

The organisation “stresses that information sharing in the context of fighting financial crime is critical in ensuring the effectiveness of the AML/CFT rules.

“Weaknesses in information sharing between obliged entities, financial intelligence units and law enforcement authorities may inadvertently facilitate the activities of criminals who operate nationally or across borders,” the EBF says.

According to the body, obliged entities send large numbers of SARs to FIUs with no or insufficient quantitative feedback.

“This situation does not allow obliged entities to focus on the most relevant predicate offenses and leads to an increased number of false positives. Often finding the relevant information for law enforcement authorities may feel like finding a needle in a haystack.” the EBF points out.

“If an intelligence-led approach were applied in the AML/CFT framework, obliged entities could receive information on current trends and typologies, as well as operational data which would allow them to focus their efforts on priorities as defined by law enforcement authorities.

” As a result, obliged entities would be able to send back more actionable data and do it in a smarter and aligned with data minimisation requirements way, reporting information when truly necessary,” the EBF concludes.

The body says the complex nature of money laundering , often involving cross-border flows of funds and layers of entities, makes it challenging to detect such crimes when the data available is mainly limited to a regulated entity’s own customer base and available open-source intelligence.

“Being able to enrich this view with information from other private sector entities and competent authorities enhances the likelihood of effective detection for all parties involved in a public-private partnership. It also allows both obliged entities and public authorities to form a holistic overall view of the current trends,” the banking organisation concludes.

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