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  • EU Consultation on Revised Risk Factor Guidelines for Assessing Money Laundering Risks

    The European Banking Authority has launched a consultation on proposed revisions to the Risk Factor Guidelines for financial institutions to assess money laundering and terrorist financing risks. The proposed changes aim to take into account the most recent revisions to the EU Anti-Money Laundering Directive (i.e. 5MLD) and newly identified risks, including those specified in the EBA's implementation reviews. The consultation closes on July 6, 2020.

    Since January 1, 2020, the EBA has had an enhanced role in the countering of money laundering and terrorism financing and will be responsible for developing regulatory and technical standards and other guidelines and recommendations for preventing AML/CTF risks, as well as collecting information on breaches of AML/CTF rules. The three European Supervisory Authorities jointly developed Risk Factor Guidelines, but these will now be the EBA's sole mandate to update.

    EU Member States were obliged to transpose the provisions of 5MLD into their national laws and apply those laws from January 10, 2020. Some of the changes made by 5MLD to the EU's AML/CTF requirements are:
    1. The scope of "obliged entities" has been extended to include providers of exchange services between virtual and fiat currencies, as well as custodian wallet providers.
    2. Harmonization of the application of enhanced customer due diligence for third countries that are determined by the European Commission to be high-risk countries.
    3. Reduction of the thresholds under which obliged entities are exempt from applying certain CDD measures to prepaid cards.
    4. Enhanced access to information on beneficial ownership across the EU and improved transparency in the ownership of companies and trusts.

    The EBA's proposed revisions to the Risk Factor Guidelines include additional guidelines on complying with enhanced CDD and new sectoral guidelines on crowdfunding platforms, corporate finance, payment initiation service providers and account information service providers. The EBA is also proposing revised guidelines on identifying beneficial owners, the use of technology to identify and verify a customer's identity and regulatory expectations of firms' business-wide and individual risk assessments.

    On the same day, the EBA published a report assessing the approach by national regulators to supervision of AML and CFT risks and making recommendations for improvements to supervisory approaches. The EBA report highlights that national regulators need to focus more on assessing the systems and controls within a firm to identify, assess and monitor AML/CFT risks, instead of adopting a "tick box" approach. The EBA also considers that national regulators could be more dissuasive and proportionate when imposing remedial measures to correct deficiencies in a firm's systems and controls.

    View the consultation paper.

    View the EBA's report on improving AML/CFT supervision.

    View the EBA's report and Factsheet.

    View details of 5MLD.

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