Money laundering and the terrorism financing remain a major concern for the integrity of European Union’s financial system and the security of its citizens. Over the last few years, the EU has developed a comprehensive regulatory framework for preventing money laundering and terrorist financing, in line with international standards.

 

European Banking Authority (EBA) Chairman, Jose Manuel Campa, recently addressed the Economic and Monetary Affairs Committee and called on parliamentarians to “look at the EU’s current framework critically to identify any adjustments needed” to better prevent the influx of dirty money into Europe.  The European Union must either centralise its anti-money laundering (AML) and counterterrorist financing (CFT) supervision or take further “evolutionary” steps if it is to fight financial crime effectively.

 

Supranational Risk Assessment Report (SNRA)

 

Recently, some publicly known cases in various Member States showed that the EU anti-money laundering/terrorist financing regime might not be well enforced. The SNRA report analysed the risks related to money laundering that affect the internal market as a whole, to avoid blind spots and to respond to evolving trends in money laundering and terrorist financing.

 

 

The report had identified four categories of shortcomings:

  • ineffective or lack of compliance with the legal requirements for anti-money laundering / counter terrorism financing systems and controls;
  • governance failures in relation to anti-money laundering / counter terrorism financing;
  • misalignments between risk appetite and risk management;
  • ineffective supervision of group anti-money laundering / counter terrorism financing policies.

 

The Commission also found that Member States do not apply the rules in the same way, which makes it difficult to prevent money laundering and terrorist financing.

 

The EBA said that The European Union must either centralise its anti-money laundering (AML) and counterterrorist financing (CFT) supervision or take further “evolutionary” steps if it is to fight financial crime effectively. Without further action by EU leaders, the EBA cannot make up for “weak provisions” in Union law, ineffective supervisory practices by member-states, limited cross-border supervision of multinational financial institutions and variances in how nations shield themselves against money laundering and terrorist financing, Campa said.

 

To address such gaps, he suggested that the European Parliament should consider the adoption of a new regulatory framework that supersedes its current AML directives. He outlined the following improvements to the current directives:

  1. A move from a directive to a regulation-based framework would help address such divergences and is arguably a perquisite to more centralisation, if so desired.
  2. A more concrete set of supervisory powers, jointly with more prescriptive common guidelines for sanctions of AML/CFT activities, for prudential supervision
  3. Consider the adoption of mandates empowering the EBA to draft legally binding standards on intergovernmental cooperation, joint risk work and related decisions in AML colleges
  4. A bloc-wide harmonisation of customer due diligence practices and risk assessment methodologies for AML supervisors.

 

The EBA, along with the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, are empowered to develop rules and guidance in the area  of anti-money laundering/countering the financing of terrorism, and to promote cooperation and information sharing among authorities, supervisory convergence and to ensure that the anti-money laundering/countering the financing of terrorism legislation is properly applied.

 

Date: 9 Sept 2019

Argus Global specializes in regulatory compliance. We can help you determine if your company is up to date with the latest regulations with compliance reviews, and we offer as well ongoing support for all your compliance needs.

 

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