The EBA advises the EU Commission to be pragmatic when it concerns AML/CFT in Financial industry

Since 2019, EBA has a legal duty to lead, coordinate and monitor EU AML/CFT efforts of all EU financial institutions and competent authorities. The EBA making full use of its powers, continues to lead the development of EU AML/CFT policy and supports its effective implementation to foster an effective, risk-based approach to AML/CFT.

In its first response published in August 2020, EBA responses to the EU Commission Action Plan focusing on 3 out of the 6 pillars of the Commission’s Action Plan for: (1) effective implementation of existing rules, (3) EU-level supervision, (6) a stronger EU in the world. In its latest publication issued on 10th September 2020, the EBA provides its advice regarding to the second pillar of the Action Plan for a Single EU Rulebook and sets out how the EU legal framework should be strengthened to tackle vulnerabilities linked to divergent national approaches and gaps in the EU defences against money laundering and terrorist financing (ML/TF).

In EBA’s view, the gaps created by distinctive approaches transposing EU AML/CFT law into national law should be reduced by implementing a harmonised EU legal framework that can be enforced consistently across the single market.

The EBA additionally recommends a pragmatic approach with regard to the EU-level AML/CFT supervision of obliged entities. The EBA endorses Commission to leverage on competent authorities’ expertise and knowledge of their local risks than to create a new agency that would supervise all the obliged entities. Currently, the scope of the AML Directive covers both financial institutions and designated non-financial businesses and professions (DNFBPs). Hence, the EBA is concerned that the risk bringing in scope of EU supervision all obliged entities from sectors currently outside the scope of any central EU agency will delay the operation of the EU-level AML/CFT supervisor. Furthermore, EBA supports that the supervision should start with the financial sector and gradually extend its scope as the supervisor matures and its capacity increases.

Furthermore, EBA supports that an effective functioning of an EU – level AML/CFT supervisor will be successful when its roles and powers are combined with the ongoing role of National Competent Authorities (NCAs) in a hub and spoke approach, in which responsibilities for supervisors at the national and European levels are clearly assigned.

EBA advices Commission to establish a single rulebook where a robust set of common rules supports the implementation of a proportionate and effective risk‐based EU AML/CFT regime.

In specific EBA proposes :

• The EU Legal Framework to be harmonised with the implementation of a directly applicable Regulation where the divergence of national rules and practises in the cases such as customer due diligence and AML/CFT control requirements will be eliminated. In EBA’s view, Directive (EU) 2015/849 (AMLD) is a minimum harmonisation directive and Commission needs to strengthen aspects of the current AML/CFT Directive where existing provisions are insufficiently robust. According to EBA’s assessments, making sure that the same rules apply to all financial institutions and competent authorities in these areas will avoid regulatory arbitrage, provide legal certainty and a level playing field for market participants and importantly, strengthen the EU’s AML/CFT defences.
• The Commission to review the list of obliged entities currently within the scope of the EU’s AML/CFT regime and make sure that ML/TF risk is addressed consistently across all sectors.

Finally, EBA points out that a harmonized EU Legal framework needs to promote a clearly defined relationship between the future EU-level Supervisors and the NCAs and that adequate powers and resources are implemented in order to carry out their functions efficiently. EBA recommends that the future AML/CFT framework shall adopt a European utmost harmonization, a uniformized supervision practice between NCAs to impose the right risk-based compliance programs.

Avantage Reply stands ready to provide technical input and support to its clients always in line with the latest developments of legal regulatory framework. Avantage Reply highlights the importance of being well – equipped to face in future a more stringent AML/CTF regulation and supervision at EU and national level.

Source n°1: here

Source n°2: here