In 2018 / 2019 a string of anti-money-laundering failures shook the European banking landscape and sounded a wake-up call for banks, competent authorities and the legislator. One of the immediate results was a hastily introduced change to the regulation of the European Banking Authority concentrating the mandates it shared with ESMA and EIOPA in one authority. The legislative change also bolstered its powers by introducing a legal duty for EBA to contribute in the fight against money laundering and the financing of terrorism as well as a task to “lead, coordinate and monitor” the AML /CFT efforts of all financial service providers and competent authorities in the EU. The regulation entered into force on the 1st of January this year.
In practical terms the EBA sees its new mandate very much revolving around the “lead, coordinate and monitor” mantra.
The EBA intends to lead on the establishment of AML / CFT policy and support the implementation by financial services actors and national competent authorities. Concretely the EBA aims a.o. at developing EU wide AML / CFT policy and setting regulatory expectations via existing tools like common standards, guidelines and opinions. It will also assess competent authorities regarding their strategies, available capacities and resources.
The EBA intends to coordinate competent authorities in their supervision of AML /CFT in order to identify and manage cross-border risks. For that purpose, the authority has set up an AML Standing Committee and is creating an AML / CFT data base with relevant information on weaknesses identified by EU or national bodies. This data base should foster appropriate dissemination of the information. The above measures will be flanked by the set-up of AML / CFT colleges of supervisors. In its new role the EBA is also to cooperate more with national financial intelligence units (FIUs) and third country authorities.
Finally the EBA intends to monitor the implementation of EU AML / CFT standards. This is to happen via AML / CFT focused peer reviews but also importantly the European Banking Authority has now the power to ask competent authorities to take action if it has indications that financial institutions are in breach of EU law. If there is evidence that competent authorities are in breach of EU law, the EBA has a last resort power of investigation.
The above new powers have been effective since the beginning of the year and the EBA published on 5 February a first report on competent authorities’ approaches to AML /CFT supervision of banks.
The new EBA powers are nevertheless only a first step. Over the past year a debate has taken place in Brussels where a form of consensus has emerged that parts of the AML directive should be recast into a regulation to foster uniform rules in all Member States. Indeed, in contrasts to a directive which needs to be translated into national laws, a regulation is directly applicable on the ground in the whole European Union. A consensus seems also to emerge to transfer “further competences” to an “EU body”. In this context the European Commission is planning to come forward with an AML /CFT action plan in March.
By Antoine Kremer, Head of European Affairs, ABBL & ALFI