Response to consultation on Guidelines on risk factors and simplified and enhanced customer due diligence

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a) Do you consider that these guidelines are conducive to firms adopting risk-based, proportionate and effective AML/CFT policies and procedures in line with the requirements set out in Directive (EU) 2015/849?

This response covers the views of all CSDs within the Euroclear Group. Euroclear is the world’s largest post-trade provider of securities settlement services in fixed income, ETFs, equities, and funds. We serve a global client base out of our Head Office in Brussels and from our domestic European CSDs.

The Guidelines generally enhance the Risk Based Approach in a coherent and meaningful way. We make the following suggestions:

1. (Title II - Assessing and managing risk - general part) - Point 18 Notion of equivalent country"
The new AML Directive does not recognise the principle of "equivalent country" for third countries, outside the EU. We are concerned about what seems to be a restrictive approach that does not consider that other non-EU FATF members might implement AML requirements equivalent to those in place in the EU. We fear that this would heavily impact cross-border relationships with customers outside the EU.

2. (Title III - Chapter 1 - Sectoral Guidelines to correspondent banks - Point 75) "Risk Factors"
The Guidelines could helpfully refer to the recently launched International Securities Services Association (ISSA) Financial Crime Compliance Principles ( These Guidelines aim to provide guidance to custodians on how best to manage the risks that arise from the layers of intermediation between securities issues and ultimate beneficial owners. The Principles are broadly consistent with the policy aims of these new Guidelines and in particular, provide participants with practical guidance on the question of transparency of ownership and control intermediated securities custody arrangements

3. (Title III - Chapter 1 - Sectoral Guidelines to correspondent banks - Point 84) "Usage of CDD questionnaire"
The rationale why CDD questionnaires provided by international organisations (e.g. such as the Wolfsberg questionnaire) are not suitable to help correspondents complying with their obligations is unclear and not in line with common practice.

4. (Title III - Chapter 1 - Sectoral Guidelines to correspondent banks) Point 90 "Identify, and verify the identity of the respondent and their Beneficial Owners"
There is no standardised definition of Beneficial Owners. As a consequence, use of the term could lead to confusion as it might refer to either the natural person(s) who ultimately own(s) or controls the customer and /or the natural person(s) on whose behalf a transaction or activity is being conducted. More clarity on what is meant by Beneficial Owners would help avoiding misinterpretations.

5. (Title III - Chapter 9: Sectoral guidelines for providers of investment funds) Point 212 "Intermediaries"
We agree that the intermediary can be considered as the direct counterparty of the firm but suggest to delete the last sentence which states that "the firm should treat the intermediary's customers as the fund's beneficial owners". We believe that the relationship between the firm and intermediaries should here be considered in the same way as the one between correspondent banks and respondents."

b) Do you consider that these guidelines are conducive to competent authorities effectively monitoring firms’ compliance with applicable AML/CFT requirements in relation to individual risk assessments and the application of both simplified and enhanced customer due diligence measures?

Yes although they should not trigger regulatory expectations that all firms should consider all risk factors in all cases. We understand that firms should rather take a holistic view of the risks associated with specific situations. In addition, the guidelines should not be deemed to be exhaustive and firms might want to use additional risk-factors to forge their opinion.

c) The guidelines in Title III of this consultation paper are organised by types of business. Respondents to this consultation paper are invited to express their views on whether such an approach gives sufficient clarity on the scope of application of the AMLD to the various entities subject to its requirements or whether it would be preferable to follow a legally-driven classification of the various sectors; for example, for the asset management sector, this would mean referring to entities covered by Directive 2009/65/EC and Directive 2011/61/EU and for the individual portfolio management or investment advice activities, or entities providing other investment services or activities, to entities covered by Directive 2014/65/EU.

It is our view that the Sectoral guidelines approach provides more clarity to the relevant risk-factors that should be considered by firms in their assessment.

Name of organisation

Euroclear SA/NV