Response to consultation on effective management of ML/TF risks when providing access to financial services

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1. Do you have any comments on the annex that covers NPO customers?

The ECA would like to see a more precise and framed definition of “good repute” when it comes to the risk factors that financial institutions must consider when identifying the risk associated with NPO customers and managers (Point 10 of the Consultation paper, Reputation/adverse media findings).
This definition should not give any leeway for banks to de facto legislate on behalf of sovereign states, e.g. by excluding entire industries from the possibility of being of “good repute”.

2. Do you have any comments on the section ‘Subject matter, scope and definitions’? If you do not agree, please set out why you do not agree and if possible, provide evidence of the adverse impact provisions in this section would have.

The general scope of the Guidelines is clear and includes policies and controls for the effective management of ML/TF risks when providing access to financial services.
However, as follows from Point 9. of the ECA’s Submission, there is a risk that financial institutions (falsely) deny access to financial services and products based on ESG-related arguments or topics such as morality.
Hence, both Sets of Guidelines should include a clear statement that they focus on de-risking on an ML/TF basis only, which cannot be bypassed by relying on different motivations such as ESG-related arguments (Environmental/Social/Governance) or morality.
2. In the ECA’s view, a Section could be added in Subject matter and scope of application:
“ 6. The scope of these guidelines is exclusively for policy, procedures and controls of credit and financial institutions in regard to ML/TF risks factors. Other topics should not be considered or used by a financial institution in the scope of the application of these guidelines. “

3. Do you have any comments on the section titled ‘General requirements’?

Where the actual underlying motivation is based on ML/TF grounds, it should not be possible for financial institutions to rely on false motivations to escape guidelines on unwarranted de-risking. The obligation to provide a documented and substantiated decision in case of refusal constitutes a first step towards avoiding this type of behavior. The provision of this documentation to the respective competent authorities would be a welcome addition, as would be the necessity to update the individual risk assessment of the customer and to dynamically adjust the extent of monitoring and the range of products and services offered.
2. In the ECA’s view, credit and financial institutions should be required to update the risk assessment of customers in accordance with the latest applicable Supranational Risk Assessment (from the European Commission).

4. Do you have any comments on the section titled ‘adjusting monitoring’?


5. Do you have any comments on the section titled ‘applying restrictions to services or products’?


6. Do you have any comments on the section titled ‘Complaint mechanisms’?

The section ‘Complaint mechanisms’ outlines that credit and financial institutions, when communicating their decision to refuse or terminate a business relationship with a customer, must advise the customer that he can contact the relevant competent authority or designated dispute resolution body and must provide him with the EBA’s website link of complaints.
2. Means should be provided for NPOs or other businesses which face a refusal decision to take action if it appears from the written motivation provided that this refusal constitutes a case of unwarranted de-risking, wrapped in greenwashing.

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Name of the organization

European Casino Association