16 December 2021
The European Banking Authority (EBA) published today its revised Guidelines on risk-based supervision of credit and financial institutions’ compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) obligations. The Guidelines set out the steps supervisors should take to ensure adequate AML/CFT oversight of their sector and support the adoption, by credit and financial institutions, of effective ML/TF risk management policies and procedures. The EBA decided to update and strengthen these Guidelines in light of the findings from its ongoing work to review competent authorities’ approaches to AML/CFT supervision. These findings suggest that some competent authorities found the implementation of the risk-based approach to AML/CFT supervision challenging.
The revised Guidelines build on the existing 4-step approach to the risk-based AML/CFT supervision and provide additional guidance on ML/TF risk assessments, including the sectoral risk assessment. They also help supervisors choose the most effective tools to meet their supervisory objectives, including in situations when they have identified breaches and weaknesses in institutions’ systems and controls framework and emphasise the importance of cooperation between AML/CFT supervisors and other stakeholders, including prudential supervisors, Financial Intelligence Units (FIUs) and tax authorities. This cooperation can happen, for example, in AML/CFT colleges, which are permanent structures that bring together AML/CFT supervisors to exchange information relating to institutions that operate on a cross-border basis in at least 3 Member States (AML/CFT colleges are further explained in the related factsheets).
Upon their entry into force, the Guidelines will foster greater convergence of supervisory practices across the EU and, as a result, will contribute to further strengthening Europe’s AML/CFT defences before the new legal framework enters into force.
Directive (EU) 2015/849 (AMLD) puts the risk-based approach at the centre of the EU’s AML/CFT regime. Article 48(10) of the AMLD mandates the EBA to issue guidelines addressed to competent authorities on the characteristics of a risk-based approach to supervision and the steps to be taken when conducting supervision on a risk-based basis.
The initial Guidelines on risk-based supervision were published by the European Supervisory Authorities (ESAs) in 2016. They created a common understanding of the risk‐based approach to AML/CTF supervision and, in particular, set out the steps that supervisors should take to carry out supervision on a risk-sensitive basis. Together with the ESAs’ ML/TF Risk Factors Guidelines, they transformed the way AML/CFT supervision was carried out in the EU. The revised Guidelines take into consideration changes in the EU legal framework that came into force since the original Guidelines were first issued, as well as new international guidance by the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision (BCBS) on this topic.
The EBA consulted on these Guidelines between March and June 2021. In its Special Report 2021/13 published in June 2021, the European Court of Auditors called for greater consistency in the AML/CFT approach to supervision and recognised the need to publish these guidelines as a matter of priority by the end of 2021.