The Wealth Management Association believes that the content of the guidance will be helpful to firms in assessing ML/TF risk and in mapping these risks with a view to create effective policies and procedures.
However, how these guidelines will sit within the UK’s national regulatory system remains a grey area. Art. 8(1) of the Directive requires national authorities to take appropriate steps to identify and assess the risks of money laundering and terrorist financing, taking into account risk factors including those relating to their customers, countries or geographic areas, products, services, transactions or delivery channels. The Directive is silent as to how this rule is to be implemented, but in practice there is likelihood that guidance will be issued, which will be applicable to firms. Art. 18(4) of the Directive requires the ESAs to issue guidelines addressed to competent authorities and the credit institutions and financial institutions. The ESAs guidelines therefore will apply automatically to both national authorities and firms. This overlapping of national and EU-wide guidance can cause issues when it comes to implementation, ultimately causing confusion in both national authorities and firms. This potentially has the unwanted effect of making the guidelines unhelpful, not because of their content but because of their uncertain positioning within the UK’s national regulatory system. Further guidance on how these inconsistencies in the implementation framework of the risk-based approach can be dealt with would be desirable.
Please refer to our comment above in relation to the application of the guidelines to firms.
The Wealth Management Association prefers the guidelines in Title III to be kept by types of business rather than legally driven, for the following reasons:
• A business model-based approach is more intuitive and user-friendly. It is easier and quicker to match requirements to a business model rather than to refer to legislation each time
• A firm may perform several business activities which would fall under different pieces of legislation, and having to identify each requirement out of a legally-driven directory could become problematic
• Legislation is subject to continuous evolution and amendment and there is no guarantee that a business activity that is now regulated just by one instrument will not be regulated by multiple instruments in the future: this would make the referencing even more complex.