Before responding to the specific questions of EBA’s consultation paper, AMAFI would like to point out the following general comments:
• AMAFI particularly welcomes proposed amendments made to Guideline 15 as they contribute to a major improvement compared with the previous version. Though AMAFI suggests slight amendments to improve even more the quality of the drafting (see Question 15 below).
• AMAFI suggests EBA to consider the addition of a Guideline on “crypto-currencies” as they have been considerably expanding into an international powerful payment method. The Financial Action Task Force (FATF) provided in that sense different preliminary key elements of assessment. Considering AML/CFT risks and the cross-border dimension of these activities, AMAFI strongly supports the necessity of a European harmonisation on this matter. A new guideline on crypto-currencies would thus participate in the first steps of European harmonisation.
Finally, regarding Title III ‘Sector specific guidelines’, AMAFI wishes to outline that it only answers to questions entering within the scope of the Association (i.e. Guidelines 12, 15 and 20).
Regarding Question 1, AMAFI partially agrees with the proposed changes made to the Definitions section of the Guidelines in relation to “risk”.
Nevertheless, AMAFI is opposed to add a definition of “Jurisdictions associated with higher ML/TF risk”. Indeed, the proposed definition excludes ‘high-risk third countries’ while they are the only ones precisely defined (by Article 9 of the 4th AML Directive2) and identified (by the Delegated Regulation (EU) 2016/16753). Thus, all European obliged entities under AML Directives4 should apply enhanced due diligence (EDD) measures to their relationship linked with those high-risk third countries. Conversely, there is no harmonised definition of ‘Jurisdictions associated with higher ML/TF risk’ as it is a new concept developed by the EBA without any justification.
If EBA wants to keep this definition, AMAFI considers it should also be added a definition of ‘Jurisdictions associated with lower ML/TF risk’ as there is no reason for having one without the other. The main principle of the risk-based approach is to simplify the due diligences for some clients to have more time to reinforce the due diligences for some other clients.
AMAFI partially agrees with the changes made within Guideline 1. Nevertheless, AMAFI considers that some amendments should be made to improve the quality of the drafting.
Firstly, AMAFI considers that some proposed amendments made to the Guidelines can be confusing for the reader, in particular the structural and presentational proposed amendments made in § 1.2.
Thus, AMAFI considers the current redaction of § 1.7.a) is too much detailed as it requires to define a date rather than a period or a frequency for the next review. AMAFI wishes to underline that usually, in practice, obliged entities define within their policies the frequency of review and not a precise date. Thus, AMAFI would rather suggest EBA to propose to set up a “frequency”, or at least a “period” for more flexibility.
AMAFI generally agrees with the proposed amendments to Guideline 2 but wishes to propose some amendments.
Regarding § 2.4.f), AMAFI considers as important to also take into account the jurisdiction where the customer with high public profile operates to appreciate the risk associated with its position.
Moreover, § 2.5.c) requires obliged entities to take into account, without limitation, potential suspicious transaction reports linked to the client / beneficial owner when identifying the risk. In practice, due to the extreme confidentiality of such reports, there is no way obliged firms can be aware of reports made by other entities. However, AMAFI notes that this could be eventually possible, in practice, when the customer or the beneficial owner whose reputation is assessed, was client of the firm in the past.
Finally, regarding § 2.6.k), in AMAFI’s view, the AML-CFT risks of the client should only be increased if the client cannot justify the changes related to the products and services used.
AMAFI has no comment on the proposed amendments and additions made by EBA in Guideline 4.
AMAFI welcomes EBA amendments made to Guideline 5 on record keeping.
AMAFI strongly welcomes the inclusion of Guideline 6 on training.
AMAFI agrees with that Guideline 7 on reviewing effectiveness.
AMAFI partially agrees with the proposed amendments made to Guideline 12.
Regarding § 12.8.b), in AMAFI’s point of view, the source of funds can also be verified using a recent tax return statement.
Finally, AMAFI considers it is important to bring to the EBA’s attention the proposed amendments made to the Guidelines which can lead to some confusion for the readers. In that sense, AMAFI noticed the structural and presentational proposed amendments made in § 12.8.b) can lead to some misunderstandings. Indeed, points viii. and ix. of § 12.8.b) should, according to AMAFI, be subject to two different subsections of § 12.8 in line with new Article 18bis introduced by the 5th AML Directive. Moreover, the obligation to “establish the destination of funds” is not required by the 5th AML Directive. Thus, AMAFI proposes to use the exact wording of the Directive: “obtaining information on the reasons for the intended or performed transactions;” instead of adding a new requirement.
AMAFI welcomes the proposed amendments made to Guideline 15 as they contribute to a major improvement compared with the previous version. However, AMAFI is of the opinion that few amendments may be done in order to improve slightly the drafting.
Firstly, in light of the other specific sector guidelines5 and in the same way, AMAFI would suggest EBA to add a more precise definition of what are “investment firms” in order “to provide more clarity” as stated in § 28 of the consultation paper. Thus, AMAFI would suggest referring to MiFID II definition of an “investment firm” in the introduction of this Guideline.
Otherwise, in the “Customer risk factors” sub-section of Guideline 15, and more specifically in § 15.6 regarding factors which may contribute to reducing risk, AMAFI wishes to remind the EBA that the 4th AML Directive considers “listed companies” as potential “low risk client” (4th AML Directive, Annex II). AMAFI suggests therefore to add this factor to the list of § 15.6 (which may become § 15.7).
Furthermore, AMAFI considers it is also important to take into account that some jurisdictions are providing strong AML/CFT regimes, or equivalent to the European requirements in combating ML/FT, fact that may also contribute to lower the risk.
Finally, AMAFI wishes to bring to the EBA’s attention the not yet amended mention to “MiFID I”6 in § 15.9.
AMAFI agrees with the addition of sector specific Guideline 20 on corporate finance. Nevertheless, AMAFI noticed that in order to assess the risk associated with a business relationship, the draft Guideline, § 20.7. f) mentions the “[u]se of non-documentary forms of evidence, such as meetings with credible persons who know the individuals in question; such as bankers, auditors or legal advisors” while, in practice, except using public reports, there is no firm using such “non-documentary forms of evidence” as listed firms (bankers, auditors, legal advisors) are usually subject to professional secrecy.
More anecdotally, AMAFI has noted that there are two paragraphs 20.5 in this Guideline.
Consequently, AMAFI would suggest EBA to supress § 20.7.f).