Supervisors of banks are making progress in the fight against financial crime, the EBA finds

The European Banking Authority (EBA) published today the findings from its 2022 review of competent authorities’ approaches to tackling money laundering and terrorist financing (ML/TF) risks in the banking sector. For this Report, the EBA staff assessed 12 competent authorities from nine Member States.

Overall, the EBA’s findings suggest that supervisors are making progress in the fight against money laundering and terrorist financing. Some competent authorities in the EBA’s sample have made far-reaching changes in recent years, and their approach to Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) supervision of banks is now broadly effective.

Thanks to the EBA’s ongoing efforts to foster a holistic approach to AML/CFT, many competent authorities have made tangible progress in tackling ML/TF risks through prudential supervision and most are on track to embed cooperation and information exchange in their supervisory processes. Nevertheless, most supervisors in the 2022 sample were asked to do more to tackle ML/TF risk in their banking sector.

As it was the case in the previous rounds of reviews (2020, 2022), competent authorities find assessing ML/TF risk difficult. Several competent authorities in the 2022 sample did not use their ML/TF risk assessments to inform their supervisory strategy and inspection plans. A general lack of formalised processes and targeted training for AML/CFT and prudential supervisors meant that opportunities for intervening at an early stage, before risks crystallise, were sometimes missed. The EBA staff provided advice to competent authorities on the steps they should take to strengthen their approach.

The findings and recommended actions summarised in this report will be relevant to all competent authorities responsible for tackling ML/TF risks in credit and financial institutions across the single market and can help them in their ongoing effort to prevent the use of the EU financial system for ML/TF purposes.

Legal basis, background and next steps

The legal basis for the EBA’s implementation reviews is set out in the Articles 1, 8(1), 9a as well as Article 29(1) and (2) of the EBA Regulation, which confers on the EBA a duty to ensure effective and consistent supervisory practices, to contribute to the consistent and effective application of Union law and to contribute to preventing the use of the EU’s financial system for ML/TF purposes. To this effect, the EBA can carry out peer reviews and investigate potential breaches of Union law, and it can take other measures such as staff-led implementation reviews of 9a risk assessments to assess competent authorities’ responses to particular compliance challenges.

AML/CFT implementation reviews are staff-led, qualitative assessments of competent authorities’ approaches to the AML/CFT supervision of banks. The purpose of these reviews is to identify areas for improvement and to support individual competent authorities’ AML/CFT efforts. Each implementation review concludes with targeted feedback and recommending specific actions to each competent authority.

The EBA entered its fourth and last round of implementation reviews of competent authorities in 2023. After this round, the EBA will publish a final report, which will include an assessment of progress made since 2019.