Supervisory cooperation in the fight against financial crime is improving, the EBA finds

The European Banking Authority (EBA) today published its third Report on the functioning of anti-money laundering and countering the financing of terrorism (AML/CFT) colleges. The Report finds that competent authorities had taken important steps to improve the functioning of AML/CFT colleges. Nevertheless, many colleges had not reached full maturity. The Report highlights good practices that will be useful for competent authorities to further improve the effectiveness of AML/CFT colleges and of supervisory outcomes.

AML/CFT colleges are permanent structures that serve to enhance cooperation between different supervisors involved in the supervision of cross-border institutions. As of 31 December 2022, competent authorities had reported 229 fully operating colleges to the EBA. An additional 54 colleges had yet to hold their first meeting.

This Report sets out findings and observations from the monitoring of AML/CFT colleges in 2022 done by EBA staff. This suggests that college members had taken important steps to improve the effectiveness of AML/CFT colleges. More specifically, members were approaching the organisation of AML/CFT colleges in a more structured manner, which contributed to the exchange of more substantive and actionable information than was the case in the previous years.

Prudential supervisors and financial intelligence units (FIUs) participated in a greater number of colleges. As a result, supervisors had access to more relevant information that could timely inform their approach to the supervision of institutions operating on a cross-border basis. In some colleges, members had taken steps to identify common issues and address these issues in a coordinated manner.

Despite these notable achievements, AML/CFT colleges had not yet reached full maturity. Competent authorities reported that approximately 50 colleges had not yet held their first meeting. In some colleges the sharing of relevant information remained insufficient. Lastly, the onboarding of third country authorities was still a challenge and only a few of them could participate in college meetings.

The Report highlights good practices that could be useful for competent authorities to overcome these challenges and further improve the effectiveness of AML/CFT colleges going forward.

Legal basis and background

• The outcomes of the various money laundering and terrorist financing (ML/TF) scandals involving various European banks, showed that the absence of cooperation would often lead to ML/TF risk not being identified and addressed in good time.
• Directive (EU) 2018/843 (Anti-Money Laundering Directive - AMLD) introduced an explicit requirement for competent authorities to cooperate with each other but did not provide a framework of how this cooperation should happen in practice. The ESAs Guidelines (JC 2019 81) on cooperation and information exchange  between competent authorities supervising credit and financial institutions published in December 2019 provide details on how competent authorities should give effect to the cooperation requirements set out in AMLD, by establishing a framework for AML/CFT colleges.
• AML/CFT colleges complement other supervisory tools, such as the EBA’s central AML/CFT database (EuReCA). The purpose of EuReCA is to collect targeted information on all material weaknesses identified by AML/CFT and prudential supervisors in individual financial institutions, as well as on the measures taken in response, in a centralised way, so that this information can then be analysed by EBA staff and disseminated to competent authorities as needed. AML/CFT colleges, on the other hand, allow competent authorities responsible for the supervision of the same group to share a broader range of information in a direct manner and to address common issues in a coordinated way.