Response to consultation on effective management of ML/TF risks when providing access to financial services
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‘Such a differentiation should facilitate individual evaluations when people belonging to pre-established high risk customer categories access financial services, avoiding that individuals are automatically excluded without a proper customer due diligence.’
#11. The section of ‘General requirements’ mentions that Credit and financial institutions should set out in their policies, procedures and controls all options for mitigating higher ML/TF risk that they will consider applying before deciding to reject a customer on ML/TF risk grounds.
We suggest adding:
‘Options for mitigating higher ML/TF risks should consider barriers that people in vulnerable situations may face in producing requested documentation, but which does not lead necessarily to a high level of risk (such as the example of people confronting with homelessness, destitute mobile EU citizens or asylum seekers who may not hold an address).’
It is also not clear how will the EBA ensure that financial institutions are executing set policies. While institutions are expected to follow ML/TF risk, there should be consistency in the creation of policies an institution decides to follow. There should be a clear set of guidelines to ensure similar enforcement of policies across financial institutions in the EU.
#14. Suggestion to modify as follows: ‘Credit and financial institutions should document [in writing] any decision to refuse or terminate a business relationship and the reason for doing so, [respecting the deadline foreseen in the PAD Directive: “without undue delay and at the latest 10 business days after receiving a complete application.”.] Furthermore, they should be prepared to make this documentation available to their competent authority upon request.
#15. For clarity purposes, we suggest reformulating this point as follows:
‘The limited functionalities of a basic payment account go towards mitigating the risk that the customer could abuse these products and services for financial crime purposes. In relation to the right of access to a payment account with basic features in accordance with Articles 16(2) and 17 of Directive 2014/92/EU, credit institutions obliged to offer such basic accounts should set out in their account opening policies and procedures how they can adjust their customer due diligence requirements to account for this fact.’
We suggest adding a new point, namely:
#18. In view of Article 15 on Non-discrimination, financial authorities should move beyond ensuring that “The conditions applicable to holding a payment account with basic features shall be in no way discriminatory” to pro-actively developing and implementing guidelines allowing to avoid excluding certain groups from accessing a payment account with basic features, in particular the ones who might not have a permanent address or who cannot produce proof of address.
Section 19b, we suggest adding: ‘This documentation may include expired identity documents and, where permitted under national law, documentation provided by an official authority such as social services or a well-established Not-for-Profit Organisation working on behalf of official authorities (Red Cross or established service providers in the homelessness sector), which also provides assistance to this customer.
Furthermore, currently financial institutions reject persons from opening a bank account and fail to provide the grounds for the rejection. Consequently, many disadvantaged individuals are turned away without knowing the reasoning of why they are unable to open a bank account. As a result, when enforcing a complaint mechanism, it is vital to also ensure institutions provide tangible, physical written evidence of why an individual person is rejected. This should be done in accordance with the PAD Directive: “without undue delay and at the latest 10 business days after receiving a complete application.” (Article 16.3).
1. Do you have any comments on the annex that covers NPO customers?
The annex aims at supporting credit and financial institutions in their understanding of the specificities of prospective or existing customers who are NPOs. However, the annex only considers institutions rather than the individual workers. There is the issue of financial institutions having rules and regulations that fail to be carried out by the workers under that institution. As a result, there needs to be clear set of regulatory expectations for both institutions and the workers under the financial institution. To contribute to this clarity, more training and awareness activities regarding the existing and upcoming guidelines need to be implemented for the staff of the competent authorities targeted by the EBA.3. Do you have any comments on the section titled ‘General requirements’?
#9. We suggest adding the sentence:‘Such a differentiation should facilitate individual evaluations when people belonging to pre-established high risk customer categories access financial services, avoiding that individuals are automatically excluded without a proper customer due diligence.’
#11. The section of ‘General requirements’ mentions that Credit and financial institutions should set out in their policies, procedures and controls all options for mitigating higher ML/TF risk that they will consider applying before deciding to reject a customer on ML/TF risk grounds.
We suggest adding:
‘Options for mitigating higher ML/TF risks should consider barriers that people in vulnerable situations may face in producing requested documentation, but which does not lead necessarily to a high level of risk (such as the example of people confronting with homelessness, destitute mobile EU citizens or asylum seekers who may not hold an address).’
It is also not clear how will the EBA ensure that financial institutions are executing set policies. While institutions are expected to follow ML/TF risk, there should be consistency in the creation of policies an institution decides to follow. There should be a clear set of guidelines to ensure similar enforcement of policies across financial institutions in the EU.
#14. Suggestion to modify as follows: ‘Credit and financial institutions should document [in writing] any decision to refuse or terminate a business relationship and the reason for doing so, [respecting the deadline foreseen in the PAD Directive: “without undue delay and at the latest 10 business days after receiving a complete application.”.] Furthermore, they should be prepared to make this documentation available to their competent authority upon request.
#15. For clarity purposes, we suggest reformulating this point as follows:
‘The limited functionalities of a basic payment account go towards mitigating the risk that the customer could abuse these products and services for financial crime purposes. In relation to the right of access to a payment account with basic features in accordance with Articles 16(2) and 17 of Directive 2014/92/EU, credit institutions obliged to offer such basic accounts should set out in their account opening policies and procedures how they can adjust their customer due diligence requirements to account for this fact.’
We suggest adding a new point, namely:
#18. In view of Article 15 on Non-discrimination, financial authorities should move beyond ensuring that “The conditions applicable to holding a payment account with basic features shall be in no way discriminatory” to pro-actively developing and implementing guidelines allowing to avoid excluding certain groups from accessing a payment account with basic features, in particular the ones who might not have a permanent address or who cannot produce proof of address.
4. Do you have any comments on the section titled ‘adjusting monitoring’?
The section regarding ‘adjusting monitoring’ speaks on alternative documentation that marginalized groups can provide to access a bank account. As disadvantaged groups do not have access to traditional documents that may better ease opening a bank account, the opportunity to bring alterative documentation is vital. However, it should be regulated that institutions have similar policies surrounding the exact alternative documentation that can be provided at financial institutions across the EU.Section 19b, we suggest adding: ‘This documentation may include expired identity documents and, where permitted under national law, documentation provided by an official authority such as social services or a well-established Not-for-Profit Organisation working on behalf of official authorities (Red Cross or established service providers in the homelessness sector), which also provides assistance to this customer.
6. Do you have any comments on the section titled ‘Complaint mechanisms’?
Section 22 reviews information on the ‘Complaint mechanisms.’ It is important for financial institutions to not only allow individuals to contact the relevant competent authority, but it is imperative to make this information readily available. Not all marginalized groups have access to a phone or email, so having the “competent authority” or “designated alternative dispute resolution body” contact details given physically would be key. This would ensure that complaints successfully reach the intended point of contact. Also, due to lack of access to technology for some marginalized groups, it would be beneficial for them to have the option to mail the EBA to submit complaints to national bodies rather than solely use a weblink.Furthermore, currently financial institutions reject persons from opening a bank account and fail to provide the grounds for the rejection. Consequently, many disadvantaged individuals are turned away without knowing the reasoning of why they are unable to open a bank account. As a result, when enforcing a complaint mechanism, it is vital to also ensure institutions provide tangible, physical written evidence of why an individual person is rejected. This should be done in accordance with the PAD Directive: “without undue delay and at the latest 10 business days after receiving a complete application.” (Article 16.3).
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