On 31 March 2020, the European Banking Authority (EBA) published the following:
- Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19. Among other things the EBA states that Member State competent and resolution authorities should assess the extent to which a delayed submission of all the data or subsets of the data included in the EBA reporting framework would be justified in these extraordinary circumstances. For the time being, such supervisory actions are only being considered for submissions due between March and end of May 2020. In general, institutions should be allowed up to one additional month for submitting the required data. Each Member State competent and resolution authority should clarify the precise terms for institutions in their jurisdiction. The EBA also suggests that Member State competent and resolution authorities do not prioritise their supervisory actions towards ad-hoc data collections that are not specifically needed to monitor institutions in the context of the COVID-19 outbreak;
- Statement on dividends distribution, share buybacks and variable remuneration. The EBA, acknowledging that some banks have already communicated a postponement of their decisions, urges all banks to refrain from dividends distribution or share buybacks which result in a capital distribution outside the banking system, in order to maintain its robust capitalisation. Banks should revert to their Member State competent authorities in case they consider themselves legally required to pay-out dividends or make share buybacks; and
- Statement on actions to mitigate financial crime risks in the COVID-19 pandemic. The EBA statement reminds the financial services industry of the importance to maintain effective and strong anti-money laundering/counter-terrorist financing (AML/CTF) systems and controls in the current, challenging, environment. It calls on Member State competent authorities to support firms by communicating their expectations to them as well as offering them support and guidance as required to facilitate their compliance with the AML/CTF legal and regulatory requirements in these trying times. In particular, the EBA expects Member State competent authorities to:
- raise awareness on the emerging money laundering/terrorist financing (ML/TF) risks;
- alert firms of the ML/TF techniques used as a result of the economic downturn and to update their AML/CTF risk assessments as required. Departure from using certain financial products because they are no longer as attractive for ML purposes due to diminished returns could be one example of a red flag. Firms should revisit the European Supervisory Authorities’ “Guidelines on ML/TF risk factors and simplified and enhanced customer due diligence” for further information and guidance on these points. In the UK, firms should also consult the Joint Money Laundering Steering Group Guidance, including Part 2 which contains sector specific detail regarding particular ML/TF risks;
- remind firms of the need to continue monitoring transactions, paying particular attention to any unusual or suspicious customer behaviour or activity which appears at odds with their past dealings and interactions. For example, an unexpected increase in financial flows and from customers which are known to be at risk or affected by the current economic downturn could be a suspicious activity indicator; and
- also remind firms of the importance to continue reporting any suspicious ML/TF activity to the relevant financial intelligence unit (such as the National Crime Agency in the UK).
The EBA’s message in the statement is consistent with that communicated by the Financial Action Task Force and should further encourage firms to continue their efforts in identifying and managing ML/TF risks and strengthening the associated systems and controls and policies and procedures.