On 17 March 2021, the European Banking Authority (EBA) issued a consultation paper setting out proposed changes to its guidelines on risk-based supervision of credit and financial institutions’ compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) obligations.

Article 48(10) of the Fourth Anti-Money Laundering Directive requires the EBA to issue guidelines to Member State competent authorities (NCAs) on the characteristics of a risk-based approach to AML/CTF supervision. The first iterations of the guidelines was published in 2016 as joint guidelines, as all three European Supervisory Authorities held AML/CFT mandates at the time.

The proposed amendments to the guidelines set out in the consultation paper are designed to address the key challenges for NCAs when implementing the risk-based approach. They also take into consideration changes in the EU legal framework that came into force since the guidelines were first issued and new international guidance by the Financial Action Task Force and the Basel Committee on Banking Supervision.

In summary, the revised guidelines:

  • Emphasise the need for a comprehensive risk assessment at a sectoral and sub-sectoral level to support NCAs’ identification of those risk areas that require more intense supervisory attention.
  • Explain different supervisory tools available to NCAs and provide guidance on selecting the most effective tools for different purposes.
  • Emphasise the importance of a robust follow-up process and set out different aspects that NCAs should consider when determining the most effective follow up action.
  • Provide further guidance on the implementation of a robust supervisory strategy and plan, to ensure that NCAs allocate their supervisory resources according to the risk exposure of subjects of assessment under their supervision.
  • Clarify NCAs’ obligations as regards to the AML/CFT supervision of groups and emphasise the need for NCAs, that are responsible for the supervision of the group’s head office, to develop a good understanding of money laundering / terrorist financing risks to which the group is exposed with a view to ensure that group-wide policies and procedures are implemented effectively.
  • Highlight the importance of cooperation among NCAs and between NCAs and other stakeholders including prudential supervisors, the financial intelligence units, tax authorities, law enforcement and AML/CFT authorities in third countries. In particular, the guidelines recognise that supervisory cooperation is important not only when supervising cross-border groups, but also in respect of domestic groups and subjects of assessments.
  • Provide further guidance on how NCAs can determine the type of guidance needed within the sector and how to communicate this guidance in the most effective manner.
  • Include further clarifications on the type of training that NCAs should provide to their staff.

The deadline for comments on the consultation paper is 17 June 2021.

The EBA will hold a virtual public hearing on the draft guidelines on 22 April 2021 from 14:00 to 16:00 Paris time. The dial-in details will be communicated to those who have registered for the meeting.