On 13 July 2023, the European Banking Authority (EBA) published its fourth opinion on money laundering and terrorist financing (ML/TF) risks across the EU.
The opinion is addressed to the European co-legislators and Member State competent authorities (NCAs) responsible for anti-money laundering and countering the financing of terrorism (AML/CFT). It is based on data from January 2020 to January 2023, including 49 NCAs’ responses to the EBA’s biennial ML/TF risk assessment questionnaire, submissions to the EBA’s EuReCA database and findings from the EBA’s ongoing work to lead, coordinate and monitor the EU financial sector’s fight against ML/TF.
The opinion is issued pursuant to Article 6(5) of the Fourth Money Laundering Directive which requires the EBA to issue an opinion on the ML/TFrisks affecting the EU’s financial sector every 2 years. It serves to inform NCAs’ application of the risk-based approach to AML/CFT supervision and the European Commission’s Supranational Risk Assessment.
Among other things, the opinion highlights the following:
- Awareness of ML/TF risks is increasing across all sectors under the EBA’s AML/CFT remit with small, but tangible, improvements in credit institutions and investment firms.
- The AML/CFT systems and controls institutions have put in place are not always effective, with significant challenges in institutions’ approaches to transition monitoring and reporting of suspicious transactions in particular.
- Transaction monitoring and the reporting of suspicious transactions are particularly weak and rated as ‘poor’ or ‘very poor’ by between 30% and 50% of NCAs, with payment institutions and e-money institutions among the worst performing sectors.
- AML/CFT supervision is improving overall, with more AML/CFT supervisors carrying out formal ML/TF risk assessments in line with EBA guidelines.
- The frequency and intensity of supervisory engagement is increasing, with a small but tangible impact on levels of inherent and residual risk. Nevertheless, as highlighted in the EBA’s reports on ML/TF risk in payment institutions and on NCA’s approaches to AML/CFT supervision of banks, AML/CFT supervision is not always commensurate to perceived levels of ML/TF risk or effective overall.
- Cooperation of AML/CFT supervisors with other authorities has improved thanks to EBA initiatives such as AML/CFT colleges, Supervisory Colleges, EBA’s Guidelines on cooperation and information exchange and relevant EBA prudential guidelines such as SREP Guidelines. This cooperation can be further improved with tax authorities for tax-related crimes.
The opinion contains proposals to EU co-legislators and NCAs to address the risks identified and strengthen the EU’s financial crime defences.