Shearman & Sterling LLP | FinReg | European Banking Authority Publishes Advice on Steps to Strengthen the EU's AML/CTF Legislation
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  • European Banking Authority Publishes Advice on Steps to Strengthen the EU's AML/CTF Legislation
    09/10/2020
    The European Banking Authority has published an Opinion recommending that the European Commission establish a single rulebook on anti-money laundering and counterterrorist financing. The EBA’s Opinion, and report annexed to the Opinion, are in response to the Commission’s call for advice on defining the scope of application and the enacting terms of an AML/CTF regulation that is to be adopted. The EBA sets out how to address the gaps and vulnerabilities in the EU framework, mostly due to divergent national approaches across the EU. The EBA is proposing that in the areas where national differences and practices disadvantage the EU’s fight against AML/CTF, directly applicable rules should be introduced in a new EU regulation. According to the EBA, this would cover customer due diligence, AML/CTF systems and controls and certain key supervisory processes such as risk assessments, cooperation and enforcement.

    The EBA also recommends that areas that are insufficiently robust should be strengthened, such as the powers of AML/CTF authorities. In addition, the EBA considers that financial institutions should be required to report suspicious activities, not only suspicious transactions. These improvements could be made by amending the existing Directive.

    Furthermore, the EBA advises that action should be taken to ensure that the scope of entities subject to AML/CTF requirements is fit for purpose. For example, the EBA considers that the position of investment firms, investment funds, crowdfunding service providers and virtual asset service providers should be assessed.

    Finally, in the EBA’s view, steps should be taken to ensure that the provisions in sectoral financial services legislation are compatible with the EU’s AML/CTF objectives and that the risks are addressed consistently across all sectors; for example, in prudential rules on market entry, passporting, data protection, payment services and financial sanctions. The Wire Transfer Regulation should be assessed, too—in particular, the EBA advises that transfers of virtual assets should be brought within its scope.

    View the EBA's Opinion.

    View the report annexed to the Opinion

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