European Commission Assesses Risks to EU of AML and CTF

The European Commission has published a Communication and a series of reports assessing the EU implementation of anti-money laundering and terrorist financing requirements and discussing whether further action is needed to improve the EU's AML/CTF framework. The Communication summarizes the reports and the Commission's conclusions. The Commission notes that some of the shortcomings identified in the reports may have been remedied through the Fourth AML Directive, and that others may still be mitigated through the implementation of the Fifth AML Directive, due to be implemented by member states by January 2020. The reports are:

1. The Commission's Supranational Risk Assessment report: this report assesses the AML and CTF risks impacting the EU and relating to cross-border activities. The report considers the implementation of the recommendations made by the Commission in its first Supranational Risk Assessment report, published in 2017, noting that most of the recommendations have been implemented, and sets out the outstanding actions needed to fulfill them. It also considers steps required to mitigate the remaining risks of AML and CTF in the EU, acknowledging that some of these will be addressed through the Fifth AML Directive.
2. An assessment of recent alleged AML cases involving EU banks: this report is based on the case studies of events occurring at 10 banks between 2012 and 2018 and considers the role of the banks and the actions by AML/CFT regulators and the prudential regulators. The report highlights the shortcomings evidenced at the banks as: (i) ineffective or lack of compliance with the legal requirements for AML/CTF systems and controls, including risk assessment, customer due diligence and reporting of suspicious transactions; (ii) governance failures; (iii) gaps between risk appetite and risk management; and (iv) negligence of AML/CTF group policies. It also discusses future steps that could be taken by banks, their regulators and the EU legislature to avoid repeated failures. The Commission also notes that while supervisors did take some pre-emptive steps, there were numerous occurrences of supervisors only intervening after substantial risks had arisen.
3. A report assessing the framework for cooperation between Financial Intelligence Units: the report focuses on the obstacles to enhancing cooperation between FIUs in the EU that have not been addressed through member state implementation of the Fourth AML Directive. The report notes that reporting by the private sector is hindered by the lack of a common template for the reporting of Suspicious Transaction Reports and the lack of a mandatory electronic filing of such reports and that FIUs have not been sharing information to the full extent possible, sometimes due to issues relating to technology. The Commission considers that more needs to be done to coordinate and support cross-border cooperation and analysis, potentially through powers to adopt legally binding standards, templates and guidelines in the area of work of FIUs.
4. A report on the interconnection of national centralized automated mechanisms (central registries or central electronic data retrieval systems) of the Member States on bank accounts: this report assesses the status of Member State action to implement the requirement in the Fourth AML Directive to establish central registries. The Commission highlights that it would be technologically possible to interconnect these systems to enhance access to financial information and assist in cross-border cooperation between Member State authorities. It will consult relevant stakeholders on this point in due course.

View the Communication.

View the Supranational Risk Assessment report and accompanying staff working document.

View the assessment of recent alleged AML cases involving EU banks.

View the FIU report.

View the report on the interconnection of central bank account registries.

View the Q&A.

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