Shearman & Sterling LLP | FinReg | European Commission Proposes Enhancements to the European Banking Authority's Supervisory Powers for Anti-Money Laundering
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  • European Commission Proposes Enhancements to the European Banking Authority's Supervisory Powers for Anti-Money Laundering
    The European Commission has published a Communication setting out a broad strategy for strengthening the EU's framework for anti-money laundering supervision. The Communication is accompanied by a fact sheet setting out Questions and Answers on the strategy.

    The Commission notes that, despite the recent strengthening of the EU's framework, through the Fourth Money Laundering Directive (4MLD) and the forthcoming Fifth Money Laundering Directive (5MLD), there are concerns that gaps remain in the EU's supervisory framework. The Commission highlights that there is no clear articulation between the prudential and anti-money laundering rules for financial institutions. It identifies shortcomings in the reaction time of national supervisors and in the level of cooperation and information sharing both between prudential and anti-money laundering supervisors and on a cross-border basis between EU supervisors and other supervisors based both within and outside the EU. While the Commission recognizes that 5MLD will remove certain obstacles to cooperation between anti-money laundering and prudential supervisors, it also notes that further steps are necessary to ensure effective supervisory cooperation, especially where financial institutions operate across borders.

    In the Communication, the Commission sets out a strategy that has been developed following analysis carried out by a Joint Working Group convened by the Commission. The strategy includes short-term legislative and non-legislative initiatives, along with long-term objectives, to enhance interaction between the anti-money laundering and prudential frameworks.

    The Commission proposes a number of legislative and non-legislative measures including the following:
    1. The Commission proposes an amendment to its September 2017 proposals to amend the founding regulations of the European Supervisory Authorities. The amendment is designed to: (i) centralize within the European Banking Authority the anti-money laundering resources and expertise that are currently spread across the three ESAs and the Joint Committee's dedicated subcommittee; (ii) specify in more detail in the EBA's founding regulation the anti-money laundering related tasks with which it is entrusted; (iii) reinforce the tools at the EBA's disposal for carrying out the anti-money laundering related tasks; and (iv) strengthen the coordination role of the EBA for international anti-money laundering related issues, in particular coordinating cooperation with relevant third-country authorities in cases entailing a cross-border dimension.
    2. The Commission notes that, in June 2018, the European Parliament tabled proposed amendments to the Commission's proposed amendments to the Capital Requirements Regulation and the Capital Requirements Directive (referred to as the CRDV package). The Commission supports the European Parliament's proposals, which relate to information exchange and the duty of cooperation between prudential and anti-money laundering authorities and bodies.
    3. The Commission invites the EBA to undertake a stock-taking exercise to identify the various anti-money laundering issues relevant from a prudential perspective and conduct a mapping exercise showing how anti-money laundering aspects are currently factored into prudential supervision. The EBA is then invited to adopt common guidance for EU prudential supervisors on how to appropriately and consistently take money-laundering and terrorist financing risks into account in their activities.
    4. The EBA is invited to analyze the impact of the different approaches behind the distribution of competences in prudential supervision and anti-money laundering supervision.
    5. The EBA is invited to monitor, in conjunction with the other ESAs, the implementation of the Risk-Based Supervision Joint Guidelines published in April 2017. The Commission also asks the ESAs to expand the Joint Guidelines to specify common procedures and methodologies for the supervision and assessment by anti-money laundering authorities of financial institutions' compliance with anti-money laundering rules.
    6. Going forward, the EBA should undertake reviews of the activities of EU anti-money laundering authorities, and make concrete recommendations to these authorities and have in place an effective follow-up mechanism.
    7. The EBA is invited to devise a cooperation strategy with relevant third-country authorities, for the purposes of enhancing international cooperation on anti-money laundering issues.

    View the Communication.

    View the fact sheet.

    View the amended proposal on ESAs' powers.

    View details of the Commission's September 2017 proposals on ESA powers

    View details of 5MLD.

    View the Risk-Based Supervision Joint Guidelines

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