EBA : Guidelines on risk-based supervision (revised)

The European Banking Authority (EBA) launched in march a public consultation on 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. The proposed changes address the key obstacles to effective AML/CFT supervision that the EBA has identified during its review of the existing Guidelines, including the effective use of different supervisory tools to meet the supervisory objectives. The Guidelines are central to the EBA’s mandate to lead, coordinate and monitor the EU financial sector’s fight against money laundering and terrorist financing. The consultation runs until 17 June 2021.

The Guidelines on risk-based AML/CFT supervision were originally published by the European Supervisory Authorities (ESAs) in 2016 and set out steps that competent authorities should take to ensure compliance by credit and financial institutions with their AML/CFT obligations. Since their publication, the EBA has observed that supervisors across the EU were finding the implementation of the risk-based approach to AML/CFT supervision difficult, which meant that AML/CFT supervision was not always as effective as the legal framework set out in Directive (EU) 2015/849 (AMLD) and the ESAs’ Guidelines had envisaged.

The changes the EBA is proposing include practical step-by-step approaches to addressing those aspects of AML/CFT supervision that competent authorities have found particularly challenging. The revised Guidelines focus on helping the supervisors identify and manage ML/TF risks more effectively, including the risks that may arise from de-risking practices in some sectors or Member States by providing greater detail on ML/TF risk assessments and by requiring to develop a robust supervisory strategy and plan that are based on those risk assessments.

The Guidelines also set out how supervisors can choose the most effective supervisory tools to support different supervisory needs and objectives, and stress the importance of cooperation between different supervisory authorities, and between supervisors and other stakeholders, such as Financial Intelligence Units and financial institutions. In addition, the Guidelines emphasise the importance for supervisors to develop a good understanding of ML/TF risks associated with tax crimes, which may involve a cooperation with tax authorities in their Member State.

Once implemented, the proposed changes will foster greater convergence of supervisory practices in areas where supervisory effectiveness has been hampered, so far, by divergent approaches in the implementation of the same European legal requirements. This means that they will significantly strengthen Europe’s AML/CFT defences.

Consultation process

Comments to the draft Guidelines can be sent by clicking on the "send your comments" button on the EBA's consultation page. The deadline for the submission of comments is 17 June 2021.

All contributions received will be published following the close of the consultation, unless requested otherwise.

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.

The scope of the EBA’s consultation is limited to the amendments and additions to the original risk-based supervision Guidelines, which will be repealed and replaced with the revised Guidelines.

Legal basis and background

Directive (EU) 2015/849 (AMLD) puts the risk-based approach at the centre of the EU’s AML/CFT regime. It recognises that the risk of money laundering and terrorist financing may vary between countries, sectors and financial institutions and that Member States, competent authorities and credit and financial institutions should identify and assess these risks in order to decide how to best manage them.

Article 48(10) of AMLD mandates the EBA to issue Guidelines addressed to competent authorities on the characteristics of a risk-based approach to supervision and the steps to be taken when conducting supervision on a risk-based basis. The mandate requires the EBA to take specific account of the nature and size of the business, and, where appropriate and proportionate, specific measures shall be laid down. The revised Guidelines also propose to take into consideration changes in the EU legal framework that came into force since the original guidelines were first issued, as well as new international guidance by the Financial Action Taskforce (FATF) and the Basel Committee on Banking Supervision on this topic.

p/o Virginie Gastine Menou

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