23 February 2022

SSM's Elderson: Towards a stronger AML/CTF framework in the EU

During a seminar presenting the ECB Opinions on the proposed regulation establishing the AML/CFT Authority, AML Regulation, the sixth AML Directive and the Funds and Crypto-assets Transfers Regulation

The EU framework for the prevention of the use of the financial system for the purposes of money laundering and terrorist financing already has a long history. It is more than 30 years now since the first Anti-money Laundering Directive was published in June 1991. Since then, the framework has undergone many improvements, with the previous – fifth – AML Directive being published in May 2018.

The framework grew both in terms of the number and the forms of the regulatory instruments involved, incorporating both regulations and directives, as well as regulatory technical standards and guidelines developed by the European Banking Authority (EBA), European Securities and Market Authority and the European Insurance and Occupational Pensions Authority. Nevertheless, the AML Directive has remained the core of the legal framework.

The ECB provided opinions on many of those legislative proposals. The ECB does not and cannot have any mandate to exercise anti-money laundering and countering the financing of terrorism (AML/CFT) supervision. However, as my ECB Supervisory Board colleague Edouard Fernandez-Bollo aptly articulated in a recently published blog post: “Some things matter to you, even if you are not directly responsible for them.”

The EU AML/CFT framework affects the ECB’s tasks relating to the prudential supervision of banks, as well as the tasks that fall within its central banking mandate.

In particular, it is important for the ECB to factor the outcomes of AML/CFT supervision into its prudential supervisory processes. The risk of the use of the financial system for money laundering or terrorist financing is relevant for ECB prudential supervisory decisions on acquisitions of qualifying holdings in supervised entities, granting and withdrawing authorisations to credit institutions, and suitability assessments of existing or prospective managers of supervised entities. The outcomes of AML/CFT supervision are also reflected in day-to-day supervision as part of the supervisory review and evaluation process.

Since the exchange of confidential information between the ECB and the AML/CFT supervisors was enabled in 2018 by an amendment to the Capital Requirements Directive, the ECB, as a prudential supervisor, has concluded an agreement on information exchange with more than 50 AML/CFT supervisory authorities across all Members States of the European Economic Area. This cooperation was further enhanced by subsequent amendments to the Directive in 2019, as well as by the establishment of AML/CFT colleges, in which the ECB participates as an observer. Over the past years the ECB has also been actively contributing to the work of the EBA’s AML Standing Committee. Good and efficient cooperation with AML/CFT supervisory authorities is therefore an important priority for us.

Last year, following discussions in the Council of the EU, the Commission presented a set of legislative proposals for major changes to the EU AML/CFT framework:

The first substantial change consists in transforming most of the requirements addressed to private entities from the AML Directive to a directly applicable EU regulation.

The second, and even more fundamental change is the establishment of a new authority at the EU level with a mandate for both direct and indirect AML/CFT supervision across all EU Member States. We see this as an important shift which has the potential to bring a more harmonised application of EU AML/CFT requirements and convergence of practices in AML/CFT supervision across the EU....

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