EBF reaction to EU AML/CFT framework

31 May 2023

Bearing in mind the necessary lead-time and efforts to get the AML Package adopted and implemented, this momentum is a unique opportunity to improve the framework and cannot be missed.

The European Banking Federation (EBF) is fully supportive of the European Commission and the co-legislators’ overarching objective to improve the effectiveness of the current EU AML/CFT framework. Bearing in mind the necessary lead-time and efforts to get the AML Package adopted and implemented, this momentum is a unique opportunity to improve the framework and cannot be missed.

The EBF has carefully studied the positions reached in both the Council and the European Parliament on the new AML Regulation, AML Directive and for the Regulation on establishing a new AML Authority. In doing so, we have carefully identified several key issues of the three proposals from the perspective of European financial institutions:

• The EBF welcomes the view of the co-legislators to explicitly recognise the benefits stemming from information sharing for AML/CFT purposes. To this aim, we emphasise the importance of having a sound legal basis for exchanging AML/CFT data supplemented by appropriate safeguards to ensure that the data is protected.
• We support the Council and Commission’s proposal to maintain the 25% threshold for determining beneficial ownership which is aligned with international standards. We caution that the Parliament’s proposal to lower the threshold is not aligned with the risk-based approach and would lead to disproportionate effects. Likewise, the Parliament’s approach to expand the scope of PEPs would impose significant burden for banks and customers alike.
• We caution that the intertwining of AML/CFT with sanctions obligations could have unintended consequences, particularly in terms of supervision.
• The EBF expresses concern with the Council’s proposal to prohibit entering into a business relationship with entities incorporated outside the Union whose information is not held in an EU UBO register. In view of obliged entities’ obligation to identify and verify beneficial ownership information, this information would be readily available in case it was required by competent authorities. As a result, the prohibition will likely impact EU competitiveness and introduce friction into the ordinary course of business without a substantiated AML/CFT purpose.
• The EBF calls for a stronger focus on the risk-based approach to updating customer information. The proposed 5-year limit will impose disproportionate requirements given the large proportion of low-risk customers whose information would change only marginally in this timeframe, if at all. We recommend that firms are permitted to apply a defensible and documented risk-based approach to ongoing monitoring that is subject to review by supervisors.
• The EBF stresses the importance of following a risk-based approach in developing AMLA’s methodology for selection of obliged entities that would fall under its direct supervision. To target the riskiest entities, it is key to put the focus on residual risk from the first selection process.
• We call for stronger UBO registers that hold accurate, adequate and up-to-date information. Ensuring the reliability of registers is essential for the industry in the fight against financial crime.

EBF

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