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EBA publishes ambitious workplan for 2020, warning that it cannot be a ‘supervisor of supervisors’ and hinting that further centralisation may be the only way to ensure a ‘truly European approach’ to AML/CTF

  • Europe
  • Fraud and financial crime

03-10-2019

As the European Banking Authority publishes a wide-ranging workplan for 2020, Zia Ullah and Ruth Paley explain the EBA’s role and its forthcoming programme, and take a look at the substance of the developments planned for the next twelve months with a particular focus on AML-related objectives.

What is the EBA?

The European Banking Authority (EBA) was established on 1 January 2011 as part of the European System of Financial Supervision (ESFS). As an independent EU Authority which works to maintain the stability and effectiveness of the EU’s financial system, the main task of the EBA is to contribute to the production of a single set of harmonised prudential rules for financial institutions throughout the EU. It also plays an important role in promoting convergence of supervisory practices and is mandated to assess risks and vulnerabilities in the EU banking sector. In terms of an anti-money laundering (AML) focus, the EBA has a legal mandate to foster the consistent and effective application of the EU-wide Anti-Money Laundering Directives (MLD) including 4MLD and the forthcoming 5MLD, due to be transposed by 10 January 2020.

What’s in the EBA’s work plan?

The EBA's work for 2020 is defined under six strategic areas and 37 activities. The programme includes a description of the EBA’s objectives for 2020, expected results and main outputs. It is focused on six strategic areas for 2020:

  1. Support the development of the risk reduction package and the implementation of the global standards in the EU
  2. Providing efficient methodologies and tools for supervisory convergence and stress testing
  3. Moving towards an integrated EU data hub and a streamlined reporting framework
  4. Making AML a real priority for the EU
  5. Contributing to the sound development of financial innovation and sustainability
  6. Promoting an operational framework for resolution

What AML-specific activity is planned?

The EBA’s work programme for 2020 is centred around completion of the European Council action plan on AML for which the EBA will be the lead. The EBA will also review the effectiveness of the approaches to the AML/CFT supervision of banks used by National Competent Authorities (NCAs), which in the UK will be the FCA and the PRA. The main outputs are listed as:

  • Preparing the EBA’s new tasks and powers, including establishing a database, enhanced monitoring and requests for action, and establishing a new senior AML committee
  • Deliverables resulting from the European Council action plan on AML, including an EBA database with EU sanctions information
  • Individual and thematic feedback to Competent Authorities on their approaches to AML supervision
  • AML-focused follow-up work that results from the EBA’s roadmap on FinTech
  • Answers to the questions that the EBA receives in relation to 4MLD/5MLD, through its Q&A tool
  • Training activities.  

These outputs are expressed in high-level terms and it is difficult to divine from this list exactly how it’s intended they will be achieved, leaving a lot of scope for interpretation. All of these tasks sound sensible, of course, but absent a degree of granularity it will be hard to predict the methods by which they will materialise, or the form they’ll take. Thematic feedback to Competent Authorities on their approaches to AML supervision will likely be of interest to individual Member States but, in the case of the UK, for example, there is already a good understanding from the FCA and from OPBAS where supervision could be enhanced and so it is not immediately obvious how valuable this output will be. More tangible, perhaps, is the delivery of an EBA database with EU sanctions information, which advisors in this space will want to consider carefully.

What challenges does the EBA face in the fight against ML/TF?

On 5 September, Jose Manuel Campa, Chairperson of the EBA, made an introductory statement which covered the EBA’s role, current and future AML/CTF powers; and some of the challenges that the EBA faces in supporting AML change and improvement across the European Union.

In support of a move from a directive-based approach to a regulation-based framework, he commented that the current systems of directives was unable to eliminate national differences, and ‘limits how much convergence our guidelines and standards can achieve as the competent authorities and financial institutions will not be able to comply with our guidelines if national law stands in the way’. He expressed concern that divergence of national practices exposes the Union’s internal market to significant money laundering and terrorist financing (ML/TF) risks, and suggested that a move towards a regulation-based framework would address these issues. He spoke of the possibility of ‘new mandates’ which would empower the EBA to issue legally binding standards and establish a ‘common risk assessment methodology for AML supervisors’.

However, warning that the EBA could not fulfil a role as a ‘supervisor of supervisors’ Campa said ‘whilst we welcome a few extra people, and a limited number of extra tasks and responsibilities, one cannot expect the EBA to alone ensure a fundamental change in the system as a whole’.

Campa spoke of the need to ensure uniformity of approach, including comparable approaches, consistent outcomes and full accountability for relevant authorities. He cautioned of the significant risk of not reaching expectations for harmonised and effective supervision, and predicted that if not, then ‘further centralisation’ including a new  AML/CFT Regulation, ‘may be the only way to ensure a truly European approach to preventing the single market from being used for the purposes of ML/TF’.

Leaving aside the vexed question of Brexit, these words do seem to foretell of a move towards a further concentration of control in Europe with a reach extending not only to the relevant national AML supervisors, but also, potentially, over the AML systems and controls of regulated businesses themselves. With other EU-level developments in the fight against ML/TF including a renewed push towards a third-country AML blacklist, new rules designed to ensure the management and mitigation of third-country local-law conflict risk, and recognising the significant pressure that recent laundromat scandals within the EU have created for the EBA and other supra-national authorities, the likelihood of further, measurable, developments in this area emerging over the coming months is certainly very strong.

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