Draft Guidelines under Articles 17 and 18(4) of Directive (EU) 2015/849 on customer due diligence and ML/TF risk factors (JC 2019 87) (JC 2019 87)

Start Date: 05/02/2020 | Deadline: 06/07/2020 | Status: OPEN | | Send your comments

The EBA issued today a public consultation on revised money laundering and terrorist financing (ML/TF) risk factors Guidelines as part of a broader communication on AML/CFT issues. This update takes into account changes to the EU Anti Money Laundering and Counter Terrorism Financing (AML/CFT) legal framework and new ML/TF risks, including those identified by the EBA’s implementation reviews. These Guidelines are central to the EBA’s work to lead, coordinate and monitor the fight against money laundering and terrorist financing, explained in the accompanying factsheet. The consultation runs until 06 July 2020.

These Guidelines, which are addressed to both financial institutions and supervisors, set out factors that institutions should consider when assessing the ML/TF risk associated with a business relationship or occasional transaction. In addition, they provide guidance on how financial institutions can adjust their customer due diligence measures to mitigate the ML/TF risk they have identified. Finally, they support competent authorities’ AML/CFT supervision efforts when assessing the adequacy of firms’ risk assessments and AML/CFT policies and procedures.

In its revised version, the EBA is proposing key changes, including new guidance on compliance with the provisions on enhanced customer due diligence related to high-risk third countries. New sectoral guidelines have been added on crowdfunding platforms, corporate finance, payment initiation services providers (PISPs) and account information service providers (AISPs) and for firms providing activities of currency exchanges offices.

The revised Guidelines also provide more details on terrorist financing risk factors and customer due diligence (CDD) measures including on the identification of the beneficial owner, the use of innovative solutions to identify and verify the customers’ identity. In addition, they set clear regulatory expectations of firms’ business-wide and individual ML/TF risk assessments.

The proposed changes will significantly strengthen Europe’s AML/CFT defences and 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.

Consultation process

Comments to the draft Guidelines can be sent by clicking on the "send your comments" button on the EBA's consultation page. Please note that that due to the current Covid-19 situation the deadline for the submission of comments has been extended to 6 July 2020.

All contributions received will be published following the close of the consultation, unless requested otherwise.
The EBA will hold a public hearing on the draft Guidelines, which will take place via conference call on 15 May 2020 from 14:00 to 16:00 Paris time. The dial in details will be communicated in due course.

Legal Basis and background

Article 17 and 18 of Directive (EU) No 2015/849, mandate the ESAs to issue Guidelines addressed to both Competent Authorities and to credit and financial institutions on the risk factors to be considered and the measures to be taken in situations where simplified customer due diligence and enhanced customer due diligence are appropriate.

In June 2017, the three ESAs issued Guidelines on customer due diligence and the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risks associated with individual business relationships and occasional transactions (JC 2017 37). Since then, the applicable legislative framework in the EU has changed. On 9 July 2018, Directive (EU) 2018/843 (AMLD5) entered into force and is applicable from 10 January 2020. Moreover, new risks have emerged and have been identified in the ESAs’ 2019 Joint Opinion. The European Commission’s post mortem report and the EBA’s implementation reviews has highlighted widespread challenges in the operationalisation and supervision of the risk-based approach to AML/CFT. Therefore, a review of the original Risk Factors Guidelines was warranted.

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

The EBA has a new legal mandate to lead coordinate and monitor the financial sector’s fight against ML/TF across the EU. Information on how the EBA will discharge its AML/CFT functions is set out in a factsheet published today.

Documents