As part of Requirement 4.3.1, paragraph 46 of the EBA Guidelines on loan origination and monitoring indicates that Institutions should have policies and procedures in place for the disbursement of loans to ensure that this is made in line with the credit decision and the loan agreement and ensure that there are appropriate checks in place to consider risks connected to ML/TF in line with the institutions' obligations in relation to AML and CTF requirements. Furthermore, said paragraph also states that Institutions should record clearly the necessary documentation for the disbursement following a positive outcome on the credit decision.   it is unclear  what is the expectation of the Authority in relation to the above clause of the Guidelines. 

Example:

Customer approaches the Bank to take out a loan. This can be for various purposes. It could be to effect some home improvements or purchase of a motor vehicle or boat. There could also be other purposes.

It is normal practice that in such instances, the customer would go through the loan application process. The Bank would assess the credit risks and affordability (and other operational and due diligence checks) and if no issues are encountered, the loan application would be approved.

The next step would be that the Bank deposits the loan amount into the applicant’s account.

It is unclear whether the EBA’s expectation in relation to AML/CFT obligations. Can you please elaborate whether the EBA’s expectation in relation to these obligations is restricted to the loan applicant or whether the expectation is that this is applicable also to any other third party to whom the funds are eventually disbursed (this could also be a non-customer).

I would like to reiterate at this stage that the above is related to personal unsecured loans only and does not relate to mortgages or green loans (loans provided for environment-friendly initiatives).