On the 1 March 2021, the European Banking Authority (the "EBA") published the revised Guidelines on customer due diligence and the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions under Articles 17 and 18(4) of Directive (EU) 2015/849 (the "CDD and Risk Factor Guidelines").
Addressed to competent authorities and to credit and financial institutions as defined in Directive 2015/849 (the "4th AMLD") (and therefore including also, amongst others, insurance undertakings and investment firms) , upon date of application, the CDD and Risk Factor Guidelines will repeal the original guidelines (JC/2017/37) (the "Original Guidelines"). The CDD and Risk Factor Guidelines will apply three months after publication across the EU.
The new risks which have emerged over the past years, as also identified by the EBA during its reviews, coupled with the changes brought about by Directive (EU) 2018/843 (the "5th AMLD"), warranted a reconsideration of the Original Guidelines to ensure their ongoing accuracy and relevance. Enhanced customer due diligence related to high-risk third countries was one such area which necessitated reassessment.
It will be noted that Title II of the CDD and Risk Factor Guidelines contains significant updates in the following areas of focus:
- business-wide and individual ML/TF risk assessments
- customer due diligence measures including on the beneficial owner
- terrorist financing risk factors
- emerging risks, such as the use of innovative solutions for CDD purposes
Title III is sector-specific and complements the generic guidelines in Title II. It sets out risk factors directed to 13 sectors and provides guidance on the risk-sensitive application of Customer Due Diligence measures by firms in those sectors. Whilst 4 new sectors have been added (see below), updates were undertaken to the sectors already dealt with in the Original Guidelines.
The sectoral guidelines concern the following:
- correspondent banks
- retail banks
- electronic money issuers
- money remitters
- wealth management
- trade finance providers
- life insurance undertakings
- investment firms
- providers of investment funds
- regulated crowd funding platforms – NEW
- Payment Initiation Service Providers and Account Information Service Providers – NEW
- firms providing activities of currency exchange offices – NEW
- corporate finance – NEW
The revised Guidelines form part of a broader ongoing effort on the part of the EBA to foster, lead, coordinate and monitor a common approach to AML/CFT by national competent authorities and financial institutions across the single market to AML/CFT and to implement its AML/CFT mandate entrusted to it by the European legislature. As stated in its February 2020 Fact Sheet, the EBA is intent on using its all its powers and functions to fulfil its AML/CFT mandate with a view to ultimately making a real difference in the fight against financial crime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.