The European Banking Authority ("EBA") has recently unveiled two documents pertaining to the risks of money laundering and terrorist financing associated with crypto-asset service providers and payment institutions.
1) Consultation on Amendments to Money Laundering/Terrorist Financing Risk Factors Guidelines
On 31 May 2023, the EBA released a consultation paper presenting proposed revisions to its guidelines concerning Money Laundering/Terrorist Financing risk factors. The primary objective of these proposed changes is to broaden the scope of the guidelines to encompass crypto-asset service providers ("CASPs") in view of the recently enacted Markets in Crypto-Assets Regulation. Through such amendments, the EBA is seeking to establish consistent regulatory expectations for CASPs in effectively identifying and mitigating money laundering and terrorist financing risks.
The updated guidelines offer insights into indicators that can determine the level of Money Laundering/Terrorist Financing risks for CASPs and provide specific guidance on adjusting customer due diligence procedures accordingly. Furthermore, the amendments provide guidance to other credit and financial institutions regarding the risks associated with conducting business with CASPs or being exposed to crypto assets in general.
The consultation period will conclude on August 31, 2023.
2) Report on Money Laundering/Terrorist Financing Risks related to Payment Institutions
Additionally, on the 16 June 2023, the EBA published a report concerning the risks of money laundering and terrorist financing associated with payment institutions in the EU. The report underscores the inconsistent assessment and inadequate management of these risks by both payment institutions as well as competent authorities.
The EBA's report noted that despite the sector's high vulnerability to money laundering and terrorist financing, many payment institutions lack sufficient internal controls to adequately mitigate these risks. Furthermore, the findings highlight that a number of competent authorities responsible for overseeing the payment services sector in the EU are not fulfilling their roles adequately, resulting in the presence of numerous EU payment institutions with inadequate anti-money laundering and counter-terrorist financing controls.
Addressing these issues is therefore crucial to safeguard the EU's single market against financial crime and enhance payment institutions' access to payment accounts by tackling the underlying problems that contribute to de-risking. The EBA thus called on a more comprehensive implementation of several provisions highlighted within the EU guidelines by both competent authorities and payment institutions in order to effectively reduce the sector's vulnerability to money laundering and terrorist financing risks.
Originally published 27 June 2023
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