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European Banks to Implement Robust AML/CFT Frameworks
In an effort to enhance anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, some European banks are set to implement robust frameworks to identify risk factors and mitigate threats.
According to the European Banking Authority’s (EBA) revised guidelines, competent authorities should start by identifying risk factors that affect their sectors and subjects of assessment. This includes referring to the EBA’s AML/CFT Risk Factors Guidelines to inform their view of relevant risk factors.
Revised Guidelines Emphasize Sectoral Risk Assessments
The revised guidelines also emphasize the need for sectoral risk assessments, which were found to be lacking in many cases. As a result, competent authorities will now be required to use specific information and sources to identify risk factors within sectors and subjects of assessment.
Risk Assessment Crucial
A clear understanding of money laundering and terrorist financing (ML/TF) risks is essential for competent authorities’ risk-based approach. The revised guidelines set out the main components of a risk assessment, including individual and sectoral/subsectoral assessments.
- Developing a good understanding of ML/TF risks associated with groups
- Introducing regular reviews of approaches
Risk-Based Supervision
A risk-based approach to supervision involves tailoring supervisory actions and responses to address specific risks within sectors or subjects of assessment. This approach allows supervisors to allocate resources effectively and focus on higher-risk areas.
The revised guidelines aim to address weaknesses identified by the Financial Action Task Force (FATF) and the EBA, including competent authorities’ challenges in translating theoretical knowledge of ML/TF risks into supervisory practice and risk-based supervisory strategies.
Monitoring and Updating
In the final step of the risk-based supervision model, competent authorities are required to review their approach, including their risk assessments and methodology, as well as their supervisory strategy and plans. This ensures that inconsistencies or weaknesses are identified and addressed.
The revised guidelines aim to strengthen AML/CFT measures in European banks, ensuring a more robust framework for identifying and mitigating risks.