FINANSINSPektionen Delays Regulation on Risk Factors for Customer Classification
Finansinspektionen, Sweden’s financial regulatory authority, has announced that it will not issue regulations on risk factors for customer classification in the immediate future. This decision is aimed at ensuring effective implementation of the Fourth Money Laundering Directive.
Delayed Regulation to Await EBA, ESMA, and EIOPA Guidelines
According to sources close to the matter, Finansinspektionen is awaiting the completion of ongoing work by the European Banking Authority (EBA), European Securities and Markets Authority (ESMA), and European Insurance and Occupational Pensions Authority (EIOPA) on common guidelines for risk factors. These guidelines are expected to be adopted by June 26, 2017.
Guidelines Development Based on Directive Requirements
The EBA, ESMA, and EIOPA are developing the guidelines based on Articles 17 and 18(4) of the Fourth Money Laundering Directive, which requires them to establish a list of factors that may indicate a low or high risk of money laundering and terrorist financing. The guidelines will serve as general guidance for financial institutions subject to the directive.
Finansinspektionen’s Decision
Finansinspektionen has been authorized to issue regulations on risk factors, but has chosen to wait pending the completion of the ongoing work by the EBA, ESMA, and EIOPA. In a statement, Finansinspektionen emphasized that holding off on issuing regulations will give it a better chance of defining risk factors adapted to the specific needs of Swedish financial institutions.
Customer Due Diligence and Risk Assessment
The directive requires financial institutions to conduct customer due diligence and assess the risks associated with each customer. The assessment should be based on a number of factors, including:
- Type of business
- Complexity of products and services offered
- Level of risk involved
No Regulation on Exceptions to Documented Risk Assessments
Finansinspektionen has also announced that it will not issue regulations on exceptions to the requirement for documented risk assessments at this time. The authority believes that the possibility of exceptions should be used only when the risks of money laundering and terrorist financing are obvious and well-known.
Industry Support
Industry associations, including the Swedish Bankers’ Association and the Association of Swedish Finance Houses, have expressed support for Finansinspektionen’s approach, citing the need for clear guidance on risk factors before regulations can be issued.