The European Banking Authority (EBA) has recently taken significant steps to address the risks of money laundering and terrorist financing associated with crypto-asset service providers (CASPs) and payment institutions:
1) Consultation on Amendments to Money Laundering/Terrorist Financing Risk Factors Guidelines: The EBA released a consultation paper on May 31, 2023, proposing amendments to its guidelines on Money Laundering/Terrorist Financing risk factors. The aim of these changes is to extend the guidelines to cover CASPs, in light of the new Markets in Crypto-Assets Regulation. This regulatory expansion seeks to establish consistent expectations for CASPs in identifying and mitigating money laundering and terrorist financing risks.
The updated guidelines provide insights into indicators that determine the level of risk associated with money laundering and terrorist financing for CASPs. They also offer specific guidance on adjusting customer due diligence procedures accordingly. Additionally, the amendments offer guidance to other financial institutions about the risks associated with engaging in business with CASPs or being exposed to crypto assets more broadly.
The consultation period for these amendments is set to conclude on August 31, 2023.
2) Report on Money Laundering/Terrorist Financing Risks related to Payment Institutions: Furthermore, on June 16, 2023, the EBA published a report focusing on the money laundering and terrorist financing risks linked to payment institutions in the European Union. The report highlights inconsistent risk assessment and inadequate risk management by both payment institutions and competent authorities.
The report underscores the vulnerability of payment institutions to money laundering and terrorist financing, and points out that many such institutions lack adequate internal controls to mitigate these risks effectively. The findings also reveal that several competent authorities responsible for overseeing the payment services sector in the EU are not effectively fulfilling their roles, leading to the presence of numerous payment institutions with insufficient anti-money laundering and counter-terrorist financing controls.
Addressing these issues is critical to protecting the EU’s single market from financial crime and enhancing payment institutions’ access to payment accounts by addressing the root causes that contribute to de-risking. The EBA calls for a more comprehensive implementation of the EU guidelines’ provisions by both competent authorities and payment institutions, to effectively reduce the sector’s vulnerability to money laundering and terrorist financing risks.
By FCCT Editorial Team
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