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European Supervisory Authorities (ESAs) report on AML

After several other reports showing substantial weakness within the European anti-money laundering effectiveness, the ESAs have jointly reported a significant risk of the Union’s financial system to be used for terrorist financing and/or money laundering.

The report points out at the inconsistent and significantly diverse implementation of EU directives (including AML and fit-and-proper requirements for financial institutions.

It is noted that technology can significantly help firms to detect suspicious activities, but may increase other types of risk when performing outsourcing without full understanding of the methods applied.

Brexit was noted as a risk for the activities being relocated to countries without technical and human capital resources to effectively monitor and supervise the newly welcomed firms.

One more issue potentially linked to Brexist will be the creation of “shell” companies controlled from the UK which may weaken local controls and make harder supervision at Member State level.

New technologies bring substantial risk as per the quality of the goods and services acquired and therefore weaken the Financial Institution robustness by means of using unregulated products making CDD poorly executed and increasing risk of identity theft.

Virtual currencies where also highlighted as a Union treat and noted as needing strong regulatory frameworks to protect the market against the inherited risk known to this asset type.

Supervisory practices and weak internal controls were also noted as a serious treat to the stability and sustainability of the system.

As per terrorist financing, the report highlights the importance of CDD including KYC and KYT in order to prevent the different financial actors from being abused for terrorist financing purposes.

Source

https://eba.europa.eu/esas-highlight-money-laundering-and-terrorist-financing-risks-in-the-eu-financial-sector

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Jaime Prieto

Mr. Jaime Prieto is a lawyer experienced in Financial Crime, Anti-Money Laundering and Counter Terrorism Financing having extensive professional experience in both public and private sectors. Mr. Prieto has been a Head of Compliance in the European Union, the Americas and the Caribbean for banks, trust companies, asset managers, Big Four audit and advisory firms, RegTechs, government agencies and other types of financial professionals. In addition to his experience, he has been legal and educational chair in several compliance and sectorial organisations and performed as a teacher and speaker for a number of organisations and in several local and international forums. Furthermore, Mr. Prieto is an experienced Money Laundering Reporting Officer anda Data Protection officer with additional experience in risk management.
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