European Banking Authority (EBA) has issued an opinion that prudential supervisors across the EU when assessing financial institution’s ML/TF risk should take into account:
- Monitoring of key indicators;
- Business model analysis;
- Assessment of internal governance and institution-wide controls;
- Assessment of risks to capital;
- Assessment of risks to liquidity and funding.
This means that the Bank of Lithuania would have to assess indicators based on quantitative or qualitative information from prudential reporting that may point to ML/TF risk; identify and analyse business model or changes to the business model indications which could give rise to increased ML/TF risk; assess whether FI has implemented an effective internal control framework, developed and maintained an integrated and institution-wide risk culture and that the risk management covers all the risks the institution faces, including ML/TF risks; assess that institutions have necessary controls to ensure funds used to repay loans are from legitimate sources; and remain alert to indications that could signal ML/TF risks when assessing the liquidity and funding profile of an institution.
Since each financial institution has to carry out and audit in ML/TF prevention field too, ECOVIS ProventusLaw believes that this opinion helps auditors understand where the focus should be. Auditors should assess whether the institution has implemented an effective internal control framework, developed and maintained an integrated and institution-wide risk culture and that the risk management covers all the risks the institution faces, including ML/TF risks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances
Prepared by legal assistant Vilius Neverdauskas
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