European Banking Authority (EBA) published its final revised Guidelines on money laundering and terrorist financing (ML/TF) risk factors. The Guidelines provide sectorial guidance on crowdfunding platforms, corporate finance, payment initiation services providers, account information service providers, and currency exchange providers.
The document focuses on setting out factors that financial institutions and other firms should consider when assessing the ML/TF risks associated with a business relationship or occasional transactions. EBA also provides guidance on how financial institutions can adjust their customer due diligence measures to mitigate ML/TF risk they have identified so as to make them more appropriate and proportionate.
Guidelines were updated in the following areas:
- business-wide and individual ML/TF risk assessments;
- customer due diligence measures including on the beneficial owner;
- terrorist financing risk factors; and
- new guidance on emerging risks, such as the use of innovative solutions for CDD purposes.
The document reiterates an already well-established practice regarding the identification of beneficial owner – financial institutions must identify the customer’s beneficial owner, determine that the customer’s ownership structure is not unnecessarily complex or opaque, assess whether true control of the legal entity is in the hands of an individual not named as its owners. However, financial institutions can not blindly rely on data included in national beneficial ownership registers, especially when the risk associated with the business has increased or when there are reasons to doubt that the date in registers is inaccurate. In such cases, financial institutions must take additional steps to verify customer information. When all the possible means of identifying the natural person who ultimately owns or controls the customer are exhausted, financial institutions may name the company’s senior managers as beneficial owners.
Guidelines also addresses the difficulty faced by financial institutions when trying to balance the principle of financial inclusion and compliance with AML/CFT requirements in regard to dealing with customers from high-risk sectors. EBA notes that financial institutions are not required to discontinue services for entire categories of customers associated with higher ML/TF risk. The risk of each customer, even in the same category, is different, thus in order to implement the principle of financial inclusion, financial institutions should assess the ML/TF risk posed by each client separately.
The original risk factors Guidelines will be repealed and replaced with the revised Guidelines three months after their translation in all official European Union languages.
Prepared by legal assistant Vilius Neverdauskas