EU Takes One other Step to Harmonize Anti-Cash-Laundering Guidelines

The European Union Banking Authority has proposed guidelines for financial compliance officers, another step in the bloc’s efforts to overhaul its anti-money laundering system.

The proposal by the Paris-based European Banking Authority is the latest step by the EU to harmonize anti-money laundering rules in member states and to shift implementation from national authorities.

In July the European Commission – the legislative arm of the EU – proposed Creation of an anti-money laundering agency with direct supervisory authority about financial companies. The proposal came after two scandals between the Latvian bank ABLV and the Danish one

Danish bank

A / S called on the bloc last year to create an EU-wide set of rules to combat money laundering.

The EBA’s proposal published this week begins a public consultation phase that ends in early November. The agency should then finalize the new standards.

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“This is a step to pave the way for the new EU-wide authority”, said David Pasewaldt, Frankfurt business defender at the law firm Clifford Chance LLP.

While the EBA’s future role in combating money laundering is in the air amid plans to create a specialized anti-money laundering agency, the guidelines should have an immediate impact on financial institutions, lawyers said.

The EBA said that its nearly 50-page proposal, for the first time, comprehensively lists the EU’s regulatory expectations regarding the establishment and management of anti-money laundering and terrorist financing programs by financial sector companies. The proposal outlines a framework for such programs with minimum requirements for the roles and responsibilities of compliance officers and board members.

Although some member states already have similar anti-money laundering standards, Pasewaldt said the proposal should be helpful for financial institutions and their compliance officers due to its thoroughness and specificity. “The level of detail [the EBA’s guidance] contains is quite surprising, ”he said.

The proposed policy would require that a member of the board of directors of a financial institution be specifically responsible for the company’s anti-money laundering program, although the rest of the board of directors also have responsibility.

It also describes the responsibilities of anti-money laundering compliance officers, including customer due diligence and reporting suspicious transactions to national authorities. According to the proposal, compliance officers should report directly to the company’s management board.

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The proposed guidance states that strategic decisions related to anti-money laundering and terrorist financing programs should not be outsourced to third parties.

The EBA also identified actions that national authorities should take, such as reviewing the technical expertise of a compliance officer upon appointment to ensure that he is qualified.

One focus of the guidelines is the requirement for banks to appoint a Group Compliance Officer who is responsible for harmonizing a financial institution’s approach to anti-money laundering regulations in the member states. These guidelines are reminiscent of a directive that the EU adopted in 2015.

The EBA stated that it had analyzed money laundering scandals and came to the conclusion that one cause was the lack of reporting lines between the local offices of the institutes and their group management bodies.

According to Jasper Helder, attorney at the law firm Akin Gump Strauss Hauer & Feld LLP in London, the requirement is part of the responsibility for developing a unified, EU-wide approach to combating money laundering standards at the financial institutions themselves.

“It’s pretty smart,” said Mr Helder. “If you did so, as an individual within such a transnational financial institution in charge of the group’s anti-money laundering program, would you accept that your organization in country A has different rules than in country B? Of course not.”

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