The report highlights substantial progress in supervisory strategies, tools, and cooperation mechanisms, while also identifying persistent gaps in risk assessment and enforcement. These findings will inform the implementation of the new EU AML/CFT framework. As Money Laundering and Terrorist Financing (“ML/TF”) risks evolve amid geopolitical instability and technological advancement, the EBA underscores the urgent need for consistent, risk-based supervision that safeguards the financial system and ensures alignment with Financial Action Task Force (“FATF”) standards. The consequences of non-compliance include heightened enforcement, reputational damage and potential supervisory interventions, particularly for cross-border banking groups. 

Key Developments 

Advancements in AML/CFT Supervisory Frameworks 

The EBA’s reviews reveal NCAs’ increased efforts to embed AML/CFT into core supervision, with notable enhancements covering: 

• Implementation of integrated AML/CFT supervisory strategies and annual plans, aligned with National Risk Assessments (“NRAs”) and the EBA’s Supranational Risk Assessment (“SNRA”); 
• Updates to supervisory manuals and tools incorporating EBA Guidelines on risk-based supervision, with expanded use of off-site monitoring, thematic reviews, and data analytics; 
• Ongoing integration of AML/CFT considerations into the Supervisory Review and Evaluation Process (“SREP”) under the Capital Requirements Directive IV (“CRD IV”). 

Strengthening Cooperation Mechanisms 

• Cooperation remains a central pillar of effective supervision. The report identifies improvements in both domestic and international collaboration: 
• Domestically, NCAs have formalised relationships with Financial Intelligence Units (“FIUs”) and other authorities through memoranda of understanding and joint supervisory committees, enabling enhanced information sharing regarding suspicious activity; 
• Internationally, progress has been made through bilateral arrangements with third-country supervisors and the use of AML/CFT colleges to oversee cross-border banking groups. 

Nevertheless, supervisory challenges persist, particularly regarding oversight of foreign bank branches and assessing global ML/TF exposure. 

Importance of Compliance and Applicable Regulations 

The EBA underscores the importance of a risk-based approach under the forthcoming EU AML Regulation (“AMLR”) and Sixth Anti-Money Laundering Directive (“AMLD6”), which aim to harmonise risk assessments, supervisory measures, and enforcement across Member States.  

Relevant regulatory texts include: 

• EBA Guidelines on ML/TF Risk Factors (EBA/GL/2021/02), 
• Guidelines on Internal Governance (EBA/GL/2021/05), 
• Guidelines on the Assessment of the Suitability of Members of the Management Body and Key Function Holders (EBA/GL/2021/06), 
• CRD V, and 
• The establishment of the new Anti-Money Laundering Authority (“AMLA”), whose supervisory remit will begin in 2026. 

Firms should prepare for increased regulatory scrutiny, particularly where weaknesses in governance or supervisory cooperation are identified. Common areas of concern include under-resourced AML/CFT functions and gaps in data-sharing frameworks with third countries. 

Proposed regulatory updates aim to improve consistency, including: 

• Mandatory integration of AML/CFT into SREP assessments; 
• Enhanced reporting through the European Reporting System for Material AML/CFT Weaknesses (“EuReCA”); and 
• Revised guidelines governing the authorisation of financial institutions. 

Regulatory Implications and Compliance Lessons 

TThe EBA’s findings point to a maturing supervisory landscape and offer the following practical considerations for financial institutions: 

• Align internal AML/CFT frameworks with NRAs/SNRAs, using EBA tools for ongoing monitoring and scenario testing. 
• Establish robust memorandum of understandings for domestic FIU links and international colleges. 
• Revise suitability assessments and internal policies per EBA Guidelines, integrating AML/CFT into Board responsibilities. 
• Address NCA challenges by upskilling staff on digital ML/TF risks and leveraging data analytics for efficiency. 
• Conduct gap analyses against AMLR/AMLD6 to ensure seamless transition to centralised supervision. 

The report serves as a timely reminder of the intensifying ML/TF threats facing the sector, from trade-based laundering to sanctions evasion. A proactive compliance approach is critical to minimising disruption, maintaining market confidence and meeting supervisory expectations. 

How Complyport Can Help  

Complyport offers tailored solutions to support AML/CFT/CPF frameworks for banks and payments institutions, ensuring alignment with EBA standards. Our services include: 

• AML/CTF/CPF Risk Assessments and Gap Analyses; 
• CDD and EDD Policy Reviews; 
• Cross Jurisdictional Rules Mapping; 
• Operational Resilience and Private Key Management reviews; 
• MiCA Authorisation Applications and CASP Compliance;  
• Staff Training on EBA Guidelines, AMLR, and Digital ML/TF/PF Risks; and 
• Regulatory Guidance and Compliance Advisory Support. 

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The post EBA Report on AML/CFT Supervision: Strengthening Banking Sector Resilience first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

HM Treasury has published a Consultation Paper on the transposition of the Fourth Money Laundering Directive (“4MLD”) and the accompanying Fund Transfer Regulation (“FTR”). Although the latter is a Regulation, and hence binding upon all Member States, Article 17 of the FTR requires Member States to set out rules on administrative sanctions and measures for breaches.

The Consultation advises that the current Anti-Money Laundering and Transfer of Funds Regulations will be replaced by a “Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017”. It is intended that the new provisions will come into force in national law by 26 June 2017, in line with 4MLD (and FTR).

Like the current Money Laundering regime, the Consultation is not just aimed at credit and financial institutions but also draws in businesses such as estate agents, providers of gambling services, letting agents etc.

Areas addressed by the Consultation include, but are not limited to:

• When Customer Due Diligence (“CDD”) should be applied to existing customers (4MLD Article 14 mentions “at appropriate times”);
• Although the concept of Simplified CDD (“SDD”) remains (4MLD Annex II provides a non-exhaustive list of factors and types of evidence of potentially lower risk which can be taken into account when determining the validity of SDD), the Consultation is proposing to remove the list of products that could be subject to SDD (see Regulation 13 of the current Money Laundering Regulations);
• The possibility of removing the application of SDD to pooled client accounts e.g. pooled accounts held by notaries and other independent legal professionals (although this express provision applies under the current regime it is not repeated in 4MLD);
• The need for Enhanced Due Diligence (“EDD”) for Politically Exposed Persons (“PEPs”) continues and, of course, is widened under 4MLD due to the removal of the distinction between a domestic or foreign PEP. The government’s view is that a risk-based approach can be used in identifying whether a customer is a PEP and so different degrees of EDD measures can be used.  The Consultation provides an example of a PEP check not being required if the product being offered was assessed as being the subject of a low risk of take-ups by PEPs. Where a person is identified as a PEP, the enhanced measures can be tailored to the risk posed by both the product and the person – in low risk cases the government’s view is that UK PEPs (and their family members and close associates) should be treated at the lowest level of EDD.
• Still on PEPs, the Consultation also poses the question as to whether senior members of international sporting federations (“ISF”) should also be included in the UK’s definition of PEPs (4MLD does not expressly include members within ISF).
• Under 4MLD Article 54 imposes a maximum penalty of at least €5m or 10% of the total annual turnover (note that this only applies to credit and financial institutions, there are lesser maximum penalties for other types of entities).  The Consultation advises that the government does not intend to set an upper limit, believing that such a matter should be dealt with on a case-by-case basis. As for breaches of the FTR it is proposed that power to determine the measures and level of administrative sanctions remains with the relevant supervisory authority.

HM Treasury invites comments on the Consultation Paper by 10 November 2016.

The post 4MLD: HM Treasury Consultation first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

The beneficial owner is the person(s) who ultimately owns or controls a customer. In terms of individuals this is, normally, straightforward with the customer being the beneficial owner. However, as we all know, it becomes more complex when faced with e.g. corporate entities, trusts etc. To this end the Joint Money Laundering Steering Group already produces useful guidance to firms to assist in the application of CDD, including identification of the beneficial owner(s).

The Financial Action Task Force (FATF) has recently published its own guidance on ‘Transparency and Beneficial Ownership’ which, amongst other topics, includes the misuse of legal persons and arrangements and, of course, beneficial ownership.

The guidance is really aimed at national authorities and policy makers but those having responsibility for AML oversight will no doubt wish to add this to their archive of reference material.

Whilst on the subject of beneficial ownership, a reminder that the current version of the Money Laundering Directive (fourth) – which is still at the European negotiation stage – includes a requirement (Chapter III) for Member States to ensure that corporate and ‘other legal entities’ hold information on their beneficial ownership. Such information must be made available to any entity applying CDD in accordance with general AML requirements. In addition the information must be held in a manner which allows access by competent authorities and Financial Intelligence Units (in the case of the UK this would be the National Crime Agency) without alerting the entity concerned. Similar requirements will apply to trustees in terms of identity of the settlor and beneficiaries.

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