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New Developments for Anti-Money Laundering Supervision

Firms that operate on a cross-border basis in the EU will be supervised by colleges of anti-money laundering and countering the financing of terrorism supervisors, pursuant to new Joint Guidelines just published by the European Supervisory Authorities.

According to the ESAs, recent high profile AML/CFT cases involving EU banks suggest that where firms are operating on an EU cross-border basis (“Firms”), serious compliance failures were allowed to continue for long periods due to the failure of AML/CFT supervisors to communicate effectively with their EU counterparts.

Overview of the Guidelines

The aim of the Guidelines is to ensure that supervisors from different EU Member States have a formal framework to structure supervisory cooperation thus strengthening the effectiveness of the AML/CFT framework. In this regard, they set out the rules for the establishment of AML/CFT colleges for Firms. These colleges are intended to provide a forum for AML/CFT competent authorities and other relevant authorities, including prudential supervisors, to work together to improve their understanding of the ML/TF risk associated with the Firm, exchange information to inform their approach to the supervision of that Firm and to coordinate supervisory action where appropriate.

Mapping Firms

As a first step, each competent authority must identify each Firm that has been authorised in its Member State and all branches or subsidiaries set up by the Firm in other jurisdictions. The mapping should also include all branches and subsidiaries operating in the competent authority’s Member State from other Member States or third countries as well as those third countries where the third country undertaking linked1 to the EU establishment is situated.

Setting up an AML/CFT College

If competent authorities from three or more Member States are involved in the AML/CFT supervision of the same Firm, an AML/CFT college should be established, comprised of:

  • each competent authority involved in the Firm’s AML/CFT supervision;
  • the ESAs;
  • observers, including the relevant Firm’s prudential supervisors, the AML/CFT authorities of the third countries where cross-border establishments operate, and the relevant Financial Intelligence Unit (“FIU”). An observer will only be invited to participate in the AML/CFT college where none of the permanent members object and where the potential observer agrees to abide by the specified terms of participation;
  • other attendees, such as the Firm and other FIUs.

Other Matters

The Guidelines also deal with a number of other matters regarding AML/CFT colleges, including contact lists, the frequency and form of college meetings, written cooperation and information sharing agreements, the scope of mutual assistance, the procedure for requesting and providing mutual assistance, confidentiality restrictions and permissible uses of information, establishing a common supervisory approach, co-ordinated supervisory actions and conflict resolution.

In situations where the conditions for setting up an AML/CFT college are not met, the Guidelines set out rules regarding bilateral relationships between competent authorities to facilitate effective and efficient cooperation and information exchange.

Next Steps

The Guidelines apply from 10 January 2020 and AML/CFT colleges should be established for all Firms as soon as possible, but focusing initially on those firms assessed as high-risk for ML/TF purposes. According to the Guidelines, colleges for all Firms should be established within two years from the 10 January 2020.