EU update – July 2021

Business Wide Risk Assessments are a hot subject

We recently wrote about the Dear CEO letter sent by the FCA to Retail banks naming the Business Wide Risk Assessment (BWRA) as an area of concern and one that they need to see significant improvements in.

Financial Services aren’t the only firms failing under scrutiny for failing to carry out an acceptable firm-wide assessment of their ML/TF risks. The Solicitors Regulation Authority (SRA) have been dishing out fines to Law firms for failing to carry out their BWRA.

Whilst Financial Services, for the most part, have been using technology for some time to record the kind of information required for this assessment, the legal sector is some way behind, with recording keeping and customer information often still recorded and stored manually. However, this shouldn’t be a defence, but another reason to prioritise the BWRA, to identify such a process as needing improvement and help the firm to make the necessary level of improvement.

This level of assessment is meant to inform and improve a firms AML program overall, so is a must for more than just regulatory compliance.

European AML Regulator

In July the European Commission announced its ambitious package of anti-money laundering initiatives including the introduction of a new EU anti-money laundering authority (AMLA) to establish a single integrated system of AML/CTF supervision across the bloc and keep a close eye on some of the riskiest financial institutions with a presence across the EU.  A single EU Rulebook will be introduced to harmonise AML rules across the EU.  The lack of alignment across member states has contributed to some of the biggest breaches and fines issued to EU countries of late.

This Rulebook will also apply to FinTechs and the Crypto sector, however that is as far as the AMLA will be able to reach. Other sectors often targeted by criminals wanting to wash their dirty money are Legal, Gaming and Accounting, all of which will still fall under the regulations and supervisor of each member state. So, whilst the 250-strong team at the AMLA will be closing the loopholes between the member states rulebooks, perhaps the European Commission should have going one step further and looked at the wider ecosystems used my criminals. Or have they already gone one step too far and should have instead invested the €45 million a year the AMLA will cost, into each member state creating one overall AML authority for all sectors. Im somewhat on the fence and think that what we really need to see is this new authority being agile enough during its creation to take account of and tackle the changes that will no doubt occur in financial crime in the next 3 to 5 years.

The AMLA is due to be operational in 2024, though it is speculated that we won’t see any action from them until 2026.

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