The European Banking Authority (EBA) has published its biennial Opinion on risks of money laundering and terrorist financing (ML/TF) affecting the EU’s financial sector.
The Opinion specifically contemplates the exposure of credit providers to trade-based money laundering (TBML), otherwise it identifies and provides a list of the ML/TF risks that are applicable to the entire financial system, for instance the use of innovative financial services, while others affect specific sectors, such as de-risking.
The list also includes ML/TF risks that emerge from wider developments such as the coronavirus pandemic that has an impact on both firms’ ant-money laundering and counter financing of terrorism (AML/CFT) compliance and competent authorities’ supervision. The Opinion sets out recommendations to the competent authorities that supervise and regulate financial sectors at a national level.
Old and new risks
Some of the risks identified in the Opinion, such as those associated with virtual currencies and innovative financial services, had already been identified in the previous two Opinions on ML/TF risks and continue to be very relevant today.
Others are included in the Opinion for the first time, such as differences in the treatment by competent authorities of financial institutions’ involvement in facilitating or handling tax-related crimes.
De-risking and pandemic impacts
The EBA observes a continuing trend of de-risking, which has implications from a ML/TF, consumer protection and financial stability point of view.
The authority also says the coronavirus pandemic illustrates how new ML/TF risks can emerge unexpectedly and impact firms’ ability to ensure adequate AML/CFT compliance.
In contemplating risks associated with credit providers, the Opinion says that commercial providers are more exposed to TBML risks than consumer credit providers while the risk in this sector is also increased when credit intermediaries are used by credit providers to distribute their products and services.
Over- or under-invoicing in order to create inflated payments and triangulated trade operations that might be aimed at disguising the true destination of funds through the interposition of false beneficiaries were also considered risks associated with this sector by some of the competent authorities that the EBA consulted with in the process of forming its Opinion.
To complement its Opinion, the EBA has developed an interactive tool, which provides universal access to all ML/TF risks covered in the Opinion.
The EBA’s interactive tool on ML/TF risks covered in the Opinion can be found here.
The EBA’s Opinion on the risks of money laundering and terrorist financing affecting the European Union’s financial sector can be found here.
Categories: Trade Based Financial crimes News