The European Banking Authority (EBA) has released updated guidelines on customer due diligence and the factors credit and financial institutions should consider when assessing money laundering and terrorist financing (ML/TF) risks associated with individual business relationships and occasional transactions.
The guidelines aim to support firms’ anti-money laundering and combating the financing of terrorism (AML/CFT) compliance efforts and enhance the ability of the EU’s financial sector to effectively deter and detect ML/TF.
The new guidelines have been updated in four areas: business-wide and individual ML/TF risk assessments; customer due diligence measures including on the beneficial owner; terrorist financing risk factors, and new guidance on emerging risks, such as the use of innovative solutions for customer due diligence (CDD) purposes.
The guidelines are divided into two parts. The EBA describes the first part as generic and applicable to all firms. It is designed to equip firms with the tools they need to make informed, risk-based decisions when identifying, assessing and managing ML/TF risk associated with individual business relationships or occasional transactions.
The second part is sector-specific and sets out risk factors that are of particular importance in those sectors and provides guidance on the risk sensitive application of CDD measures by firms in those sectors.
Trade financing and correspondent banking
Trade financing and, separately, correspondent banking are amongst the thirteen sectoral guidelines about very different key financial sectors.
In contemplating trade financing, the guidelines seek to clarify a provision related to the transaction risk factor that refers to goods traded to ‘prohibited end users’. The new guideline on this includes a risk factor that traded goods are destined to an embargoed country, to a prohibited end user, or in support of a prohibited end-user.
The EBA has made editorial changes to clarify this relates to goods that are destined to parties or countries that are under sanctions, embargos or similar measures issued by, for example, the EU or the UN.
The EBA’s Final Report on Guidelines on revised ML/TF Risk Factors can be found here.
Categories: Trade Based Financial crimes News