International alignment and business considerations should feature in EBA’s de-risking guidance say Wolfsberg and IIF

The Wolfsberg Group, the association of global banks that aims to develop frameworks and guidance for the management of financial crime risks, and the Institute of International Finance (IIF), the global association of the financial industry, have submitted joint comments in response to the European Banking Authority’s (EBA’s) consultation on de-risking announced in December.

The EBA issued the consultation with the aim of ensuring that customers, especially the most vulnerable ones, are not denied access to financial services without valid reason and are not marginalised from the financial system due to banks de-risking due to anti-money laundering and counter financing of terrorism (AML/CFT) rules.

International alignment

The joint comments suggest financial institutions should have the ability to apply a risk based approach to non for profit organisations (NPOs) in line with the relevant Financial Action Task Force (FATF) recommendation 8. It is aimed at preventing misuse of NPOs for the financing of terrorism while, at the same time, respecting legitimate actions of NPOs.

Wolfsberg and the IIF also stress the importance of alignment with the FATF definition of de-risking to align with international standards and to avoid unintended consequences.

Business considerations

They recommend that the EBA’s guidance acknowledges the principle of financial institutions having legitimate risk management reasons for exiting or declining individual customers on a case-by-case basis.

The comments also say that it is appropriate and prudent business practice to consider the cost of effective risk management when determining the viability of a relationship or product offering.

In these circumstances, Wolfsberg and the IIF conclude that it should not be necessary for financial institutions to consider all possible mitigating measures.

The Wolfsberg IIF comment letter to EBA on derisking Feb 2023 can be found here.

The EBA’s Consultation on effective management of ML/TF risks when providing access to financial services can be found here.


Categories: Trade Based Financial crimes News

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