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Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539
Rapid Response Team: 0800 559 3500
Switchboard: +44 (0)203 947 1539

The EBA's Assessment of Money Laundering & Terrorist Financing Risks

Author: Niall Hearty  28 June 2023
2 min read

Niall Hearty of Rahman Ravelli details the key points in the European Banking Authority’s report on payment institutions.

The European Banking Authority’s (EBA’s) latest report suggests that money laundering and terrorist financing (ML/TF) risks are not being assessed and managed effectively by European Union payment institutions and their supervisors.

Last year, the EBA assessed the scale and nature of ML/TF risk in the payment institutions sector and how such institutions in the EU could identify and manage those risks. The EBA also considered what supervisors could do to mitigate those risks, both when considering an application for the authorisation of a payment institution and during the life of a payment institution.

The latest findings from the EBA suggest that institutions in the sector do not generally manage ML/TF risk adequately, with their internal controls often insufficient to prevent problems. This is in spite of the high inherent ML/TF risk to which the sector is exposed.

The EBA states that its findings also suggest that not all competent authorities are currently doing enough to supervise the sector effectively. As a result, payment institutions with weak anti-money laundering / combating the financing of terrorism controls can operate in the EU. They can do this by, for example, establishing themselves in Member States where authorisation and supervision processes are less stringent and then passport their activities across borders afterwards.

The EBA stresses that failure to manage ML/TF risks in the payment institutions sector can affect the integrity of the EU’s financial system. With several of its findings relating to issues that are addressed in the EBA’s guidelines, it emphasises that a more robust implementation by supervisors and institutions of the provisions in the guidelines would reduce the sector’s exposure to ML/TF risks.

Article 9a(5) of Regulation (EU) 1095/2010 (‘the EBA founding regulation’) mandates the EBA to perform risk assessments on significant ML/TF risks affecting the EU’s financial sector.

The EBA drew on a number of sources to inform this risk assessment. These include the findings of the EBA peer review on authorisation of payment institutions under the revised Payment Services Directive (PSD2), data extracted from the EBA’s AML/CFT database EuReCA, questionnaire responses, bilateral interviews with selected EU supervisors, and national and supervisory assessments of ML/TF risks in the sector.

The findings of this risk assessment will feed into the EBA’s bi-annual ML/TF risk assessment exercise under Article 6(5) of Directive (EU) 2015/849.

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Niall has a wealth of corporate crime expertise and an ability to coordinate global bribery and corruption cases. His achievements in such investigations have made him a logical choice for corporate clients.

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