Through the Circular, CySEC informs the Regulated Entities that:
- According to Section 6(5) of the 4th EU Anti-Money Laundering Directive 2015/849, the three European Supervisory Authorities (the “ESAs”) namely EBA, EIOPA and ESMA, are mandated to prepare every two (2) years, a joint Opinion on the risks of money laundering (the “ML”) and terrorist financing (the “TF”) affecting the EU financial sector.
- The ESAs published on 20th February 2017 a joint opinion (the “Joint Opinion”) addressed to the EU Commission on the risks of ML/TF affecting the EU financial sector. The Joint Opinion should contribute to the EU Commission’s supranational risk assessment work as well as that of the ESAs of fostering supervisory convergence and a level playing field in the area of anti-money laundering (AML) and countering the financing of terrorism (CFT).
- The Joint Opinion finds that problems exist in key areas such as firms’ understanding of the ML/TF risk to which they are exposed, and the effective implementation of customer due-diligence policies and procedures by those firms. The Joint Opinion further highlights difficulties associated with the lack of timely access to intelligence that might help firms identify and prevent TF and considerable differences in the way competent authorities discharge their functions.
- Particularly, ESAs consider that at the time of writing the Joint Opinion, the EU financial sector is exposed to ML/TF risks arising from:
- ineffective AML/CFT systems and controls, which leave firms vulnerable to abuse by financial criminals;
- firms taking advantage of significant differences in Member States’ approaches to AML/CFT regulation and oversight to obtain authorisation in Member States whose AML/CFT regime is perceived to be less demanding, with a view to pass-porting services to other Member States;
- lack of access to intelligence on terrorist suspects undermining efforts to curb terrorist financing; and
- high-risk transactions being driven underground, as firms withdraw from offering services to less profitable clients that are associated with higher ML/TF risk.
5. The ESAs believe that the ML/TF risks arising from the above and highlighted in the Joint Opinion, mean that more has to be done to ensure that the EU AML/CFT defences are effective. This is particularly important as Member States move towards a more risk-based AML/CFT regime that presupposes a level of ML/TF risk awareness and management expertise that this Opinion suggests does not yet exist.
CySEC’s expects that: The Regulated Entities duly account for and read the Joint Opinion (accessible here), giving special attention to the analysis of the findings in relation to points (a) and (d) of paragraph 4 above.