European Banking Authority launches central database for anti-money laundering and counter-terrorist financing
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On 31 January 2022, the European Banking Authority (“EBA”) launched a central database for anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”).
The EBA was established on 1 January 2011 as part of the European System of Financial Supervision (“ESFS”). It is an independent EU Authority which works to ensure effective and consistent prudential regulation and supervision across the European banking sector. The EBA is tasked with contributing to the creation of the European Single Rulebook in Banking, which aims to provide a single set of harmonised prudential rules for financial institutions throughout the EU. In particular, the EBA has a legal duty under EU Regulation No. 1093/2010 to contribute to the prevention of the use of the EU’s financial system for money laundering and terrorist financing.
The EBA has therefore established a central database for AML/CFT called EuReCa. The EBA states that EuReCa will be pivotal to coordinating efforts by competent authorities to combat money laundering and terrorist financing risks in the EU.
EuReCa will contain information on material weaknesses in individual financial institutions that make them vulnerable to money laundering and the financing of terrorism. Competent authorities across the EU are obliged to report such weaknesses, as well as the measures they have imposed on financial institutions to rectify those material weaknesses. Examples of such material weaknesses include:
- the lack of adequate AML/CFT policies and procedures
- the absence of transaction monitoring at the group level
- the absence of policies and procedures for high-risk customers, which increase the money laundering or terrorist financing risks associated with the financial institution.
In addition, EuReCA will include internal audit findings identified by a prudential authority during an on-site inspection about which senior management appeared to have been informed of a money laundering or terrorist financing risks and decided not to remediate.
The EBA intends to use EuReCA to inform its view on money laundering and terrorist financing risks and to perform risk assessments. It will also share pertinent information from EuReCA with competent authorities where appropriate, to support them in their supervisory activities and, in particular, in the event of the emergence of specific money laundering and terrorism financing risks or trends. The EBA states that EuReCA will therefore act as an early warning tool, which will enable competent authorities to act before money laundering and terrorist financing risks materialise.
Money laundering and the financing of terrorism continue to be a major concern for the EU’s financial system and the security of its citizens. It is anticipated that EuReCA will further strengthen the EU framework in the fight against money laundering and terrorist financing in order to maintain the integrity and stability of the financial system.
Written by Maria Curran, Clodagh Morrissey and Cian Ronan.
The EBA intends to use EuReCA to inform its view on money laundering and terrorist financing risks and to perform risk assessments. It will also share pertinent information from EuReCA with competent authorities where appropriate, to support them in their supervisory activities and, in particular, in the event of the emergence of specific money laundering and terrorism financing risks or trends. The EBA states that EuReCA will therefore act as an early warning tool, which will enable competent authorities to act before money laundering and terrorist financing risks materialise.
Money laundering and the financing of terrorism continue to be a major concern for the EU’s financial system and the security of its citizens. It is anticipated that EuReCA will further strengthen the EU framework in the fight against money laundering and terrorist financing in order to maintain the integrity and stability of the financial system.