The European Banking Authority (EBA) has unveiled a series of proposals designed to streamline and strengthen anti-money laundering (AML) and counter-terrorism financing (CFT) measures across the EU. The proposed Regulatory Technical Standards (RTS) seek to create a unified approach for AML/CFT supervision, aligning the practices of supervisors and financial institutions in all Member States.
Napier AI, an AI-powered compliance platform tackling financial crime compliance, has delved into the EU regulatory Technical Standards for AML.
The first area of focus is risk profiling. The EBA has proposed a harmonised methodology requiring AML/CFT supervisors across the EU to adopt a standardised system for assessing the risk profiles of obliged entities, Napier AI said.
The assessment will include analysing inherent risk based on customer bases, business models, and operational exposure, categorising entities from low to high risk. Supervisors will also evaluate the quality of AML controls and determine residual risks post-controls, using a consistent scoring system. This approach aims to automate the risk classification process while allowing supervisors to adjust scores manually when justified, ensuring supervisory actions match the actual risk posed by each entity.
The RTS also addresses direct supervision, detailing criteria for determining which entities could fall under AMLA’s direct oversight, it said. Entities operating in at least six Member States, whether through establishment or cross-border services, will be eligible for direct supervision if they meet specific thresholds. These include having more than 20,000 customers in a Member State or conducting transactions exceeding €50m. The criteria apply to both retail and institutional customers.
Customer due diligence (CDD) is another key area covered in the draft RTS, Napier AI explained. The proposals outline standardised data requirements for identifying and verifying customers, beneficial owners, and legal entities, promoting consistency across the EU. These requirements also define the standards for data formatting, identity verification, cross-checking, and record-keeping. Additionally, the draft RTS introduces a risk-based approach to reviewing ML/TF risk profiles, with annual reviews as the default frequency, while allowing longer review periods for lower-risk entities, ensuring supervisory efforts remain proportionate.
The final focus is on sanctions and penalties, with the RTS aiming to harmonise the application of pecuniary sanctions, administrative actions, and periodic penalty payments across the EU. The proposals include guidelines on assessing the seriousness of AML/CFT breaches, considering factors such as the duration, financial impact, and the nature of the breach.
Napier AI commented on the EBA’s proposals, stating that they aim to balance proportionality, practicality, and risk management while supporting financial institutions in managing compliance costs effectively.
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