On July 29, 2021, the European Banking Authority (EBA) published a public consultation period on its new proposed guidelines for anti-money laundering and countering the financing of terrorism (‘AML/CFT') compliance officers responsibilities, functions, and duties.
According to Regulation Asia, the rules will apply to all finance industry operators who are subject to the EU AML Directive once they are implemented. Thus, for the first time at the EU level, the draft guidelines will attempt to address the whole AML/CFT governance system.
The rules will also provide clear expectations for the officers' roles, tasks, and responsibilities, as well as how they engage.
Stakeholders Involved and Their Responsibilities
The proposed guidelines include highly precise criteria for the following regulated company stakeholders:
- Wherever appropriate, the management body
- The senior manager in charge of anti-money laundering and counter-terrorist financing
- Separate anti-money laundering and anti-terrorist financing compliance officers
The management body or the senior manager in charge of AML/CFT has the following key responsibilities:
- Approval of the organization's AML/CFT policies, controls, and processes;
- Overseeing the execution of AML/CFT policies and procedures;
- The activity report is reviewed by the AML/CFT compliance officer at least once a year.
- Request regular interim reports for actions that put financial sector players at increased risk of money laundering and terrorist financing;
- Evaluation of the AML/CFT compliance function's effectiveness at least once a year, with an emphasis on the appropriateness of the human and technological resources given to the compliance officer;
- Immediate and direct access to relevant and important reports, such as the AML/CFT officer's activity report, the internal review function's report, external auditors' research results and findings, as well as the proficient authority's findings, relevant conversations with the Financial Intelligence Unit (FIU), and oversight measures or imposed sanctions.
The compliance officer's responsibilities include:
- developing a risk assessment framework;
- preparing specific policies and procedures to be implemented across the organization;
- establishing risk-based rules for dealing with various types of customers, including high-risk customers; and
- planning and implementing systems to manage compliance.
Finally, if a financial services firm is part of a larger group, the holding company should designate an executive AML/CFT compliance officer to assure that group-wide AML/CFT policies and procedures are implemented effectively.
The proposed rules are currently available for public comment for a three-month period, finishing on November 2, 2021. This link will take you to the complete consultation document, as well as instructions on how to contribute your suggestions. After reviewing all of the replies to the consultation, the EBA will finalize its new rules, which will apply to all financial sector operators covered by the EU's Anti-Money Laundering Directive.
The EBA has suggested rules for the role of compliance experts at the EU level for the first time. Such consideration and acknowledgment clearly show how compliance experts' responsibilities and influence have grown dramatically within financial institutions, in parallel with the implementation of stricter AML regulations and the enhanced personal liability for high-ranking management in the event of non-compliance.