European Banking Authority’s “Name & Shame” Database to be operational in January 2022

The EBA sets up a central database to name and shame financial institutions in the EU that have weak AML/CFT controls.

21 December 2021

AML/CFT: The European Banking Authority (EBA) published on 20 December 2021 its draft Regulatory Technical Standards (RTS) on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in the EU.

As a reminder, the EBA is responsible for the creation of the European Single Rulebook in banking whose objective is to produce a single set of harmonised prudential rules for EU financial institutions. The Authority also promotes convergence of supervisory practices and is mandated to assess risks and vulnerabilities in the EU banking sector.

The new EBA database, also known as EuReCa, will collect and store information on banks that demonstrate “material weaknesses” in their AML efforts.

The EBA intends to use EuReCA to essentially make public the ML/TF risk affecting the EU’s financial sector, but also share information from the database with competent authorities in order to support them in their supervisory process.

According to the EBA, EuReCA aims to be “an early warning tool, which will help competent authorities to act before the ML/TF risk crystalise”.

The EBA said the new database would be a “key tool for coordinating efforts to prevent and counter money laundering and terrorism financing (ML/TF) in the Union.”

AML National Regulators

The new database will also contain information on the measures that EU national regulators are adopting to crack down on financial institutions that perform poorly from an AML/CFT perspective. Competent authorities across the EU will have to report such weaknesses, as well as the measures they have taken to rectify them.

The draft of the RTS details in particular:

  • the type of information competent authorities will have to report
  • how information will be collected and
  • how the EBA will analyze and disseminate the information contained in EuReCa.

Confidentiality and Protection of Personal Data

The draft RTS also specifies the rules necessary to ensure confidentiality, protection of personal data and the effectiveness of EuReCa.

Technical specifications that detail the data points and a list of competent authorities that will be indirectly submitting information to EuReCA are also published.

RTS Next steps

The EBA will submit these draft RTS to the European Commission for approval. Once approved, the RTS will be directly applicable in all Member States. EuReCA will start to receive data in Q 1 2022.

The EU AML Challenges

The former executive secretary of the Paris-based Financial Action Task Force (FATF) David Lewis, stated before departing his post that governments were failing to stop organized criminals and corrupt regimes from washing vast sums each year.

Although most countries have passed laws and regulations to combat money laundering, Lewis said: “they are rarely being used effectively, or to the extent that we would expect.”

The EU has sought to strengthen its scrutiny of the financial sector after a series of scandals in Estonia, Malta, Latvia, Cyprus and the Netherlands exposed how national regulators were slow at acting against banks who enabled or failed to prevent money laundering. The recent Luanda Leaks, also demonstrated the key role played by Portuguese banks in facilitating business expansion for Angolan billionaire Isabel dos Santos and her close associates and the purchase of luxury properties, super-yachts, jewelry and extensive travel.

The EU has passed several pieces of anti-money laundering legislation over the past thirty years, but individual member states have been slow to enact it. Differences in interpretation and implementation in member states have also opened several loopholes.

On 20 July 2021, the EU Commission unveiled a new package of legislative proposals to strengthen the EU’s rules on combating money laundering and financing of terrorism. The package notably included a proposal for the creation of a new EU authority to fight AML/CFT. The aim of this new Authority is to improve the detection of suspicious transactions and activities, and close existing loopholes.

The legislative package is now being discussed by the European Parliament and Council. The new AML authority is predicted to be operational in 2024.

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