On 1 November 2022, the Wolfsberg Group published the Comment Letter on the EU AML/CFT legislative package which was initially addressed to strategic EU officials on 28 October 2022. The Comment Letter aims to provide suggestions and observations on key issues such as:

1. Harmonisation of supervisory practices and standards
2. Enhanced information-sharing in line with GDPR principles
3. Facilitating an effective risk-based approach

The Wolfsberg Group is an association of 13 global banks focusing on the development of frameworks and guidance for the management of financial crime risk. Importantly, the proposals of the Comment Letter reflect the individual responses contributed by Wolfsberg Group’s members. These members have also engaged on the EU AML/CFT Legislative Package with trade associations and international bodies.

Purpose of the Comment Letter

The integrity of the EU financial system and the security of its citizens are jeopardised by the risks posed by money laundering and terrorist financing. In this respect, through the submission of the Comment Letter, the Wolfsberg Group attempts to reinforce its support for the EU AML/CFT Package as a milestone in the development of a robust AML/CFT framework. As relevant to ongoing negotiations and recent submissions by EU bodies including the European Data Protection Board and the European Banking Authority, the Comment Letter provides suggestions and observations on the following issues:

1. Harmonisation of supervisory practices and standards

The Comment Letter proposes the establishment of the EU AML Authority (AMLA) supported by Regulatory Technical Standards. Such a proposal is promising in ensuring effectiveness and harmonisation, which should be comprised of a rationalised set of requirements and practices based on identified money laundering and terrorist financing risks.

It is vital that AMLA’s scope is broad enough so that all sectors that introduce money laundering and terrorist financing risk into the system are adequately incorporated. Consequently, peer reviews of supervisory authorities in the non-financial sector should also be included, to enhance AMLA’s responsibility of establishing high-quality supervision across the EU.

Additionally, the Wolfsberg Group promotes the advancement of global consistency by encouraging both the Commission and AMLA to leverage guidance issued by the Financial Action Taskforce (FATF), including areas such as beneficial ownership.

2. Enhanced information sharing in line with GDPR principles

The Comment Letter entails the Financial Institutions (FIs) to provide valuable information to government agencies in line with defined EU financial crime priorities.

The Wolfsberg Group suggests that by permitting and encouraging relevant public and private sector stakeholders to share financial crime information, both on a domestic and an international level, the EU’s AML/CFT efforts can be strengthened. In turn, such actions should be done through an appropriate legal framework, consistent with GDPR principles. Moreover, FATF’s recommendation that countries should consider “updating existing legal or supervisory instruments” is also supported.

3. Facilitating an effective risk-based approach

The Comment Letter emphasises the importance of developing a baseline of rules that support FIs in the detection, prevention and reporting of money laundering and terrorist financing cases. The Wolfsberg Group believes that risk-focused rules, documented in regulation and technical standards guidance, are integral for reducing complexity and ensuring harmonisation and effectiveness of AML/CFT measures across the EU. In turn, a requirement for FIs to design their control environment, dedicate their resources, and convey the design effectiveness of their approach, must accompany the risk-focused rules. Such a requirement must be in line with all of the posed risks and must undergo the relevant examination/regulation accordingly. Therefore, supervisors play a vital role in the true implementation of the risk-based approach.

The Wolfsberg Group has identified seven (7) areas where the EU AML package can enhance the risk-based approach:

1. Beneficial Ownership
2. Customer due diligence
3. Outsourcing
4. “Ongoing” reliance
5. Cash limits
6. Technology
7. Bank account registers and Electronic Data Retrieval Systems-AMLD-6

Wolfsberg Group’s news release can be found here and the submitted Comment Letter can be found here.