EBA Criticizes Lenders for Not Taking Money Laundering Risks Seriously

Lenders are failing to take money laundering risks seriously, despite many facing financial penalties due to customer due diligence (CDD) failings, the European Banking Authority (EBA) has said.

In its latest Risk Assessment Report, the organization highlighted that the high number of cases of money laundering and terrorist financing (ML/TF) involving European banks in recent years “has caused substantial reputational damage to the banking system and undermines the integrity of the EU/EEA banking sector.”

Despite this, the EBA stated that results from its latest risk assessment questionnaire (RAQ) indicated that many lenders are not prioritizing the issue. “Based on the RAQ results, banks appear to attribute decreasing significance to ML/TF risk, with 13% agreement that it is a main driver of operational risk [compared to] 18% agreement in autumn 2023,” the EBA reported.

The organization mentioned that it has “further developed” EuReCA, the EU’s central AML/CFT database. In May, individuals’ names were included on AML/CFT compliance reporting to EuReCA. “In 2023, 37 national competent authorities reported to EuReCA 601 serious deficiencies, or ‘material weaknesses’, that they had detected in 216 credit and financial institutions’ systems and controls,” it said.

While most reports concerned credit institutions such as banks, the EBA noted an increasing trend in submissions related to payment and e-money institutions. “Most deficiencies reported in 2023 related to institutions’ approaches to customer due diligence,” the regulator said.

The EBA revealed that a “large majority” of banks were asked to correct the deficiencies themselves “through orders to comply, orders to implement measures and orders to put in place a remediation plan.” However, it added that “a large number of measures were punitive and included fines or administrative pecuniary sanctions.”

By fLEXI tEAM