European Banking Authority observes improved cooperation between authorities through newly established AML-CFT colleges

The European Banking Authority (EBA) published today its first Report on progress made by competent authorities with the setting up of colleges to enhance supervisory cooperation for anti-money laundering and countering the financing of terrorism (AML/CFT) purposes. The EBA’s work on monitoring colleges is part of its new role to lead, coordinate and monitor the fight against money laundering and terrorist financing (ML/TF) in all EU Member States as set out in the EBA Regulation.

Cooperation between AML/CFT supervisors within the EU and globally is key to ensuring effective AML/CFT supervision of financial institutions that operate on a cross-border basis. To that effect, in December 2019, the European Supervisory Authorities (ESAs) published guidelines that require competent authorities to cooperate and exchange information through AML/CFT colleges.

Between the publication of the Guidelines in December 2019 and October 2020, AML/CFT colleges for 10 EU banks were established. The EBA staff attended all these colleges to monitor their functioning and share observations with competent authorities on their approach to AML/CFT supervision.

This Report provides examples of good and poor practices drawing on the lessons learnt from these first colleges, with the aim of supporting the effective and efficient setting up and operation of new colleges going forward. In particular, the Report highlights that there was a good level of interaction and willingness to share the information through a mix of presentations and round-table discussions within the colleges, which contributed to enhancing the supervisors’ understanding of the group’s exposure to ML/TF risks in different jurisdictions.

The EBA also found some challenges, which were mainly related to the timely invitation of some observers. This meant that limited or no participation by third country authorities or prudential supervisors was observed in some colleges.

Legal basis and background

Directive (EU) 2018/843 (AMLD) introduced an explicit requirement for competent authorities to cooperate with each other but did not provide a framework of how this cooperation should happen in practice. To overcome this challenge, the three ESAs published Guidelines in December 2019 (JC 2019 81) on cooperation and information exchange between competent authorities supervising credit and financial institutions. These Guidelines provide details how competent authorities should give effect to the cooperation requirements set out in AMLD, by establishing a framework for AML/CFT colleges.

The colleges framework is broadly based on, and consistent with, the framework of colleges of prudential supervisors of banks. However, the framework of AML/CFT colleges extends beyond the banking sector and it is the first time that colleges of AML/CFT supervisors are established in the EU. In line with the Guidelines, AML/CFT colleges are permanent structures that provide a mechanism for cooperating and exchanging information between the competent authorities responsible for the supervision of financial institutions that operate on a cross border basis in different EU and non-EU jurisdictions.

The Guidelines recognise that establishing AML/CFT colleges from scratch is not an easy process and therefore provide a 2-year transition period during which competent authorities are required to put in place all elements and set up all necessary colleges on a risk sensitive basis, before the Guidelines fully apply as of 10 January 2022.