RegSol Blog

EBA Consults on Revised Guidelines on Money Laundering & Terrorist Financing Risk Factors

May 2020

The EBA issued a public consultation on revised money laundering and terrorist financing (ML/TF) risk factors Guidelines as part of a broader communication on AML/CFT issues. This update takes into account changes to the EU Anti Money Laundering and Counter Terrorism Financing (AML/CFT) legal framework and new ML/TF risks, including those identified by the EBA’s implementation reviews. In its revised version, the EBA is proposing key changes, including new guidance on compliance with the provisions on enhanced customer due diligence related to high-risk third countries.

Particular guidance on wealth management risk factors and increasing factors is notable in Guideline 12 where it outlines sections on source of wealth, customer, geographic and transaction risk factors. Establishing the source of wealth and funds; is required where the risk is particularly high and/or where the firm has doubts about the legitimate origin of the funds.

Verifying the source of wealth and funds may be the only adequate risk mitigation tool. The source of funds or wealth can be verified, by reference to for example:

  • an original or certified copy of a recent pay slip; 
  • written confirmation of annual salary signed by an employer; 
  • an original or certified copy of contract of sale of, for example, investments or a company; 
  • written confirmation of sale signed by an advocate or solicitor
The revised Guidelines also provide more details on terrorist financing risk factors and customer due diligence (CDD) measures including on the identification of the beneficial owner, the use of innovative solutions to identify and verify the customers’ identity.

In addition, they set clear regulatory expectations of firms’ business-wide and individual ML/TF risk assessments.

The consultation runs until 06 July 2020.

By Judy de Castro - Regulatory Consultant