2. Rationale for the proposals
What are the reasons for the Commission's proposed changes to the supervisory framework?
The EU's supervisory framework underwent a complete overhaul in the financial crisis, thanks to the establishment of the three European Supervisory Authorities for banking, capital markets and insurance and pensions, as well as the European Systemic Risk Board for the monitoring of macro-economic risks. Despite these important steps, the process of financial integration is a work in progress and needs to keep pace with developments both within the EU and at global level.
Having recovered from the financial crisis, the EU is moving ahead to complete the Banking Union (BU) and the Capital Markets Union (CMU). More integrated financial markets are beneficial for the EU as a whole, but are particularly important for the Economic and Monetary Union, as set out in the Reflection Paper on Deepening the Economic and Monetary Union of May 2017 and in the Five Presidents' Report of June 2015.
As part of these broader efforts, decisive action must also be taken to ensure that anti-money laundering rules are effectively supervised across the EU and different authorities cooperate closely with each other.
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To this end, the Commission proposed to further integrate and strengthen EU financial market supervision by reinforcing the coordination role of the ESAs and attribute new direct supervisory powers to ESMA. The Commission also proposed to strengthen the EBA's role in the area of anti-money laundering. In order to fit their new tasks, the Commission also made changes to the ESAs' governance and funding.
This reform constitutes a response to new opportunities and challenges in supervision, such as the increased importance of sustainable finance as well as the new developments in the area of financial technology (FinTech).
How were the proposals prepared?
The September 2017 proposals build on six years of operational experience with the ESAs, on almost 300 responses to the Commission's public consultations of autumn 2016 (on the ESRB) and of spring 2017 (on the ESAs) and an intense dialogue with all relevant stakeholders. They also take into account the March 2014 recommendations of the European Parliament and the review report prepared by the Commission in August 2014.
In September 2018 as part of a broader strategy to strengthen the EU framework for prudential and anti-money laundering supervision for financial institutions, the 2017 proposals were amended to introduce a set of targeted changes to the EBA founding Regulation and give EBA the necessary tools, governance and resources to ensure effective cooperation and convergence of supervisory standards in the area of anti-money laundering.
3. Key features of the agreement
Why an enhanced role for the EBA in the area of anti-money laundering?
While the EU has strong anti-money laundering rules in place, recent cases involving money laundering in some EU banks have raised concerns that those rules are not always supervised and enforced effectively across the EU. That is why the Commission proposed in September 2018 to further strengthen the supervision of EU financial institutions to better address money-laundering and terrorist financing threats.
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In particular, to ensure high quality anti-money laundering supervision and effective coordination among different authorities across all Member States, anti-money laundering responsibilities in the financial sector will be entrusted specifically to one of the three European Supervisory Authorities, namely the European Banking Authority (EBA), as it is in the banking sector that money-laundering and terrorist financing risks are the most likely to have a systemic impact. The new rules streghten the EBA's role and give to the EBA the necessary tools and resources to ensure effective cooperation and convergence of supervisory standards.
What is the role of the European Banking Authority under the new rules?
The European Banking Authority (EBA) has been provided with a more explicit and comprehensive mandate to ensure that risks of money laundering and terrorist financing in the Union's financial system are effectively and consistently incorporated into the supervisory strategies and practices of all relevant authorities.
The amended Regulation will:
- ensure that breaches of anti-money laundering rules are consistently investigated: the EBA will be able to request national anti-money laundering supervisors to investigate potential material breaches and to request them to consider targeted actions - such as sanctions;
- provide that the national anti-money laundering supervisors comply with EU rules and cooperate properly with prudential supervisors. The EBA's existing powers will be reinforced so that, as a last resort if national authorities do not act, the EBA will be able to address decisions directly to individual financial sector operators;
- enhance the quality of supervision through common standards, periodic reviews of national supervisory authorities and risk-assessments;
- enable the collection of information on anti-money laundering risks and trends and fosterng exchange of such information between national supervisory authorities (so-called data hubs);
- facilitate cooperation with non-EU countries on cross-border cases;
- establish a new permanent committee that brings together national anti-money laundering supervisory authorities;
- Ensure that the EBA will have enough resources to carry out these new tasks.
These amendments will bring major improvements to the supervisory framework of anti-money laundering risks and contribute to risk reduction in the financial sector.