The Joint Committee of the three European Supervisory Authorities (ESA*) have now published their final Guidelines on AML and CFT.  

If you are a credit or financial institution or an AML/CFT supervisor under AML/CFT legislation then these guidelines should form part of your standard in-house training for all staff. 

Title II is general and applies to all firms. Title III is sector specific and is in addition to Title II.

The Guidelines set out specific steps to be taken in identifying the risk associated with customers in terms of AML/CFT compliance. 

For example firms should consider the risk related to: 

a) the customer’s and the customer’s beneficial owner’s business or professional activity; 

b) the customer’s and the customer’s beneficial owner’s reputation;  and

c) the customer’s and the customer’s beneficial owner’s nature and behaviour.

It then goes into significant detail in terms of questions you should be asking about your relationship with your client and also how well you understand the purpose of their interaction/relationship with you.  To highlight but a few red-flags to consider:

  • Does the customer issue bearer shares or does it have nominee shareholders? 
  • Is the customer a legal person or arrangement that could be used as an asset-holding vehicle? 
  • Is there a sound reason for changes in the customer’s ownership and control structure?

It is worth sitting down with your AML/CFT team to review the guidelines and to consider whether you currently apply the extensive risk based approach analysis for all of your customer transactions.

It has been suggested that Competent authorities use these guidelines when assessing the adequacy of firms’ risk assessments and AML/CFT policies and procedures. Therefore knowledge is key. Make sure your policies and procedures are adequate.

(*The ESA  brings together the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority.)