EBA considers the role of AML/CFT compliance officers in new consultation  

The European Banking Authority has launched a consultation on new guidelines that determine the tasks and responsibilities of compliance officers within anti-money laundering (AML) and countering the financing of terrorism (CFT).

The inconsistent role of the compliance officer, according to EU Directives

The compliance officer and their functions are pivotal to AML and CFT efforts across financial services, which is why EU Directives require that AML/CFT compliance officers are appointed at management level. Moreover, such Directives also insist that management bodies within financial institutions have highlighted an individual who is responsible for the implementation of any relevant laws, regulations and administrative tasks related to AML/CFT compliance.

Despite the importance of compliance officers and their function, the EBA notes that the requirements of Directive (EU) 2015/849 “have been implemented unevenly across different sectors and Member states”, adding that it can have “adverse consequences for the integrity of the EU’s financial system.

With the critique for inconsistency looming, the EBA has published draft guidelines in search of an industry standard and “a common understanding, by competent authorities and financial sector operators, of financial sector operators’ AML/CFT governance arrangements”.

What do the draft guidelines say?

The draft guidelines set out plans for the entirety of AML and CFT across the EU, making this the first consultation to do so. In essence, the guidelines look to standardise expectations of the roles and responsibilities of compliance officers and managers under the AML/CFT umbrella, and how they interact across the board, including at a group level.

More specifically, the four key topics areas of focus are:

1. Role and responsibilities of the management body in the AML/CFT framework and of the senior manager responsible for AML/CFT
2. Organisation of AML/CFT compliance function at group level
3. Role and responsibilities of AML/CFT compliance officer
4. Review of AML/CFT compliance function by competent authorities

What will happen next?

The consultation runs until 2 November 2021. After which, all contributions will be published. Once the guidelines are adopted, they will apply to all financial service organisations that fall within the scope of the AML Directive.

CUBE comment

The EBA’s consultation says that a “common understanding, which is applied consistently and enforced as necessary, will be key to strengthening the EU’s AML/CFT defences.”

As a company focussed on capturing the entire world of regulatory content, analysing, structuring it and presenting it in a standardised way, the standardisation of regulations for compliance is a topic close to our hearts at CUBE. Our CEO and Founder, Ben Richmond, recently sat down with The Banker’s James King to talk about harmonising global compliance standards, in fact.

It’s a theme that is becoming prevalent across financial regulation – the idea that lack of regulatory standards is no longer just inconvenient but becoming a barrier to effective compliance and regulation. The EBA’s recent RegTech Report, for instance, highlighted that a “lack of common regulatory standards could pose barriers for wider market adoption of RegTech.” This was echoed in ESMA’s recent report, which found that MiFID II non-compliance had quadrupled in a year. This could easily be attributed in part to a lack of consistency and standard guidance. 

Whether regulators are looking to standardise roles and responsibilities or regulations more generally, it is becoming clear that in a globalised world, with fewer technical ‘borders’ (owing chiefly to new and emerging technology and innovation) legacy regulations are becoming harder to implement. The regulations no longer fit the mould that made them. The same can be said for legacy regulatory compliance solutions. The only solution – at least in my opinion – is to innovate.

Society, financial services, and the way customers engage with financial services have all turned to advanced technology. This technology transcends traditional jurisdictions, meaning financial institutions must ‘go global’ in a way they would not have had to historically. The only solution is for financial services and regulators to level up their technology to meet demand… or the system risks falling apart.

Streamline your compliance systems with CUBE.