EBA consults on a new central AML/CFT Database

On 6 May the EBA published details of a consultation on the creation of “Regulatory Technical Standards (RTS) on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in the EU”.

The EBA has faced significant criticism in the wake of supervisory issues that emerged from events at Danske Bank. At the start of last year, it announced a new legal mandate that establishes it in a new role to lead, coordinate and monitor the financial sector’s fight against money laundering and terrorist financing across the EU. They published a factsheet on the strategy and approach.

Taken from EBA – Anti-Money Laundering and Countering the Financing of Terrorism, Feb 2020

The new consultation is part of work to create a key tool as part of the new EBA strategy. To establish and keep up-to-date a central database with information on AML/CFT weaknesses that competent authorities (CAs) across the EU have identified in respect of individual financial institutions.

Information sharing, either public or private, relating to financial crime is always a good thing but the focus here seems to be misdirected and could lead to further pressure on banks and FIs without the desired effect of risk reduction. As such the priority seems to be an attempt at fixing the supervisory failings, without turning the spotlight on the supervisors themselves, when it should really be focussed on improving the financial crime compliance outcomes.

It is obvious that competent authorities across the EU, and FIUs globally, should do more to coordinate their efforts to combat financial crime and that information sharing is a key enabler to do this. It is also clear that the assessment of institutions plays a significant role in ensuring safety and soundness – we are only as strong as the weakest link. But, if the technical specifications described in the consultation paper are anything to go by, this new database will just create a further stick to beat the banks with rather than real risk reduction.