COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Strengthening the Union framework for prudential and anti-money laundering supervision for financial institutions
Date: 2018-09-12
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU banking union, European Banking Authority, European Central Bank, banking supervision, fight against crime, financial institution, financial stability, financial supervision, money laundering, terrorism

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.9.2018 COM(2018) 645 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Strengthening the Union framework for prudential and anti-money laundering supervision for financial institutions  
 
 
1.  INTRODUCTION 

The  Union's  financial  system  is  underpinned  by  a  strong  regulatory  and  supervisory 
framework that was fundamentally overhauled in recent years in order to safeguard the safety 
and soundness of institutions operating in the financial sector and the stability of the financial 
system. The reinforced framework now provides for a Banking Union, which is in the process 
of  being  completed.1  The  first  two  pillars  of  the  Banking  Union  have  been  successfully 
established,  placing  the  banking  system  within  the  participating  Member  States  under  the 
common  responsibility  of  a  Single  Supervisory  Mechanism  and  a  Single  Resolution 
Mechanism,  underpinned  by  a  single  rulebook  for  the  Union  as  a  whole.  To  support 
convergent and effective financial supervision throughout the Union the Commission has also 
put forward legislative proposals to reinforce the mandates and governance of the European 
Supervisory Authorities.2 These proposals are central to the Capital Markets Union and need 
to be adopted quickly. 

A strong and credible system to detect and fight money-laundering and terrorist financing is 
an  essential  part  of  this  framework  and  a  well-functioning  Banking  and  Capital  Markets 
Unions.  While  the  current  system  has  been  significantly  enhanced  in  recent  years,  rapid 
legislative and  non-legislative  actions  are  needed  in  order  to  address  a number  of  identified 
shortcomings.   

The Union’s framework for anti-money laundering and combating the financing of terrorism3  
has  been  considerably  strengthened  through  the  adoption  of  the  fourth  Anti-Money 
Laundering Directive,4 in line with international standards.5 The fifth Anti-Money Laundering 
Directive,6 which entered into force in July 2018 for transposition by 10 January 2020, will 
bring  further  major  improvements.  It  goes  beyond  international  standards  and  includes 
measures to enhance transparency on beneficial ownership, it reinforces the framework for the 
assessment  of  high-risk  third  countries,  addresses  risks  related  to  anonymous  prepaid  cards 
and virtual currencies, and contains rules on cooperation between anti-money laundering and 
prudential supervisors.  

Despite this strengthened legislative framework, several recent cases of money laundering in 
European  banks  have  given  rise  to  concerns  that  gaps  remain  in  the  Union’s  supervisory 
framework. In particular, there is no clear articulation between the prudential and anti-money 
laundering rules for financial institutions. The Commission also has concerns about delayed 

1  See  Communication  to  the  European  Parliament,  the  Council,  the  European  Central  Bank,  the  European 
Economic  And  Social  Committee  and  the  Committee  of  the  Regions  on  completing  the  Banking  Union  - 
COM(2017) 592 final; Communication from the Commission to the European Parliament, the European Council, 
the Council, the European Economic and Social Committee and the Committee of the Regions Completing the 
Capital Markets Union by 2019 - time to accelerate delivery - COM/2018/0114 final.  
2 COM(2017) 536 final. 
3  References  to  anti-money  laundering  in  this  Communication  should  be  understood  as  encompassing  also 
references to combating financing terrorism. 
4 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of 
the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation 
(EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the 
European Parliament and of the Council and Commission Directive 2006/70/EC . 
5  The  Financial  Action  Task  Force  is  the  international  standard  setter  on  money  laundering  and  its 
recommendations are followed by all its Members. 
6 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive 
(EU)  2015/849  on  the  prevention  of  the  use  of  the  financial  system  for  the  purposes  of  money  laundering  or 
terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU. 

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supervisory reactions and shortcomings with respect to cooperation and information sharing – 
both at domestic level, between prudential and anti-money laundering authorities, and across 
borders, between authorities in different Member States or in third countries7. 

While these cases concern only a very small part of the Union's financial system, they have an 
impact  on  its  reputation  and  the  Union  must  take  quick  and  decisive  action  to  address  the 
shortcomings identified and to further reduce risks in the Union's financial system stemming 
from money laundering and terrorist financing activities.  

These concerns have been echoed by the other Union institutions. In the European Parliament, 
several hearings have been organised in response to the recent scandals, whilst in the Council, 
the  issue  has  been  raised  by  Finance  Ministers,  most  recently  by  Eurogroup  President 
Centeno, in his letter of 25 June 2018 to the President of the European Council, Tusk.8 The 
Franco-German  Meseberg  declaration  and  roadmap  issued  on  19  June  2018  also  highlights 
this issue.9   

As  an  initial  response,  in  May  2018,  the  Commission  invited  the  Chairpersons  of  the 
European  Supervisory  Authorities, 
the  Anti-Money  Laundering 
Committee of the European Supervisory Authorities and the Chairperson of the Supervisory 
Board  of  the  European  Central  Bank,  to  establish  a  Joint  Working  Group  to  initiate  a 
collective  reflection  on  ways  of  improving  the  current  framework  for  cooperation  between 
anti-money laundering and prudential supervisors.  

the  Chairperson  of 

Against  that  background,  this  Communication,  together  with  the  accompanying  legislative 
proposal,  sets  out  the  necessary  steps  to  further  enhance  the  supervision  of  financial 
institutions in the Union for purposes of combating money laundering and terrorist financing. 
Decisive action by all authorities concerned will further promote the integrity of the Union's 
financial system and of the Banking Union in particular, contribute to financial stability and 
further reduce financial crime in the Union.   

2.  WHY EU ACTION IS NECESSARY 

The EU has a strong legal framework in place for preventing and fighting money laundering 
and terrorist financing. It transposes the international standards of the Financial Action Task 
Force  but  also  provides  for  additional  safeguards  to  ensure  a  safe  and  well-functioning  EU 
financial  system.  A  cornerstone  of  this  anti-money  laundering  framework  is  that  financial 
institutions  as  well  as  other  entities  are  required  to  put  in  place  internal  systems  to  identify 
and  assess  money  laundering  risks  related  to  their  business  and  to  manage  those  risks.  The 
supervisory framework for combating money laundering and terrorist financing is contained 
in a single instrument, the Anti-Money Laundering Directive, that also applies to a number of 

7 These cases took place before transposition of the Fifth Anti Money Laundering Directive, which will improve 
cooperation and information sharing between all relevant authorities. 
8 “…there is agreement on the importance of enhancing the current monitoring of the implementation of Anti-
Money Laundering measures. As a first step, the institutions will prepare a report in July. Based on this, and in 
close cooperation with the National Competent Authorities, there should be agreement on further measures by 
end 2018, possibly as part of an Action Plan.” 
9      “For  anti-money  laundering,  we  need  a  set  of  substantive  core  criteria  which  reliably  measure  the  money-
laundering-risks that exist in the banking sector. In addition, we need a robust monitoring process reporting on 
the  effective  implementation  of  these  criteria.  Both,  criteria  and  monitoring  process,  should  be  developed  by 
December  2018  by  European  Institutions,  including  SSM,  and  Member  States,  with  France  and  Germany 
providing  common  input.  It  is  essential  that  such  process  is  not  only  of  formal  nature,  but  materially  reduces 
risks stemming from anti-money laundering-non-compliance.” 

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actors  outside  the  financial  services  sector.  Supervision  of  compliance  with  anti-money 
laundering  legislation  follows  a  national  approach,  based  on  host  country  supervision,  with 
only  minimum  harmonisation  of  supervisory  competences,  and  no  harmonisation  of  the 
powers of the supervisory authorities. 

The  task  of  reducing  money-laundering  risks  in  financial  institutions  is  separate  from,  but 
closely connected, to the task of prudential supervisors, to ensure financial institutions' safety 
and soundness and the stability of the financial system at large. This task is carried out based 
on the Union's prudential framework for financial institutions, which consists of a number of 
legislative  instruments  across  different  financial  services  sectors.10  Prudential  supervisory 
powers  are  extensively  harmonised  and  responsibilities  principally  assigned  to  the  home 
country  authority.  In  the  case  of  banks,  since  the  establishment  of  the  Single  Supervisory 
Mechanism supervisory powers in the Member States participating in the Banking Union are 
shared between the European Central Bank and national competent authorities.   

This  current  framework  involves  different  authorities  across  jurisdictions,  with  different 
supervisory  tasks,  powers  and  responsibilities.  To  be  effective,  those  authorities  must 
cooperate  closely.  The  Fifth  Anti-Money  Laundering  Directive  will  remove  obstacles  to 
cooperation  between  anti-money  laundering  and  prudential  supervisors,  including  with  the 
European  Central  Bank.11  However,  further  steps  are  necessary  to  ensure  effective 
supervisory cooperation, especially where financial institutions operate across borders.   

a)  Supervision of compliance with the Anti-Money Laundering Directive 

The  Anti-Money  Laundering  Directive  is  based  on  minimum  harmonisation.  It  consists  of 
high-level  principles  and  some  detailed  guidance  for  supervisors.  This  leaves  discretion  for 
Member  States  for  implementation,  and  has  led  to  differing  national  supervisory  practices. 
There is currently no mandatory mechanism or detailed guidance to ensure the ongoing and 
structured cooperation between anti-money laundering and prudential supervisors of financial 
institutions that operate on a cross-border basis, and there is scope for discretion as to what 
information is shared, and when. The scope of powers for anti-money laundering supervisors 
is not specified in detail.12 Moreover, coordination with third countries remains fragmented. 

b)  Consideration of anti-money laundering aspects by prudential supervisors, including 

the European Central Bank in its supervisory capacity 

There  are  clear  links  between  anti-money  laundering  and  prudential  supervision:  Failure  to 
address  money  laundering  and  terrorist  financing  risks  can  have  detrimental  effects  on  the 
financial soundness of individual institutions, the integrity of the internal market, as well as 

10 These legislative instruments include Directive 2013/36/EU on access to the activity of credit institutions and 
the prudential supervision of credit institutions and investment firms (Capital Requirements Directive); Directive 
2014/65 of 15 May 2014 on markets in financial instruments (MiFID); Directive (EU) 2009/138 of 25 November 
2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).  
11  The  fifth  Anti-Money  Laundering  Directive  seeks  to  remove  obstacles  and  improve  the  exchange  of 
information  between  anti-money  laundering  and  prudential  supervisors,  and  calls  for  their  cooperation  to  the 
greatest extent possible. In addition, where an FIU carries out an analysis and detects a suspicion, it is obliged to 
disseminate the information to the relevant competent authorities, which might include the prudential supervisor. 
12 The Anti-Money Laundering Directive refers to "enhanced supervisory powers". 

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on  financial  stability.  Therefore,  prudential  legislation  requires  supervisors  of  financial 
institutions to consider anti-money laundering related aspects throughout their work.13  

However,  in  practice,  supervisors  are  subject  to  differently  transposed  national  rules,  as 
prudential requirements in legislation have not been supplemented with harmonised guidance. 
Furthermore, despite a clear competence for licence withdrawal in cases of serious breaches 
of  anti-money  laundering  rules,  enshrined  in  both  the  prudential  and  anti-money  laundering 
frameworks, there is insufficient clarity about the conditions under which authorisations can 
be  withdrawn.  Cooperation  between  prudential  authorities  and  anti-money  laundering 
supervisors  is  also  largely  dependent  on  the  good  faith  and  willingness  of  the  relevant 
authorities.14  

In  the  Banking  Union,  the  European  Central  Bank  is  not  in  charge  of  ensuring  compliance 
with  rules  set  out  in  the  Anti-Money  Laundering  Directive.  However,  the  European  Central 
Bank,  in  its  supervisory  capacity,  is  tasked  with  the  direct  supervision  of  significant 
institutions and is therefore faced with the abovementioned challenges. Additional challenges 
stem  from  its  obligation  to  apply  and  rely,  for  the  prudential  aspects  relevant  to  money 
laundering  supervision,  on  national  legislation  transposing  EU  Directives  in  all  Member 
States participating in the Single Supervisory Mechanism. Divergent national transposition in 
the  Banking  Union  leads  to  important  differences  with  regard  to  the  information  that  the 
European  Central  Bank  may  obtain,  the  possibilities  to  approach  national  Financial 
Intelligence  Units  or  anti-money  laundering  authorities,  as  well  as  to  the  supervisory  tools 
available, depending on the home country of the bank concerned.  

Moreover,  the  European  Central  Bank,  in  its  supervisory  capacity,  is  also  entrusted  with 
certain  competences15  over  less  significant  institutions  in  the  Banking  Union,  including 
certain assessments of anti-money laundering related risks. When exercising this competence, 
the European Central Bank must rely on input from both national prudential supervisors and 
anti-money  laundering  supervisors,  the  scope  of  which  may  substantially  differ  across 
jurisdictions.  

c)  The role played by the European Supervisory Authorities 

The  European  Supervisory  Authorities16  are  specifically  mandated  in  their  founding 
Regulations  to  ensure  that  the  Union's  prudential  rules  and  its  anti-money  laundering 
framework  is  applied  consistently,  efficiently  and  effectively.  Moreover,  the  Anti-Money 
to  promote 
Laundering  Directive  empowers 

the  European  Supervisory  Authorities 

13  Prudential  supervisors  are  required  to  factor  in  anti-money  laundering  related  aspects  when  granting 
authorisations, when assessing acquisitions of qualifying holdings or conducting fit and proper assessments, in 
the ordinary course of supervision as part of the on-going assessment of risks to which a financial institution may 
be  exposed,  and  in  cases  of  withdrawal  of  an  authorisation  due  to  a  serious  breach  of  national  anti-money 
laundering provisions. 
14 The prudential framework does not provide for explicit cooperation obligations between prudential and anti-
money  laundering  supervisors  that  would  enable  timely  and  regular  input  of  anti-money  laundering  related 
findings  into  prudential  assessments,  nor  is  there  any  obligation  on  prudential  supervisors  to  notify  their  anti-
money  laundering  counterparts  or  the  Financial  Intelligence  Units  (FIUs)  should  they  uncover  evidence  of 
money laundering or terrorist financing in the entities they supervise. 
15 The European Central Bank is in charge of authorisation, licence withdrawal and the assessment of qualifying 
holdings acquisitions vis-à-vis less significant institutions. 
16  European  Banking  Authority,  European  Securities  and  Markets  Authority,  European  Insurance  and 
Occupational Pensions Authority. 

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convergence in anti-money laundering supervision on specific aspects, by issuing guidelines 
and preparing draft regulatory technical standards. 

Most of the work of these authorities on anti-money laundering takes place within the Anti-
Money  Laundering  Committee,  a  sub-committee  of  the  Joint  Committee,  which  brings 
together anti-money laundering supervisors. Cross-sector rules that fall within the competence 
of  several  European  Supervisory  Authorities  must  be  adopted  by  all  the  relevant  Boards  of 
Supervisors.  In  practice,  the  European  Banking  Authority  is  the  most  active  on  anti-money 
laundering issues and its work is not confined to the joint actions.17  

Anti-money laundering is just one of many tasks of the European Supervisory Authorities and 
it is therefore in competition for resources. Furthermore, the cumbersome and lengthy process 
underpinning decision-making in the Joint Committee, combined with the different degrees of 
prioritisation of anti-money laundering issues by the three authorities have until now rendered 
their role rather limited.  

3.  A STRATEGY FOR SEAMLESS SUPERVISORY COOPERATION 

The  adoption  of  the  fifth  Anti-Money  Laundering  Directive  is  an  important  step  towards 
strengthening  the  framework.  Fighting  effectively  against  financial  crime,  including  tax 
crime, needs proper implementation of the new rules and stronger coordination between the 
different authorities. 

However, it is necessary to set out a broader strategy designed to ensure that the supervision 
of  financial  institutions  and  markets  is  effective  and  robust  when  it  comes  to  addressing 
challenges stemming from money-laundering and terrorist financing. Preservation of financial 
stability  is  a  common  objective  of  the  anti-money  laundering  and  prudential  frameworks, 
which implies  the need not  only to establish a clear delineation of the tasks  of the different 
authorities, but also a coordinated and mutually reinforcing use of the full range of powers at 
their disposal and a smooth exchange and structured flow of relevant information.  

The  proposed  strategy  is  based  on  the  analysis  carried  out  by  the  abovementioned  Joint 
Working  Group  convened  by  the  Commission.  It  includes  short-term  legislative  and  non-
legislative  initiatives,  combined  with  more  ambitious  long-term  objectives,  which  should  
enhance the interaction between the anti-money laundering and prudential frameworks step by 
step.  

3.1. SHORT TERM LEGISLATIVE INITIATIVES 

A  number  of  issues  must  be  addressed  urgently through  amendments  to  legislation.  Several 
key  amendments,  which  could  bring  major  improvements  to  the  supervisory  framework  of 
anti-money laundering risks and thus contribute to risk reduction in the financial sector, could 
be considered already in ongoing legislative negotiations.     

17 For example, the European Banking Authority has published its own "Opinion on the application of customer 
due diligence measures to asylum seekers’ to foster a common approach to providing asylum seekers with access 
to  payments  accounts;"  the  European  Banking  Authority  is  an  active  member  of  the  Basel  Committee’s  Anti-
Money Laundering Expert Group; and the European Banking Authority is in the process of launching its own 
reviews  of  anti-money  laundering  supervisors  with  a  view  to  strengthening  the  effectiveness  of  anti-money 
laundering supervision of banks. 

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3.2.1  Enhancing  the  prudential  framework  for  banks  -  Changes  to  the  Capital 
Requirements Directive 

While  the  fifth  Anti-Money  Laundering  Directive  strengthens  requirements  on  cooperation 
between  various  domestic  authorities  and  improves  cross-border  cooperation,  certain 
provisions  in  sectoral  legislation,  and  in  particular  the  Capital  Requirements  Directive,  may 
inadvertently  impact  cooperation  on  anti-money  laundering  matters.  In  particular,  its  strict 
confidentiality  regime  in  combination  with  the  absence  of  a  clear  obligation  for  prudential 
supervisors to cooperate with the relevant anti-money laundering authorities and bodies, are 
problematic.  

In  this  context,  the  European  Parliament  has  tabled  two  relevant  amendments  to  the 
November 2016 Commission proposal to amend the Capital Requirements Directive (part of 
the Risk Reduction Package), concerning information exchange and the duty of cooperation 
between  prudential  and  anti-money  laundering  authorities  and  bodies.  The  Commission 
strongly  supports  improved  information  exchange  and  a  duty  of  cooperation  between 
prudential and anti-money laundering authorities and bodies:  

 

In  the  context  of  enhancing  information  exchange  requirements,  all  relevant 
authorities  and  bodies  that  receive,  analyse  and  process  information  related  to  anti-
money laundering should be explicitly covered by confidentiality waivers; 

  With  respect  to  the  duty  of  cooperation,  all  relevant  authorities  should  have  the 
possibility to refer disagreements on cooperation and exchange of information to the 
European  Banking  Authority.  The  European  Banking  Authority  could  also  be 
entrusted  with  an  explicit  mandate  to  specify  the  modalities  of  cooperation  and 
information  exchange,  particularly  in  relation  to  cross-border  groups  and  in  the 
context of identifying breaches of anti-money laundering rules. 

3.2.2 Strengthening supervisory convergence – a reinforced proposal on the European 
Supervisory Authorities' Review 

Under  the  current  legislative  framework,  the  European  Supervisory  Authorities  already 
contribute to the monitoring of anti-money laundering risks and have a series of powers that 
they  are  encouraged  to  use  fully  in  order  to  step-up  their  contribution  to  the  fight  against 
money laundering and terrorist financing. However, bolder steps need to  be taken to  ensure 
that anti-money laundering risks are systematically, effectively and consistently incorporated 
into  supervisory  strategies  and  practices  of  all  relevant  authorities.  The  European  Banking 
Authority will play a key role in achieving this.  

The  Commission’s  proposal  of  September  2017  revising  the  European  Supervisory 
Authorities'  founding  regulations  intends  to  strengthen  the  capacity  of  the  European 
Supervisory  Authorities  to  ensure  convergent  and  effective  financial  supervision  by 
enhancing  their  mandates,  introducing a  more independent and effective governance system 
and  giving  the  European  Supervisory  Authorities  a  more  adequate  funding  mechanism  to 
fulfil  their  tasks.  The  Commission  encourages  the  co-legislators  to  reach  a  quick 
agreement on this proposal. 

However, when it comes to the role of these Authorities in the area of anti-money laundering, 
further  changes  are  necessary  to  achieve  a  more  effective  system.  In  order  to  ensure  high 
quality  anti-money  laundering  supervision  and  effective  coordination  among  different 

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authorities  across  all  Member  States,  anti-money  laundering  responsibilities  across  the 
financial sector must be entrusted specifically to one of the European Supervisory Authorities, 
namely  the  European  Banking  Authority.  Its  mandate  must  be  more  explicit  and 
comprehensive,  accompanied  by  a  clear  set  of  tasks,  corresponding  powers  and  adequate 
resources. Therefore, the Commission has today amended its existing proposal amending the 
European Supervisory Authorities’ founding regulations, with the objective of reinforcing the 
anti-money laundering mandate in four ways.  

i.  Optimising  the  use  of  expertise  and  resources  dedicated  to  anti-money  laundering 

related tasks  

It is  proposed  that  the  resources  and  expertise currently  scattered across  the  three European 
Supervisory Authorities and the Joint Committee’s dedicated subcommittee be centralised at 
the European Banking Authority and given a more robust support structure. Concentration at 
the  European  Banking  Authority  is  appropriate,  as  in  the  banking  sector  money  laundering 
and terrorist financing risks are most likely to have systemic impact.  

Involvement and an appropriate level of representation of all national anti-money laundering 
supervisors responsible for all financial sector entities concerned should be ensured for  anti-
money laundering-related regulatory tasks, such as the drafting of binding technical standards, 
guidelines  and  recommendations.  For  these  purposes,  the  current  Joint  Committee's  Anti-
Money  Laundering  Committee  should  be  transformed  into  a  Standing  Committee  of  the 
European Banking Authority. It should be composed of the heads of all national anti-money 
laundering supervisory authorities, similar to the Resolution Committee established pursuant 
to Article 127 of the Banking Recovery and Resolution Directive.18  

ii.  Clarifying the scope and content of the anti-money laundering related tasks  

In  light  of  the  horizontal  nature  of  anti-money  laundering  concerns,  it  is  proposed  that  the 
European Banking Authority's anti-money laundering related tasks be specified in more detail 
in  the  founding  regulation,  as  is  already  the  case  with  respect  to  tasks  related  to  consumer 
protection.19  The  European  Banking  Authority  will  get  specific  competences  in  the  area  of 
anti-money  laundering,  whereas  the  Joint  Committee  will  deal  with  cross-sectoral  aspects 
related to anti-money laundering tasks, which require the expertise of the European Insurance 
and  Occupational  Pensions  Authority  and  the  European  Securities  and  Markets  Authority. 
The  European  Banking  Authority's  centralised  anti-money  laundering  related  tasks  would 
cover those obliged entities referred to in the Anti-Money Laundering Directive that  also fall 
within the scope of the Regulations on the European Supervisory Authorities, as well as the 
supervisory authorities of such institutions.  

iii. 

Reinforcing the tools for carrying out the anti-money laundering related tasks  

For  the  specific  anti-money  laundering  related  tasks,  a  series  of  measures  are  proposed  in 
order to ensure that anti-money laundering work is more efficient, effective and prioritised: 

  Building on the independent reviews contained in the original Commission proposal, the 
Commission  considers  that  the  European  Banking  Authority  should  carry  out  periodic 
independent  reviews  on  anti-money  laundering  issues,  with  expert  input  from  the 
proposed Anti-Money Laundering Standing Committee. The specific format and scope of 

18  Directive  2014/59/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  establishing  a 
framework for the recovery and resolution of credit institutions and investment firms. 
19 Article 9 of the European Banking Authority Regulation. 

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each  individual  review  could  be  tailored  to  address  any  needs  or  issues  in  anti-money 
laundering supervision at a particular point in time or in a forward-looking way20;  

  Where  a  review  reveals  serious  shortcomings  in  the  identification,  assessment  or 
addressing  of  risks  of  money-laundering  and  terrorism  financing,  the  Authority  should 
inform the European Parliament, the Council and the Commission; 

  For  the  purposes  of  fulfilling  its  anti-money  laundering  related  tasks,  the  European 
Banking Authority should become the data-hub on anti-money laundering supervision in 
the Union, and therefore should be able to collect all the necessary information and data 
pertaining  to  anti-money  laundering  issues,  from    anti-money  laundering  as  well  as 
prudential  supervisory  authorities,  which  should  include  confidential  data  relating  to 
specific  money  laundering  cases,  as  well  as  any  money  laundering-related  findings  in 
individual fit and proper assessments; 

  The  European  Banking  Authority  should  also  regularly  carry  out  a  risk  assessment 
exercise  to  test  strategies  and  resources  in  the  context  of  the  most  important  emerging 
money laundering risks, and should reflect these findings in the opinion that it is obliged 
to deliver for the purpose of the bi-annual supranational risk assessment, carried out by the 
Commission pursuant to the Anti-Money Laundering Directive; 

  Finally, the capacity of the European Banking Authority to enforce anti-money laundering 
rules should be strengthened, including in the context of its powers related to breaches of 
Union law or binding mediation. Therefore, it should where necessary be able to request 
national supervisors to investigate cases where financial sector operators are alleged to 
have  breached  their  obligations  under  the  Anti-Money  Laundering  Directive.  Moreover, 
where the Authority takes decisions under the existing procedures on breaches of law or 
binding  mediation,  and  a  national  authority  does  not  comply  with  these  decisions,  the 
Authority should under certain conditions be able to adopt decisions directly addressed 
to financial sector operators, requiring them to comply with their legal obligations not 
only  under  directly  applicable  Union  law,  but  also  as  provided  in  national  legislation 
transposing Directives or exercising options granted to Member States in Union law. 

These  tools  would  allow  a  comprehensive  and  up-to-date  analysis  of  the  strengths  and 
weaknesses in supervision, as well as providing a view on emerging money-laundering threats 
and trends that may have cross-border effects.  

iv. 

Strengthening the coordination role of the European Banking Authority for international 
anti-money laundering related issues  

Finally, it is proposed to endow the European Banking Authority with a clear responsibility as 
regards  the  coordination  of  material  anti-money  laundering-related  supervisory  issues  at 
international level. The European Banking Authority should in particular take a leading role 

20  In  addition  to  comprehensive  reviews  of  each  competent  authority,  the  European  Banking  Authority  may 
choose  to  conduct  thematic  or  in-depth  reviews  covering  selected  issues,  reviews  of  compliance  with  certain 
regulatory  requirements,  reviews  of  practical  supervisory  processes  across  a  few  selected  authorities,  or  other 
form of reviews related to pertinent issues. 

8 

 
 
 
 
 
 
 
 
 
 
                                                            
in coordinating cooperation with relevant third-country authorities in cases entailing a cross-
border dimension. 

3.2. SHORT-TERM NON-LEGISLATIVE MEASURES 

To  address  immediately  some  of  the  practical  hurdles  hampering  appropriate  cooperation, 
pro-active  concerted  measures  by  the  competent  authorities  are  warranted.  The  European 
Supervisory  Authorities,  as  well  as  the  European  Central  Bank  acting  in  its  supervisory 
capacity,  should  use  their  existing  powers  to  enhance  the  current  implementation  of  the 
framework. 

Actions by the European Supervisory Authorities 

Measures  should  first  focus  on  the  anti-money  laundering  related  aspects  in  the  banking 
sector,  given  the  particular  relevance  of  anti-money  laundering  for  banks,  and  the  potential 
systemic  implications  for  the  European  banking  sector.  The  European  Banking  Authority  is 
encouraged  to  assume  a  leading  role,  to  initiate  the  measures  described  below,  to  share  its 
expertise and to coordinate work with the European Securities and Markets Authority and the 
European Insurance and Occupational Pensions Authority.  

  The European Banking Authority is invited to undertake first a stock-taking exercise 
allowing an overall identification of the various anti-money laundering issues relevant 
from a prudential perspective, as well as a mapping at Union level of existing practices 
of  factoring  anti-money  laundering  aspects  into  prudential  supervision.  The  stock-
taking  should  also  outline  the  characteristics  of  cooperation  arrangements  between 
prudential and anti-money laundering authorities and bodies, both intra-Member State 
and cross-border. This should lead to identifying best supervisory practices, as well as 
potential deficiencies.  

  On the basis of the stock-taking exercise, the European Banking Authority is invited to 
in 
adopt  common  guidance  supporting 
appropriately  and  consistently  accounting  for  money-laundering  and 
terrorist 
financing  risks  in  their  activities.  In  particular,  the  Authority  should  use  existing 
mandates for issuing guidelines and draft technical standards to specify how prudential 
supervisors should integrate anti-money  laundering aspects into  their various tools.21 
The guidance should emphasise ways of improving cooperation throughout all phases 
of the supervisory process.  

the  Union's  prudential  supervisors 

  The  European  Banking  Authority  is  also  invited  to  analyse  the  impact  of  the 
different  approaches  behind  the  distribution  of  competences  in  prudential 
supervision  (i.e.  home  country  control,  consolidated  supervision)  and  anti-money 
laundering supervision (i.e. host country control, information exchange). This should 
guide  prudential  supervisors  of  cross-border  groups  in  identifying  the  relevant 
counterparties in the anti-money laundering framework. 

  On the anti-money laundering side, the European Banking Authority, in coordination 
with  the  other  two  European  Supervisory  Authorities  where  relevant,  is  invited  to 
closely  monitor  the  implementation  of  the  Risk-Based  Supervision  Joint 

9 

 
 
 
 
 
                                                            
 
Guidelines,  to  follow-up  on  the  recommendations  made  in  the  Commission's  2017 
Supranational  Risk  Assessment22.  The  European  Supervisory  Authorities  should 
highlight,  in  the  forthcoming  joint  opinion  on  money  laundering  and  terrorism 
financing  risks  in  the  Union,23  financial  sector  strategic  aspects  of  anti-money 
laundering  and  the  related  findings,  including  possible  ways  to  address  identified 
shortcomings, if any. 

  Moreover,  the  European  Supervisory  Authorities  are  invited  to  expand  the  Risk-
Based  Supervision  Joint  Guidelines  to  specify  common  procedures  and 
methodologies  for  the  supervision  and  assessment  by  anti-money  laundering 
authorities of financial institutions' compliance with anti-money laundering rules. The 
European Supervisory Authorities are also encouraged to issue substantial guidelines 
covering in detail the cooperation and information exchanges between anti-money 
laundering and prudential supervisors, and promoting the establishment of anti-money 
laundering colleges.  

  The European Banking Authority should play a central role in ensuring compliance 
with the anti-money laundering framework. It should undertake stringent reviews of 
the  activities  of  anti-money  laundering  authorities,  accompanied  by  concrete 
recommendations  to  these  authorities  and  an  effective  follow-up  mechanism.  In  this 
regard,  the  Commission  fully  supports  the  European  Banking  Authority's  recent 
initiatives  on  anti-money  laundering  reviews,  as  well  as  its  follow-up  to  the 
Commission’s requests on investigations of breaches of Union law in the field of anti-
money  laundering  and  encourages  continuous  use  of  these  tools  by  the  European 
Banking Authority for identifying unwarranted supervisory practices. 

  With  regard  to  international  aspects  of  cooperation  in  relation  to  anti-money 
laundering  issues,  the  Commission  supports  a  more  pro-active  role  for  the 
European  Banking  Authority  and  the  establishment  of  contacts  with  third 
country  authorities,  in  line  with  its  current  mandate.  It  is  invited  to  devise  a 
cooperation strategy  with  relevant  third  country  authorities,  to  ensure that  the  Union 
interests  in  the  field  of  anti-money  laundering  are  adequately  and  consistently  taken 
into account by such authorities.  

Action by the European Central Bank in its supervisory capacity 

Until now, the European Central Bank has had to rely mainly on the willingness of national 
anti-money  laundering  supervisors.  It  is  now  a  priority  that  the  European  Central  Bank 
concludes  with  anti-money  laundering  supervisors  a  multilateral  memorandum  of 
understanding on exchange of information by 10 January 2019, as required by the fifth Anti-
Money Laundering Directive.  

It  is  of  great  importance  that  all  prudential  supervisors  clarify  the  practical  arrangements 
that  concern  incorporation  of  anti-money  laundering  related  aspects  into  prudential 
supervision,  taking  into  account  the  European  Banking  Authority’s  Guidelines.  Within  the 
Single  Supervisory  Mechanism,  there  is  an  additional  need  to  clarify  the  division  of  tasks 

22  Report  from  the  Commission  to  the  European  Parliament  and  the  Council on  the  assessment  of  the risks of 
money  laundering  and  terrorist  financing  affecting  the  internal  market  and  relating  to  cross-border  activities  - 
COM(2017) 340 final. 
23 The Joint Opinion is required under Article 6(5) of Directive (EU) 2015/849. 

10 

 
 
 
 
 
                                                            
between the European Central Bank and the national competent authorities, which assist the 
European Central Bank in carrying out its prudential tasks in relation to both significant and 
less significant institutions.     

3.3. CONCLUSIONS AND LONGER TERM OUTLOOK  

Deficiencies in the current system can only be addressed if all stakeholders act swiftly and in 
close concertation. Political commitment from all sides and at all levels will be essential if the 
strategy set out above is to be successfully implemented.  

The  Commission  therefore  calls  on  the  European  Parliament  and  Council  to  endorse  the 
actions set out in this Communication and to adopt the relevant legislative proposals by early 
2019 at the latest, thereby taking a decisive step towards a more resilient system. 

While  national  anti-money  laundering  supervision  will  remain  central  in  the  fight  against 
money-laundering  and  terrorist  financing,  there  is  a  need  to  reflect  on  whether  the  current 
situation,  which  allows  for  differently  transposed  rules  in  Member  States  and  reflects 
asymmetries  in  the  distribution  of  tasks  and  competences,  is  conducive  to  a  coherent  and 
viable anti-money laundering supervisory system in the Union. Various options for potential 
further  reforms  could  be  explored.  The  Commission  will  reflect  on  these  matters  in  the 
context of the Report that it is mandated to deliver under Article 65 of the fifth  Anti-Money 
Laundering Directive.   

This  Report,  taking  into  account  legislative  developments  in  Parliament  and  Council  with 
regard to the European Supervisory Authorities review, could consider the long-term actions 
suggested  in  the  Reflection  paper  developed  by  the  Joint  Working  Group.  In  particular, 
transformation of the Anti-Money Laundering Directive into a Regulation, which would have 
the  potential  of  setting  a  harmonised,  directly  applicable  Union  regulatory  anti-money 
laundering framework should be considered. Different alternatives could also be envisaged in 
order  to  ensure  high  quality  and  consistent  anti-money  laundering  supervision,  seamless 
information exchange and optimal cooperation between all relevant authorities in the Union.24 
This  may  require  conferring  specific  anti-money  laundering  supervisory  tasks  to  a  Union 
body.  

24 Including those in the field of taxation. 

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