REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the assessment of the risk of money laundering and terrorist financing affecting the internal market and relating to cross-border activities
Date: 2019-07-24
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: banking supervision, economic offence, electronic money, fight against crime, financial transaction, market supervision, money laundering, single market, terrorism financing

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.7.2019  COM(2019) 370 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the assessment of the risk of money laundering and terrorist financing affecting the internal market and relating to cross-border activities     {SWD(2019) 650 final}  
 
 
1. 

INTRODUCTION 

Article  6  of  the  4th  Anti-Money  Laundering  Directive1  mandates  the  Commission  to 
conduct  an  assessment  of  money  laundering  and  terrorist  financing  risks  affecting  the 
internal market and relating to cross border activities and to update it every two years (or 
more frequently if appropriate). This report updates the Commission’s first supranational 
risk assessment published in 2017.2 It assesses the implementation of the Commission’s 
recommendations and evaluates remaining risks, including in new products and sectors. 

The report provides a systematic analysis3 of the money laundering or terrorist financing 
risks of specific products and services. It focuses on vulnerabilities identified at EU level, 
both  in  terms  of  legal  framework  and  in  terms  of  effective  application  and  provides 
recommendations for addressing them.  

This  supranational  risk  assessment  takes  into  account  the  requirements  of  the  4th  Anti-
Money Laundering Directive,4 which was due to be transposed by July 2017. Additional 
changes brought by the 5th Anti-Money Laundering Directive,5 due to be transposed by 
January 2020, have been anticipated when defining the new mitigating measures.   

2.  OUTCOMES OF THE SUPRANATIONAL RISK ASSESSMENT 

In this second supranational risk assessment, the Commission identified 47 products and 
services that are potentially vulnerable to money laundering/terrorist financing risks, up 
from  40  in  2017.  These  products  and  services  fall  under  11  sectors,  including  the  10 
sectors or products identified by the 4th Anti-Money Laundering Directive6 along with 1 
additional category of products and services relevant for the risk assessment.7  

1   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)  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, OJ L 0849, 09.07.2018, p.1. 

2   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. 

3   For a  more detailed description of the  methodology,  see the  Staff Working  Document  accompanying 

this Report SWD(2019) 650. 

4   Although the 5th Anti-Money Laundering Directive has been adopted, its transposition deadline has not 
yet  passed.  Similarly,  the  2017  supranational  risk  assessment  was  drafted  when  the  4th  Anti-Money 
Laundering Directive had been adopted, but its transposition deadline had not yet passed. 

5   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  (Text  with 
EEA relevance); PE/72/2017/REV/1; OJ L 156, 19.6.2018, p. 43–74. 

6   Credit  and  financial  institutions,  money  remitters,  currency  exchange  offices,  high  value  goods  and 
assets dealers, estate agents, trust and company service providers, auditors, external accountants and tax 
advisors, notaries and other independent legal professionals, and gambling service providers. 

7   This  category  includes  cash-intensive  businesses,  virtual  currencies,  crowdfunding  and  non-profit 
organisations. It also covers certain informal means, such as those used by Hawala and other informal 
value  transfer  service  providers;  and  four  new  products/sectors  that  were  not  assessed  in  the  2017 
report:  privately  owned  automated  teller  machines;  professional  football;  free  ports;  and  investor 
citizenship and residence schemes.   

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2.1.  Main risks in the sectors covered by the supranational risk assessment  

2.1.1. Cash and cash-like assets 

Law enforcement agencies’ findings show that, while cash is falling out of favor among 
consumers, it remains criminals’ money laundering instrument of choice as they can use 
cash to transfer funds rapidly from one location to another, including in air transit. Use of 
cash is the main trigger for the filing of suspicious transaction reports. 

Criminals who accumulate cash proceeds seek to move them to locations where they can 
more easily be integrated into the legal economy, i.e. those characterised by  predominant 
use of cash, lax supervision of the financial system and strong bank secrecy regulations.  

Since  the  2017  supranational  risk  assessment,  the  relevant  legal  framework  has  been 
strengthened.  The  4th  Anti-Money  Laundering  Directive  covers  traders  of  goods  who 
make or receive cash payments of EUR 10,000 or more. Member States can adopt lower 
thresholds, additional general restrictions on the use of cash and stricter provisions. 
The  revised  Cash  Controls  Regulation8  applicable  from  3  June  2021  extends  the 
obligation  of  any  traveller  entering  or  leaving  the  EU  and  carrying  cash  to  a  value  of 
EUR 10,000 or more to declare it to the customs authorities. It also extends the definition 
of  cash,  to  cover  not  only  banknotes  but  also  other  instruments  or  highly  liquid 
commodities, such as cheques, traveller's cheques, prepaid cards and gold.  

Assets  with  similar  properties  to  cash  (e.g. gold,  diamonds)  or  high-value  ‘lifestyle’ 
goods  (e.g. cultural  artefacts,  cars,  jewellery,  watches)  are  also  high-risk,  due  to  weak 
controls. Specific concerns have been expressed as regards the looting and trafficking of 
antiquities and other artefacts. In this regard, the recently adopted Regulation on import 
of  cultural  goods  complements  the  existing  EU  legal  framework  on  their  trade,  which 
until  now  has  only  included  legislation  covering  the  export  of  cultural  goods  and  the 
return of cultural objects unlawfully removed from the territory of an EU country.9 

2.1.2. Financial sector 

The  report  on  the  assessment  of  recent  alleged  money  laundering  cases  involving  EU 
credit institutions identifies the factors that contributed to, as well as lessons learnt from, 
recent  money  laundering  cases  in  EU  banks,  with  a  view  to  informing  further  policy 
actions.  It  assesses  failures  related  to  credit  institutions’  anti-money  laundering  and 
defences  and  highlights  challenges  associated  with  different  approaches  to  anti-money 
laundering/countering the financing of terrorism supervision at national level (see point 
2.2.3).  

Moreover,  some  other  financial  subsectors  or  products  that  deal  with  cash  (e.g. foreign 
exchange  offices,  transfers  of  funds,  and  some  e-money  products)  still  pose  significant 
money laundering risks, especially in case of unscrupulous behaviour on the part of third 
parties who act in their delivery channels, as agents or distributors.10 

8    Regulation  (EU)  2018/1672  of  the  European  Parliament  and  of  the  Council  of  23  October  2018  on 
controls on cash entering or leaving the Union and repealing Regulation (EC) No 1889/2005, OJ L 284, 
12.11.2018, p. 6–21. 

9    Regulation  (EU)  2019/880  of  the  European  Parliament  and  of  the  Council  of  17  April  2019  on  the 

introduction and the import of cultural goods; PE/82/2018/REV/1; OJ L 151, 7.6.2019, p. 1–14. 

10   On  April  2019  The  European  Banking  Authority  published  an  Opinion  on  the  nature  of  passport 
notifications  of  payment  institutions  and  electronic  money  institutions  using  agents  and  distributors 
located in another Member State: 

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The use of new technologies (FinTech)11that enable speedy and anonymous transactions 
with  increasingly  non-face-to-face  business  relationships,  while  bringing  considerable 
benefits, may pose a higher risk if customer due diligence and transaction monitoring are 
not  conducted  efficiently  across  the  delivery  channel.12  While  the  5th  Anti-Money 
Laundering  Directive  provisions  on  virtual  currency  providers  and  custodian  wallet 
providers  are  a  first  regulatory  step,  the  increasing  use  of  such  instruments  is  posing 
higher risks and further regulatory steps may be needed.  

2.1.3. Non-financial sector and products — Designated Non-Financial Businesses and 

Professions  

Manufacturers,  distributors,  legal  professionals  and  other  non-financial  institutions  are 
increasingly attracting the attention of would-be money launderers. One study indicates 
that 20-30% of all proceeds from crime are laundered in the non-financial sector.13 The 
sector’s exposure to risks is therefore considered significant to very significant overall. 

Failure  to  identify  the  client’s  beneficial  owner  appears  to  be  the  main  weakness 
affecting  this  sector.  When  entering  into  a  business  relationship,  some  parties  do  not 
always  properly  understand  the  concept  of  ‘beneficial  owner’  or  fail  to  check  their 
identity. 

In addition, Member State may designate self-regulatory bodies to supervise tax advisors, 
auditors,  external  accountants,  notaries  and  other  independent  legal  professionals  and 
estate  agents.14  Member  States  may  task  these  bodies  with  receiving  Suspicious 
Transactions Reports from obliged entities and sending them to the Financial Intelligence 
Units.  However,  some  obliged  entities  and  self-regulatory  bodies  do  not  report  many 
suspicious transactions to the Financial Intelligence Units, especially in certain Member 
States.  This  may  indicate  that  suspicious  transactions  are  not  correctly  detected  and 
reported.  Moreover,  with  the  inclusion  of  non-financial  sector  and  products  as  obliged 
entities  by  the  4th  Anti-Money  Laundering  Directive,  there  is  a  need  to  clarify  that  the 
principle  of  legal  privilege  is  not  impacted  by  appropriate  application  of  the  relevant 
measures.15   

https://eba.europa.eu/-/eba-publishes-opinion-on-the-nature-of-passport-notifications-for-agents-and-
distributors-of-e-money 

11  ‘FinTech’  refers  to  technology-enabled  and  technology-supported  financial  services.  ‘Reg  Tech’  is 

about adopting new technologies to facilitate the delivery of regulatory requirements. 

12   These risks may be effectively mitigated and accurate remote identification and verification of data of 
natural and legal persons could be possible by relying on the electronic identification means as set out 
in Regulation (EU) No 910/2014 and the appropriate level of assurance. 

13   In  Germany,  as  assessed  by  Bussmann,  K.-D.  and  M.  Vockrodt,  ‘Geldwäsche-Compliance  im  Nicht-

Finanzsektor: Ergebnisse aus einer Dunkelfeldstudie’, 2016, Compliance-Berater 5: p.138-143). 

14   The  4th  Anti-Money  Laundering  Directive  defines  self-regulatory  bodies  as  bodies  that  represent 
members  of  a  profession  or  have  a  role  in  regulating  them,  performing  certain  supervisory  or 
monitoring functions, and ensuring the enforcement of the rules relating to them. 

15  The legal privilege is a recognised principle at EU level which reflects a delicate balance in light of the 
European  Court  of  Justice  ECJ  case  law  on  the  right  to  a  fair  trial  (C-305/05),  itself  reflecting  the 
principles of the European Court of Human Rights as well as of the Charter (such as article 47). At the 
same time, there are cases where these professionals sometimes conduct activities that are covered by 
the legal privilege (i.e. ascertaining the legal position of their client or defending or representing their 
client in judicial proceedings) and at the same time activities that are not covered by the legal privilege, 
such as providing legal advice in the context of the creation, operation or management of companies. 
The  remit  of  confidentiality,  legal  professional  privilege  and  professional  secrecy  varies  from  one 
country  to  another,  and  the  practical  basis  on  which  this  protection  can  be  overridden  should  be 
clarified. In this regard concerns flagged by the supranational risk assessment 2017 are still valid. 

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Following  consultations  with  experts,  it  seems  that  the  real-estate  sector  is  also 
increasingly  exposed  to  significant  money  laundering  risks.  Other  common  means  of 
laundering  proceeds  are  over-invoicing  in  commercial  trade  and  fictitious  loans.  Law 
enforcement authorities consider such risks significant. 

2.1.4. Gambling sector 

Under the 4th Anti-Money  Laundering Directive,  all providers of gambling services are 
obliged entities; however Member States may decide to grant full or partial exemptions 
to  providers  of  gambling  services  other  than  casinos,  on  the  basis  of  proven  low  risk. 
Certain  gambling  products  are  considered  significantly  exposed  to  money  laundering 
risk. In the case of land-based betting and poker,16 this appears to be due to ineffective 
controls. For online gambling there is a high risk exposure due to very large numbers of 
transaction-  flows  and  the  lack  of  face-to-face  interaction.  Although  casinos  present 
inherently high-risk exposure, their inclusion in the anti-money laundering/countering the 
financing of terrorism framework since 2005 has had a mitigating effect.  

Lotteries  and  gaming  machines  (outside  casinos)  present  a  moderate  level  of  money 
laundering/terrorist  financing  risk.  For  the  former,  certain  controls  are  in  place,  in 
particular to address the risks associated with high winnings. Land-based bingo is seen as 
presenting a low level of money laundering/terrorist financing risk due to the relatively 
low stakes and winnings involved. 

2.1.5. Collection and transfers of funds through non-profit organisations  

the  categories  of  non-profit  organisations  defined 

This  report  covers 
the 
Recommendation  of  the  Financial  Action  Task  Force.17  The  risk  scenario  is  linked  to 
non-profit organisations’ collection and transfers  of funds to  partners/beneficiaries both  
within and outside the Union.  

in 

Risk  analysis  from  a  threat  perspective  is  complicated  by  the  diversity  of  the  sector. 
"Expressive non-profit organisations"18 present some vulnerability because they may be 
infiltrated  by  criminal  or  terrorist  organisations  that  can  hide  the  beneficial  ownership 
making the traceability of the collection of funds less easy. 
Some  types  of  "Service  non-profit  organisations"19  are  more  directly  vulnerable  due  to 
the intrinsic nature of their activity. This is due to the fact they may involve funding to 
and  from  conflict  areas  or  third  countries  identified  by  the  Commission  as  presenting 
strategic  deficiencies  in  their  anti-money  laundering/terrorist  financing  regimes20.  Non-
profit  organisations  are  vitally  important  for  providing  humanitarian  assistance  around 

16  This means betting and poker in dedicated premises, as opposed to online gambling. 
17   ‘A legal person or arrangement or organisation that primarily engages in raising or disbursing funds for 
purposes  such  as  charitable,  religious,  cultural,  educational,  social  or  fraternal  purposes,  or  for  the 
carrying out of other types of “good works”,  
http://www.fatf-gafi.org/media/fatf/documents/reports/BPP-combating-abuse-non-profit-
organisations.pdf  

18  "Expressive  NPOs"  are  NPOs  predominantly  involved  in  expressive  activities,  which  include 
programmes focused on sports and recreation, arts and culture, interest representation, and advocacy. 
19  "Services  NPOs"  are  NPOs  involved  in  diverse  activities,  such  as  programmes  focused  on  providing 

housing, social services, education, or health care. 

20  Commission  Delegated  Regulation  (EU)  2016/1675  of  14  July  2016  supplementing  Directive  (EU) 
2015/849 of the European Parliament and of the Council by identifying high-risk third countries with 
strategic deficiencies 

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the world.21 To safeguard the legitimate objectives of such assistance, more information 
about  terrorist financing risks is  needed within non-profit organisations to  improve risk 
awareness.  The  Commission  will  launch  still  in  2019  a  call  for  proposals  for  a 
preparatory project on capacity building, programmatic development and communication 
in the context of the fight against money laundering and terrorist financing. 

Regulated financial service providers may be reluctant to engage with certain non-profit 
organisations  in  order  to  de-risk.  This  could  lead  to  financial  exclusion  or  rejected 
customers turning to underground banking or transfer services instead. 

2.1.6. New products/sectors  

This report looks at several new products or sectors that were exposed in recent publicly-
reported incidents and operations of law enforcement authorities. In addition to FinTech, 
exchange  platforms  and  wallet  providers  (see  section  2.1.2),  professional  football,  free 
ports, and investor citizenship and residence schemes (‘golden passports/visas’) were all 
identified as new sectors posing risks. 

2.1.6.1.  Overview of new sectors  

2.1.6.1.1.  Professional football 

Risks  associated  with  sport  have  long  been  recognised  at  EU  level.22  Professional 
football  has  been  assessed  since  whilst  it  remains  a  popular  sport  it  is  also  a  global 
industry with significant economic impact. Professional football’s complex organisation 
and  lack  of  transparency  have  created  fertile  ground  for  the  use  of  illegal  resources. 
Questionable sums of money with no apparent or explicable financial return or gain are 
being invested in the sport.  

2.1.6.1.2.  Free ports 

A  free  port  is  a  part  of  the  customs  territory  of  the  Union  designated  as  such  by  a 
Member State. Free ports are lawful, but must respect EU state aid rules and the Code of 
Conduct  on  business  taxation.23  Free-trade  zones  may  pose  a  risk  as  regards 
counterfeiting,  as  they  allow  counterfeiters  to  land  consignments,  adapt  or  otherwise 
tamper with loads or associated paperwork, and then re-export products without customs 
intervention, and thus to disguise the nature and original supplier of the goods. 

The misuse of free-trade zones may be related with infringing intellectual property rights, 
and engaging in VAT fraud, corruption and money laundering. In most EU free ports or 
customs  warehouses  (with  the  exception  of  the  Luxembourg  Freeport),  precise 
information  on  the  beneficial  owners  is  not  available.  Under  the  5th  Anti-Money 

21 In line with international policy commitments taken by the Commission with a view to promoting greater 
effectiveness and efficiency, EU humanitarian assistance is increasingly delivered as cash transfers. As 
with all EU humanitarian assistance, funds are always channelled through humanitarian partners such 
as  the  UN  and  international  humanitarian  non-governmental  organisations.  Such  cash  transfers  in 
humanitarian aid operations are not concerned by the present assessment. 

22   The July 2007 White Paper on sport stated that ‘sport is confronted with new threats and challenges, as 
commercial  pressures,  exploitation  of  young  players,  doping,  corruption,  racism,  illegal  gambling, 
violence,  money  laundering,  and  other  activities  detrimental  to  the  sport’  (European  Commission, 
White Paper on Sport, COM(2007) 391 final, 11.07.2007.) 

23   The Code of Conduct Group (Business Taxation) was set up by ECOFIN on 9 March 1998. It mainly 
deals  with assessing  the tax  measures  which fall  within the scope  of the code of conduct (adopted in 
December 1997) for business taxation and overseeing the provision of information on those measures. 

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Laundering  Directive  free  port  operators  and  other  actors  in  the  art  market  become 
obliged entities and therefore subject to customer due diligence requirements. 

2.1.6.1.3.  Investor citizenship and residence schemes 

Recent years have seen a growing trend in schemes by which countries attract investment 
by  granting  investors  citizenship  or  residence  rights.  Concerns  have  been  raised  about 
inherent risks as regards security, money laundering, tax evasion and corruption.  

In January 2019, the Commission published a report on national schemes granting Union 
citizenship to investors24. Following the publication of the report, the Commission has set 
up a  group of experts from  Member States with  the task of considering  risks that arise 
from  investor  citizenship  and  residence  schemes  and  addressing  transparency  and 
governance issues.  
The 5th Anti-Money Laundering Directive requires enhanced customer due diligence for 
third-country  nationals  who  apply  for  residence  or  citizenship  in  Member  States  in 
exchange for capital or investment in property, government  bonds or corporate entities. 

2.2.  Horizontal vulnerabilities common to all sectors 

2.2.1. Anonymity in financial transactions  

Criminals try to avoid leaving an information trail and to remain undetected. Sectors with 
a high level of cash transactions are considered particularly at risk, for example traders in 
goods  and  services  accepting  payments  in  cash  and  economic  operators  accepting 
payments in large-value denominations, such as EUR 50025 and EUR 200 banknotes.   

Financial  products  offering  similar  anonymity  in  certain  circumstances  (e.g. some 
e-money products,  virtual  currencies  and unregulated crowdfunding platforms) are  also 
vulnerable to money laundering/terrorist financing. The same applies to assets like gold 
and diamonds that are easily tradable or can be safely stored and are easy to transfer.   

2.2.2. Identification and access to beneficial ownership information 

Criminals  use  the  financial  system  to  feed  illicit  proceeds  into  financial  markets,  real 
estate  or  the  legitimate  economy  in  a  more  structured  way  than  they  do  with  cash  or 
anonymous financial transactions. All sectors are vulnerable to infiltration, integration or 
ownership by organised  crime organisations and  terrorist  groups. A  common  technique 
for criminals is to create shell companies, trusts or complex corporate structures to hide 
their identities. This is not limited to certain jurisdictions or types of legal entity or legal 
arrangements.  Perpetrators  use  the  most  convenient,  easiest  and  securest  vehicle 
depending on their expertise, location and market practices in the jurisdiction in question.   

In  recent  years  there  has  been  an  increasing  focus  on  the  need  to  ensure  effective 
beneficial  owner  identification  both  in  the  EU  and  at  international  level  through  the 
Financial  Action  Task  Force  and  the  Organisation  for  Economic  Co-operation  and 
Development  Global  Forum  on  tax  transparency.26  The  Directive  on  Administrative 

24   Report  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and 
Social Committee and the Committee of the Regions on Investor Citizenship and Residence Schemes in 
the European Union, COM(2019) 12 final, 23.01.2019. 

25  The  European  Central  Bank  has  decided  to  discontinue  production  and  issuance  of  €500  banknote  

https://www.ecb.europa.eu/press/pr/date/2016/html/pr160504.en.html 
26   http://www.oecd.org/tax/transparency/beneficial-ownership-toolkit.pdf  

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Cooperation in Direct Taxes27 facilitates information exchange between tax authorities of 
Member States.  

Most Member States have put in place a central register or database to collect beneficial 
ownership information, even though the 5th Anti-Money Laundering Directive postpones 
the  deadline  for  setting  up  the  registers  to  January  2020.  The  latter  Directive  also 
provides  for  additional  transparency  and  wider  access  to  beneficial  ownership 
information. 

However, major vulnerabilities remain: 

  Criminals  might  use  complex  corporate  structures  registered  in  third  countries 
given  that  the  registers  foreseen  in  the  Anti-Money  Laundering  Directive  only 
cover legal entities and legal arrangements in Member States.  

  Criminals might wilfully use false information or documentation in order to hide 

their identity. 

  The  national  registers  on  beneficial  ownership  might  have  weak  spots  with 
regard  to  their  technical  implementation  or  management.  Criminals  might  shift 
their business to Member States with a less effective framework. 

2.2.3. Supervision in the internal market 

Anti-money  laundering  and  countering  the  financing  of  terrorism  supervisors  are 
responsible for monitoring the correct application of obligations by the private sector. In 
most Member States, such supervision of credit and financial institutions is carried out by 
the  authorities  also  tasked  with  prudential  supervision.  In  some  other  Member  States, 
Financial Intelligence Units are responsible for this task.  

The  report  on  the  assessment  of  recent  alleged  money  laundering  cases  involving  EU 
credit institutions  examines  actions undertaken  by supervisory  authorities and presents 
findings in relation to their actions taken from an anti-money laundering/countering the 
financing of terrorism perspective, as well  as from  a prudential  perspective. The report 
focuses  on  powers,  organisation  and  resources  of  the  authorities,  supervision  of  local 
entities, supervision of cross-border entities and effectiveness of supervisory measures.  

In  non-financial  sectors,  Member  States  may  allow  self-regulatory  bodies  to  supervise 
tax  advisors,  auditors,  external  accountants,  notaries  and  other  independent  legal 
professionals and estate agents. Analysis indicates that, in the large majority of Member 
States,  supervision  in  these  sectors  still  suffers  from  weaknesses  in  term  of  controls, 
guidance, and the level of reporting by legal professionals, in particular to the Financial 
Intelligence Unit.  

2.2.4. Cooperation between Financial Intelligence Units 

The Financial Intelligence Unit Platform28 mapping report of December 201629 identified 
obstacles to accessing, exchanging and using information and to operational cooperation 

27   Council  Directive  2011/16/EU  of  15  February  2011  on  administrative  cooperation  in  the  field  of 

taxation and repealing Directive 77/799/EEC; OJ L 64, 11.3.2011, p. 1–12. 

28   An informal group, set up by the Commission in 2006, which brings together Member States’ Financial 

Intelligence Units. http://ec.europa.eu/transparency/regexpert/ 

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between  Member  States’  Financial  Intelligence  Units.  The  Commission  proposed 
mitigation  measures  in  its  2017  supranational  risk  assessment  report30  and  outlined 
further  ways  of  improving  cooperation  between  Financial  Intelligence  Units.31  The 
proposed  measures  are  partly  reflected  in  the  5th  Anti-Money  Laundering  Directive. 
Access  to  information  held  by  obliged  entities  or  competent  authorities  has  been 
improved and certain aspects relating to the tasks of the Financial Intelligence Units and 
to the exchange of information between Financial Intelligence Units have been clarified.  
The report on cooperation between Financial Intelligence Units32 identifies existing gaps 
and assesses opportunities to further enhance the framework for cooperation.     

2.2.5. Other vulnerabilities common to all sectors 

The supranational risk assessment shows that all identified sectors are exposed to some 
additional vulnerabilities:  

- 

- 

- 

- 

- 

infiltration  by  criminals  –  criminals  can  become  owners  of  an  obliged  entity  or 
find  obliged  entities  willing  to  assist  them  in  their  money  laundering  activities. 
This calls for ‘fit and proper’ tests in financial sectors covered by the Directive;  
forgery  –  modern  technology  is  making  it  easier  to  forge  documents  and  all 
sectors are struggling to put in place robust detection mechanisms; 
insufficient  information-sharing  between  the  public  and  the  private  sectors  –the 
need for improved mechanisms for feedback from Financial Intelligence Units to 
obliged entities remains; 
insufficient  resources,  risk-awareness  and  know-how  to  implement  anti-money 
laundering/countering  the  financing  of  terrorism  rules  –  while  some  obliged 
entities  invest  in  sophisticated  compliance  tools,  many  have  more  limited 
awareness, tools and capacities in this field; and   
risks emerging from FinTech – the use of online services is expected to increase 
further in the digital economy, boosting demand for online identification. The use 
and reliability of electronic identification is crucial in this respect. 

3.  MITIGATING MEASURES  

3.1.  Mitigating measures under the 5th Anti-Money Laundering Directive 
The 5th Anti-Money Laundering Directive, to be transposed by January 2020, will equip 
the EU with tools allowing it to more effectively prevent its financial system from being 
used for money laundering/terrorist financing, in particular through: 

  improving transparency through public beneficial ownership registers for companies, 

and publicly available registers for trusts and other legal arrangements; 

  limiting anonymity offered by virtual currencies, wallet providers and pre-paid cards; 

29   The  Mapping  Exercise  was  carried  out  by  a  dedicated  Team  led  by  the  Italian  Financial  Intelligence 
Units  (Unità  di  Informazione  Finanziaria  per  l’Italia  -  UIF)  and  members  from  the  Financial 
Intelligence  Units  of  France  (Traitement  du  Renseignement  et  Action  Contre  les  Circuits  Financiers 
Clandestins  /TRACFIN),  Poland  (Generalny  Inspektor  Informacji  Finansowej  /  GIIF)  and  Romania 
(Oficiul  Nacional  de  Prevenire  si  Combatere  a  Spalarii  Banilor  /  ONPCSB)).  The  UK  Financial 
Intelligence Units (National Criminal Agency) contributed to the Project in its initial phase.   

30  Commission Staff Working Document accompanying the 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, SWD(2017) 241 final, pp. 196-198. 
31   Commission  Staff  Working  Document  on  improving  cooperation  between  EU  Financial  Intelligence 

Units, SWD(2017) 275, 26/06/2017. 

32   COM(2019) 371. 

8 

 
 
                                                                                                                                                                            
  broadening  the  criteria  for  the  assessment  of  high-risk  countries  and  improving  the 

safeguards for financial transactions to and from such countries; 

  requiring Member States to set up central bank account registries or retrieval systems;  

  improving anti-money laundering supervisors’ cooperation and information exchange 
with each other and with prudential supervisors and the European Central Bank. 

These  measures  are  expected  to  further  contribute  to  lowering  risk  levels  in  the 
concerned sectors and products. The Commission will review compliance with the new 
provisions and publish an implementation report mid-2021. 

3.2.  EU mitigating measures already in place or in the pipeline 

3.2.1. Legislative measure  

Most  legislative  measures  referred  to  in  the  2017  supranational  risk  assessment  have 
been adopted, notably the 5th Anti-Money  Laundering Directive, the new Cash Control 
Regulation,33 the Directive on Countering Money Laundering by Criminal Law,34 and the 
Regulation  on  the  import  of  cultural  goods.35  The  Directive  on  access  to  financial  and 
other  information36  provides    for    direct  access    to    the    national    centralised    bank  
account registries  or  data  retrieval  systems  by  competent  authorities, including  tax  
authorities,  anti-corruption  authorities and Asset  Recovery  Offices.  
The  revision  of  the  European  Supervisory  Authorities  Regulations37  strengthened  the 
further 
European  Banking  Authority's  mandate 
disseminating  information  to  ensure  all  relevant  authorities  effectively  and  consistently 
supervise the risks of money-laundering. The European Banking Authority's power to act 
where Union law is breached has also been clarified and enhanced. The adoption of the 
5th  Capital  Requirements  Directive38  removes  the  obstacles  to  cooperation  between 
prudential and anti-money laundering/countering the financing of terrorism supervisors. 

for  collecting,  analysing  and 

3.2.2. Policy initiatives 

The  Commission  established  in  December  2017  an  expert  group  on  electronic 
identification  and  remote  Know-Your-Customer  processes.39  The  expert  group  will 

33   Regulation  (EU)  2018/1672  of  the  European  Parliament  and  of  the  Council  of  23  October  2018  on 
controls on cash entering or leaving the Union and repealing Regulation (EC) No 1889/2005,OJ L 284, 
12.11.2018, p. 6–2. 

34   Directive  (EU)  2018/1673  of  the  European  Parliament  and  of  the  Council  of  23  October  2018  on 

combating money laundering by criminal law, OJ L 284, 12.11.2018, p. 22–30. 

35   Regulation  (EU)  2019/880  of  the  European  Parliament  and  of  the  Council  of  17  April  2019  on  the 

introduction and the import of cultural goods; PE/82/2018/REV/1; OJ L 151, 7.6.2019, p. 1–14. 

36   Directive (EU) 2019/1153 of the European Parliament and of the Council of 20 June 2019 laying down 
rules facilitating the use of financial and other information for the prevention, detection, investigation 
or  prosecution  of  certain  criminal  offences,  and  repealing  Council  Decision  2000/642/JHA; 
PE/64/2019/REV/1, OJ L 186, 11.7.2019, p. 122–137. 

37   Political agreement reached in March 2019; The revised Regulations are not yet published at the time of 

this report. 

38  Directive 2006/48/EC of the European Parliament and of the  Council of 14 June 2006 relating to the 
taking up and pursuit of the business of credit institutions, OJ L 177, 30.6.2006, p. 1–200 and Directive 
2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of 
credit institutions and the prudential supervision of credit institutions and investment firms, amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176, 27.6.2013, p. 
338–436.  

39   The  Expert  Group  is  chaired  by  the  Commission  and  composed  by  21  representatives  from  Member 
States,  including    regulators,  supervisors,  and  identity  experts  as  well  as  15  representatives  from 

9 

 
 
                                                           
provide expertise to the Commission as it explores issues relating to the use by financial 
services providers of electronic identification (e-ID) schemes and other innovative digital 
processes to comply with anti-money laundering rules.  
In June 2018, the Commission published a report on restrictions on cash payments.40 The 
report  concluded  that  restrictions  on  cash  payments  would  not  significantly  address 
terrorism financing, although preliminary findings also indicated that prohibition of high 
value cash payments in cash could positively impact the fight against money laundering. 

3.2.3. Further supporting measures  

  Improving statistical data collection;  

  Training  for  professionals  carrying  out  activities  covered  by  ‘legal  privilege’, 
providing  guidance  and  practical  insights  to  help  them  recognise  possible  money 
laundering/terrorist  financing  operations  and  how  to  proceed  in  such  cases.  The 
Commission will assess options for improving compliance in this sector in line with 
relevant case law. An EU funded project for training of lawyers is foreseen to start by 
early  2020.  In  2018,  notaries  received  an  EU  funded  grant  covering  anti-money 
laundering/countering the financing of terrorism training needs;   

  Raising  public  awareness  about  anti-money  laundering/countering  the  financing  of 

terrorism risks;  

  Further analysis of the risks posed by Hawala and informal value transfer services – 

the scale of the problem and possible law enforcement solutions; 

  Further  monitoring  of  currency  counterfeiting  and  its  possible  links  to  money 
laundering. The Commission presented a proposal for a Regulation41 establishing an 
exchange,  assistance  and  training  programme  for  the  protection  of  the  euro  against 
counterfeiting  for  the  period  2021-2027  (the  ‘Pericles  IV’  programme)  and  its 
extension42 to the non-euro area Member States , expected to be adopted in 2020; 

  Further work to enhance supervision in the EU. The report on the assessment of the 
recent  alleged  money  laundering  cases  involving  EU  credit  institutions  points  to 
possible  additional  actions  to  further  strengthen  the  EU  legislative  anti-money 
laundering framework and hereby reinforce the Banking and Capital Markets Unions. 

4.  RECOMMENDATIONS 

Having  assessed  the  risks  in  light  of  the  updated  legal  framework,  the  Commission 
considers that a series of mitigating measures should be taken at EU and Member State 
level, taking into account:   

  money laundering/terrorist financing risk levels;   

 

the  need  to  take  action  at  EU  level  or  to  recommend  that  Member  States  take 
action (subsidiarity); 

financial  institutions  and  consumer  organisations.  Commission  Decision  of  14  December  2017, 
C(2017) 8405 final. The group should present opinions, recommendations or reports to the Commission 
by December 2019. 
40   COM(2018) 483 final. 
41   COM(2018) 369 final 
42 COM(2018) 371 final. 

10 

 
 
                                                                                                                                                                            
 
 

 

the need for regulatory or non-regulatory measures (proportionality); and 

the impact on privacy and fundamental rights.   

The  Commission  has  also  taken  into  account  the  need  to  avoid  any  abuse  or 
misinterpretation  of  its  recommendations  that  would  result  in  the  exclusion  of  entire 
classes  of  customers  and  the  termination  of  customer  relationships,  without  taking  full 
and proper account of the level of risk in a particular sector.   

4.1.  Recommendations to the European Supervisory Authorities  

4.1.1. Follow-up to the 2017 Supranational Risk Assessment Recommendations  

In  the  2017  report,  the  Commission  recommended  that  the  European  Supervisory 
Authorities should: 

(1) raise  awareness  as  to  money  laundering/terrorist  financing  risks  and  identify  the 
appropriate actions to  further enhance the capacity of  national  supervisors in  anti-
money laundering/countering the financing of terrorism supervision; 

The European Supervisory Authorities have responded in the following way by: 
  issuing  eight  draft  technical  standards,43  guidelines,44  and  opinions45  to  support  the 
effective 
anti-money 
laundering/countering  the  financing  of  terrorism  by  credit  and  financial  institutions 
and  their  supervisors.  A  ninth  instrument  on  improving  cooperation  between  anti-
money laundering/countering the financing of terrorism supervisors is currently under 
consultation; 

implementation 

risk-based 

approach 

the 

of 

to 

  providing 

and 

training 

anti-money 
laundering/countering the financing of terrorism  aspects  of the risk-based approach, 
risk-based  supervision;  e-money  risks;  and  money  remittance  risks.  The  workshops 
were attended by over 300 supervisors from all Member States; and 

organising  workshops 

the 

on 

  fostering  the  exchange  of  information  and  good  practices  through  the  European 
Supervisory  Authorities’  internal  committees  and  boards  of  supervisors,  and  setting 
clear  expectations  of  supervisory  practices  in  relation  to  specific  issues,  e.g. the 
Panama Papers. 

43   These are the Joint draft Regulatory Technical Standards on a Central Contact Point to strengthen fight 
against  financial  crime  (Commission  Delegated  Regulation  (EU)  2018/1108  of  7  May  2018 
supplementing Directive (EU) 2015/849 of the European Parliament and of the Council with regulatory 
technical  standards  on  the  criteria  for  the  appointment  of  central  contact  points  for  electronic  money 
issuers  and  payment  service  providers  and  with  rules  on  their  functions,  C/2018/2716,  OJ  L  203, 
10.08.2018,  p.  2–6;  the  Consultation  Paper  on  the  Regulatory  Technical  Standards  on  CCP  to 
strengthen fight against financial crime (JC-2017-08); and the European Supervisory Authorities’ Joint 
response to the European Commission on the amendment of the draft Regulatory Technical Standards 
under Articles 8(5), 10(2) and 13(5) of Regulation (EU) No 1286/2014 of the European Parliament and 
the  Council    of  26  November  2014  on  key  information  documents  for  package  retail  and  insurance-
based investment products, OJ L 352, 09.12.2014, p. 1–23. 

44   The Joint Guidelines on the Characteristics of a  Risk-based Approach to Anti-money Laundering and 
Terrorist  Financing  Supervision  (ESAs  2016  72);  the  Joint  Guidelines  on  the  Joint  Committee 
Consultation on PRIIPs with environmental or social objectives (JC 2017 05); and the Joint Guidelines 
on  the  prudential  assessment  of  acquisitions  and  increases  of  qualifying  holdings  in  the  banking, 
insurance and securities sectors (JC/GL/2016/01). 

45   The  European  Supervisory  Authorities  Joint  Opinion  on  the  risks  of  money  laundering  and  terrorist 
financing  (JC-2017-07);  and  the  Opinion  on  the  use  of  innovative  solutions  by  credit  and  financial 
institutions (JC-2017-81). 

11 

 
 
                                                           
In  2018,  the  European  Banking  Authority  launched  a  multi-annual,  staff-led  review  of 
competent authorities’ approaches to the anti-money laundering/countering the financing 
of terrorism supervision of banks, in order to identify areas for improvement in order to 
establish best practices and remedy weaknesses, as well as to support national authorities' 
anti-money  laundering/countering  the  financing  of  terrorism    efforts  within  the 
framework set by Union law and the European Supervisory Authorities guidelines. The 
findings will inform the content of the training that the European Banking Authority has 
committed  to  providing  in 2019  and  updates  to  the  risk-based  supervision  guidelines 
under Article 48(10) of the 4th Anti-Money Laundering Directive. 

(2) 

take further initiatives to improve cooperation between supervisors;   

In November 2018, the European Supervisory Authorities consulted on draft guidelines 
to  improve  cooperation  among  anti-money  laundering/countering  the  financing  of 
terrorism  supervisors.  The  draft  guidelines  clarify  practical  aspects  of  supervisory 
cooperation  and  information  exchange  and  set  out  rules  governing  new  anti-money 
laundering/countering  the  financing  of  terrorism  colleges  of  supervisors.  It  is  expected 
that they will be finalised in 2019. 

On  10  January  2019,  the  European  Supervisory  Authorities  approved  the  content  of  a 
multilateral  agreement  on  the  practical  aspects  of  information  exchange  between  the 
European  Central  Bank  acting  in  its  supervisory  capacity  and  all  competent  EU 
authorities responsible for the supervision of credit and financial institutions’ compliance 
with anti-money laundering/countering the financing of terrorism obligations. 

(3) 

develop further solutions for supervising operators acting under the ‘passporting’ 
regime; 

The  European  Banking  Authority  has  set  up  a  task  force  to  clarify  when  agents  and 
distributors  that  operate  in  a  Member  State  other  than  that  in  which  the  appointing 
institution 
the  purposes  of  Directives 
(EU) 2015/2366,46  Directive 2009/110/EC,47  and  4th  Anti-Money  Laundering  Directive. 
Work is under way and expected to be concluded in 2019. 

is  authorised  are 

‘establishments’ 

for 

(4) 

provide  updated  guidelines  on  internal  governance  so  as  to  further  clarify 
expectations around the functions of compliance officers in financial institutions; 

In September 2017, the European Supervisory Authorities’ Joint Sub-committee on anti-
money laundering/countering the financing of terrorism decided, in light of their own and 
national competent authorities’ limited resources, to postpone the drafting of guidelines 
on the functions of compliance officers and to focus on supervisory cooperation, which 
was deemed a priority as risks in this area had already materialised; 

(5) 

provide  further  guidance  on  beneficial  ownership  identification  for  investment 
funds  providers,  especially  in  situations  presenting  a  higher  risk  of  money 
laundering or terrorist financing; 

in 

46   Directive  (EU)  2015/2366  of  the  European  Parliament  and  of  the  Council  of  25  November  2015  on 
payment  services 
internal  market,  amending  Directives  2002/65/EC,  2009/110/EC 
and 2013/36/EU  and  Regulation  (EU)  No  1093/2010,  and  repealing  Directive  2007/64/EC,OJ L 337, 
23.12.2015, p. 35. 

the 

47   Directive  2009/110/EC  of  the  European  Parliament  and  of  the  Council  of  16  September  2009 on  the 
taking up, pursuit and prudential supervision of the business of electronic money institutions, amending 
Directives 2005/60/EC  and  2006/48/EC  and  repealing  Directive  2000/46/EC,OJ  L  267,  10.10.2009, 
p. 7. 

12 

 
 
                                                           
In June 2017, the European Supervisory Authorities published ‘risk  factor guidelines’48 
on  simplified  and  enhanced  customer  due  diligence  and  factors  credit  and  financial 
institutions should consider when assessing the money laundering/terrorist financing risk 
associated with individual business relationships and occasional transactions. 

The guidelines contain sectoral  guidance for providers of investment  funds and set out, 
for  the  first  time  at  EU  level,  measures  that  funds  and  fund  managers  should  take  to 
comply with their customer due diligence obligations (including in respect of beneficial 
owners) and how to adjust the extent of the measures on a risk-sensitive basis; 

(6) 

analyse operational anti-money laundering/countering the financing of terrorism  
risks  linked  to  the  business/business  model  in  the  corporate  banking,  private 
banking  and  institutional  investment  sectors  on  the  one  hand,  and  in  money  or 
value transfer services and e-money on the other. 

The European Banking Authority took stock of the findings from competent authorities’ 
thematic reviews of credit institutions and investment firms. The findings are reflected in 
the joint opinion on the money laundering/terrorist financing risks affecting the Union’s 
financial system that the European Supervisory Authorities’ are obliged to issue for each 
suprarnational risk assessment exercise.49  

4.1.2. Current state of play 

The  recommendations  addressed  to  the  European  Supervisory  Authorities  in  the  2017 
supranational  risk  assessment  have  been  addressed,  except  recommendation  (4)  on  the 
provision  of  updated  guidelines  on  internal  governance  aimed  at  further  clarifying 
expectations  around  the  functions  of  compliance  officers  in  financial  institutions.  The 
Commission reiterates that recommendation (4) remains to be completed. 

Furthermore, the European Banking Authority is invited to complete the relevant actions 
under  the  EU  Action  Plan  on  Anti-Money  Laundering  annexed  to  the  Council 
Conclusions of 4 December 2018.50  

4.2.  Recommendations to non-financial supervisors 

For  the  non-financial  sector,  there  are  no  bodies  at  EU-level  corresponding  to  the 
European  Supervisory  Authorities.  Under  the  EU’s  anti-money  laundering  framework, 
Member States may allow self-regulatory bodies to perform supervisory functions for tax 
advisors,  auditors,  external  accountants,  notaries  and  other 
legal 
professionals and estate agents. 

independent 

The  Commission  reiterates  the  recommendations  of  the  2017  supranational  risk 
assessment  for  self-regulatory  bodies,  notably  to  carry  out  more  thematic  inspections, 
raise  the  level  of  reporting;  and  continue  to  organise  training  schemes  to  develop 

48   Joint  guidelines  under  Articles  17  and 18(4) of  Directive  (EU)  2015/849 on  simplified  and  enhanced 
Customer  Due  Diligence  and  the  factors  credit  and  financial  institutions  should  consider  when 
assessing  the  money  laundering  and  terrorist  financing  risk  associated  with  individual  business 
relationships and occasional transactions; 
https://eba.europa.eu/documents/10180/1890686/Final+Guidelines+on+Risk+Factors+%28JC+2017+3
7 %29.pdf 

49   See section 2.2.3. 
50   It  must be highlighted that the three European Supervisory Authorities  will see their  role and powers 
significantly reinforced in the context of the new legislative proposals on which political agreement was 
reached in March 2019 (the review of the European Supervisory Authorities founding regulations and 
its  anti-money  laundering  dimension)  and  any  further  follow-up  of  the  mentioned  recommendations 
should be strictly undertaken within the already agreed resources. 

13 

 
 
                                                           
 
understanding of risks and anti-money laundering/countering the financing of terrorism 
compliance obligations. 
4.3.  Recommendations to Member States51 

4.3.1. Follow-up to the 2017 Supranational Risk Assessment Recommendations  

Under Article 6(4) of the 4th Anti-Money Laundering Directive, if Member States decide 
not  to  apply  any  of  the  recommendations,  they  should  notify  the  Commission  of  their 
decision  and  provide  a  justification  for  it  (‘comply  or  explain’).  To  date,  no  Member 
State  has  made  such  a  notification  to  the  Commission  as  concerns  the  2017 
recommendations. 

The Commission followed up on the 2017 Recommendations to Member States through 
checks on the transposition of the 4th Anti-Money  Laundering Directive, questionnaires 
to  Member  States  on  the  follow  up  of  2017  recommendations  and  the  update  of  the 
national risk assessments.  

For  some  Recommendations  the  input  received  is  either  not  significant  or  national 
authorities  stressed  the  limited  time  available  to  implement  them.  The  Commission 
underlines the need to maintain or intensify current efforts. Furthermore, it is important 
to note that the legal obligations of the 5th Anti-Money Laundering Directive supersede, 
either totally or in part, some of the Recommendations in the 2017 report, in particular as 
regards increased transparency of beneficial ownership, reduced thresholds for customer 
due diligence in some sectors, or extending the list of obliged entities. 

(1) 

Scope of national risk assessments 

The  2017  report  identified  cash  intensive  business  and  payment  in  cash,  the  non-profit 
organisation  sector  and  electronic  money  products  as  areas  to  which  Member  States 
should  give  due  consideration  in  their  national  risk  assessments  and  define  appropriate 
mitigating measures.  

Most  of  the  national  risk  assessments  take  into account  the  risks  posed  by  cash-related 
operations  and  those  arising  from  traffic  in  cultural  artefacts  and  antiques,  have 
incorporated non-profit organisations in the scope of their national risk assessments and 
addressed  the  risks  of  e-money  products,  in  line  with  4th  and  the  5th  Anti-Money 
Laundering Directive. 
However,  several  Member  States  have  not  yet  adopted  any  national  risk  assessment,52 
while others have not addressed the risk posed by the concerned products. These Member 
States are encouraged to urgently act on this Recommendation.   

This report maintains the 2017 Recommendation and calls on all Member States to cover 
in their national risk assessments the risks associated with the mentioned products and to 
provide the appropriate mitigating measures.  

(2) 

Beneficial ownership 

The 2017 report recommended to  Member States  that the information  on the beneficial 
ownership of legal entities and legal arrangements should be adequate, accurate and up to 

51   For  more  details  on  the  recommendations  by  product/service,  see  the  accompanying  Staff  Working 

Document SWD(2019) 650. 

52   At the time of the preparation of this report 13 Member States  have notified to  the  Commission  the 
adoption of their national risk assessments. 15 Member States foresee to finalise them in 2019. This 
issue  is  also  addressed  in  infringements  against  member  States  for  partial  transposition  of  the 
Directive. 

14 

 
 
                                                           
date.  In  particular,  tools  should  be  developed  to  ensure  that  the  identification  of 
beneficial  ownership  is  done  when  applying  customer  due  diligence  measures  and  that 
the  sectors  most  exposed  to  risks  from  opaque  beneficial  ownership  schemes  are 
effectively monitored and supervised.  
The  4th  Anti-Money  Laundering  Directive  had  already  provided  for  an  obligation  for 
Member States to set up beneficial ownership registers for companies, trusts and similar 
legal  arrangements,  but  the  5th  Anti-Money  Laundering  Directive  changed  the  context 
and deadline for transposition  of these registers.  Most Member States have notified the 
Commission that they have set up such registers. 

This report maintains the 2017 recommendation and encourages Member States to ensure 
the  timely  implementation  of  the  provisions  set  out  in  the  5th  Anti-Money  Laundering 
Directive related to beneficial ownership registers.53 

(3) 

Appropriate resources for supervisors and Financial Intelligence Units 

The 2017 supranational risk assessment called on Member States to allocate "adequate" 
resources  to  their  competent  authorities.  Most  Member  States  confirm  that  they  have 
allocated  adequate  resources 
their  competent  authorities,  as  required  under 
Article 48(2)  of  the  Directive.  However,  the  report  on  the  assessment  of  recent  alleged 
money  laundering  cases  involving  EU  credit  institutions  shows  that  many  supervisors 
were critically understaffed. 

to 

This  report  maintains  the  recommendation  that  Member  States  further  intensify  their 
efforts in this area and demonstrate that anti-money laundering/countering the financing 
of terrorism supervisors can fully carry out their tasks. 

(4) 

Increased on-site inspections by supervisors 

Financial sector 

The 2017 report recommended that Member States put in place a risk-based supervision 
model according to the 2016 joint guidelines on risk-based supervision of the European 
Supervisory Authorities.54 

Several  Member  States  indicated  that  they  conduct  regular  thematic  supervisory 
inspections  on  investment  firms.  Others  report  that  they  carry  out  a  general  risk 
assessment. 

The  report  on  the  assessment  of  recent  alleged  money  laundering  cases  involving  EU 
credit  institutions  shows  that  often  supervisors  did  not  carry  out  adequate  on-site 
inspections. 

Supervisors  should  continue  to  conduct  on-site  inspections  that  are  commensurate,  in 
terms  of  frequency  and  intensity,  to  the  identified  money  laundering/terrorist  financing 
risks.  These  must  focus  on  specific  operational  money  laundering/terrorist  financing 
risks,  depending  on  the  specific  vulnerabilities  inherent  to  a  product  or  service,  in 
particular:  institutional  investment  (especially  through  brokers);  private  banking,  where 
supervisors  should in  particular assess compliance with  beneficial ownership  rules;  and 

53  The  5th  Anti-Money  Laundering  Directive  postpones  the  deadline  for  setting  up  the  registers  and 
ensuring new access rights to them. Member States have until 10 January 2020 to set up the registers for 
companies and 10 March 2020 to set up those for trusts. 
54  See  European  Supervisory  Authorities’  Joint  Guidelines,  the  Risk-Based  Supervision  Guidelines; 

07/04/2017:  
https://esas-joint-committee.europa.eu/Publications/Guidelines/Joint%20Guidelines%20on%20risk-
based%20supervision_EN%20%28ESAs%202016%2072%29.pdf 

15 

 
 
                                                           
 
   
 
currency  exchange  offices  and  money  or  value  transfer  services,  where  inspections 
should include a review of agents’ training. 

Non-financial sector 

The  2017  supranational  risk  assessment  called  on  Member  States  to  ensure  that  their 
competent authorities conduct sufficient unannounced spot-checks on high-value dealers, 
real-estate professionals and antique traders.  

Member  States  follow  different  approaches  when  it  comes  to  inspections  in  the  non-
financial sectors and the quality of such supervision tends to vary more.   

This  report  maintains  the  recommendation  to  conduct  a  sufficient  number  of  on-site 
inspections. 

(5) 

Supervisory authorities to carry out thematic inspections 

The 2017 supranational risk assessment  recommended that supervisors develop a better 
understanding of the anti-money laundering/countering the financing of terrorism risks to 
which a specific segment of the business is exposed to.  

According  to  replies  from  Member  States,  when  inspecting  sectors  of  obliged  entities, 
most  supervisors  allocate  supervisory  resources  on  the  basis  of  risk.  Supervisors’ 
inspections  usually  cover  compliance  with  beneficial  owner  and  training  requirements 
among others. In most replies, there is no mention of thematic inspections in the money 
or  value  transfer  services  sector  in  the  last  two  years.  Supervisors  should  continue  to 
improve their understanding of the money laundering/terrorist financing risks to which a 
specific segment of the business is exposed. They should specifically assess compliance 
with beneficial ownership rules in the sectors identified in 2017. 

This  report  maintains  the  recommendation  that  Member  States  further  ensure  that 
supervisors  carry  out  thematic  inspections.  In  addition,  supervisors  should  better  focus 
their resources in thematic inspections. 

(6) 

Considerations for extending the list of obliged entities 

The  2017  report  pointed  at  some  services/products  which  were  not  covered  by  the  EU 
anti-money  laundering/countering  the  financing  of  terrorism  framework  and  called  on 
Member States to extend the scope of the anti-money laundering/countering the financing 
of terrorism regime to professionals particularly at risk.  
The  4th  Anti-Money  Laundering  Directive  extended  the  scope  of  the  anti-money 
laundering/countering  the  financing  of  terrorism  regime  to  those  professionals.  Most 
Member  States’  replies  and 
this 
recommendation  was  followed.  Moreover,  some  Member  States  already  apply  the  5th 
Anti-Money Laundering Directive provisions as regards new obliged entities.  

transposition  check  show 

that  generally 

the 

This  report  maintains  the  recommendation  to  pay  close  attention  to  professionals 
particularly  at  risk,  including  new  obliged  entities  introduced  by  the  5th  Anti-Money 
Laundering Directive (estate agents, art and antiques dealers and specific traders in high-
value  goods  if  they  accept  cash  payments  above  a  certain  threshold;  virtual  currencies 
exchange platforms and wallet providers).  

(7) 

An appropriate level of customer due diligence for occasional transactions 

The  2017  report  drew  attention  to  the  exemption  from  customer  due  diligence  of 
occasional  transactions  below  EUR  15  000  and  called  on  Member  States  to  define  a 
lower threshold as appropriate given the anti-money laundering/countering the financing 
of terrorism risks at national level.  

16 

 
 
The  threshold  for  occasional  transactions  varies  across  Member  States.  Some  apply 
thresholds for money or value transfer services or currency exchange offices that could 
still be considered high. As a result, efficient monitoring of transactions is more difficult.   

This report maintains the 2017 recommendation and calls on Member States to provide 
guidance on the definition of ‘occasional transactions’ and to set out criteria that ensure 
that  the  customer  due  diligence  rules  applicable  to  business  relationships  are  not 
circumvented for currency exchange offices and money remittances; 

(8) 

Appropriate level of customer due diligence for safe custody and similar services 

The  2017  report  recommended  that  appropriate  safeguards  are  put  in  place  to  monitor 
safe custody services properly, in particular those provided by financial institutions and 
similar storage services provided by non-financial providers. 

Replies  from  Member  States  show  that  these  activities  are  subject  to  anti-money 
laundering/countering  the  financing  of  terrorism  regulation  regardless  of  whether 
developed  by  a  credit  institution  or  not.  In  some  Member  States  only  financial 
institutions are providing these services.  

This report maintains the recommendation to ensure an appropriate level of customer due 
diligence for safe custody and similar services.  

(9) 

Regular cooperation between competent authorities and obliged entities 

The  2017  report  recommended  enhanced  cooperation  in  order  to  make  detecting 
suspicious transactions simpler, to increase the number and the quality of the Suspicious 
Transactions  Reports,  to  provide  guidance  on  risks,  customer  due  diligence,  and 
reporting  requirements.  This  can  be  mainly  achieved  through  feedback  from  Financial 
Intelligence  Units  to  the  obliged  entities  on  the  quality  of  reporting  but  also  on 
typologies. Several sectors have stressed the lack of feedback as a problem in particular: 
gambling,  tax  advisors,  auditors,  external  accountants,  notaries  and  other  independent 
legal professionals and money or value transfer services. 

The analysis and the assessment for the purposes of the report assessing the framework 
for cooperation between Financial Intelligence Units showed that in many Member States 
feedback from Financial Intelligence Units to obliged entities is still deficient, despite the 
existence of internal regulations and sectoral guidelines as regards this requirement.  

This  report  partly  maintains  the  recommendation  and  calls  for  enhanced  cooperation 
between competent authorities and obliged entities.   

(10) 

Special and ongoing training for obliged entities 

The 2017 report recommended that training by competent authorities should address the 
risk of infiltration or ownership by organised crime groups, in particular for the gambling 
sector, trust and company services providers, tax advisors, auditors, external accountants, 
notaries  and  other  independent  legal  professionals,  some  service  providers  (on  capital 
structure, industrial strategy, mergers and the purchase of undertakings), real estate and 
money or value transfer services. 

Most Member States reported that training has been provided as recommended, as well 
as guidance on  anti-money laundering/countering  the financing of terrorism obligations 
for different sectors. 

This  report  maintains  the  recommendation  to  provide  further  training,  especially  with 
regard to obliged entities particularly at risk, as identified in the 2017 supranational risk 
assessment, or for newly designated obliged entities.  

17 

 
 
(11)  Annual  reporting  from  competent  authorities/self-regulatory  bodies  on  the  anti-
money laundering/countering the financing  of  terrorism activities of  the  obliged 
entities under their responsibilities   

The  2017  supranational  risk  assessment  showed  that  this  reporting  obligation  helped 
national  authorities  to  conduct  National  Risk  Assessments  and  allowed  for  more 
proactive  action  to  deal  with  weaknesses  or  failures  to  comply  with  anti-money 
laundering/countering  the  financing  of  terrorism  requirements  in  particular  in  the  real 
estate  sector  and  for  tax  advisors,  auditors,  external  accountants,  notaries  and  other 
independent legal professionals.  

In  some  Member  States,  self-regulatory  bodies  have  only  recently  begun  their 
supervisory  activity  because  certain  sectors,  mainly  designated  non-financial  business 
and professions, have only been added through the 4th Anti-Money Laundering Directive. 
Therefore  there  are  as  yet  detailed  statistics  as  requested  in  the  recommendation  to 
designated non-financial business and professions.  Some Member States disagree on the 
utility of annual reporting on supervisory activities. 

This  report  maintains  the  recommendation  and  encourages  self-regulatory  bodies  to 
perform a more proactive role in anti-money laundering supervision. 

4.3.2. Risk analysis by product/service — specific recommendations 

In  addition  to  the  above  recommendations,  there  is  a  need  for  the  following 
product/sector-specific action:55 

(1) Cash and cash-like assets 

  In  their  national  risk  assessments,  Member  States  should  take  into  account  

risks posed by cash payments and take appropriate mitigating measures. 

  Authorities  should  act  on  amounts  below  the  EUR  10,000  declaration 

threshold where they suspect criminal activity. 

(2) Financial sector 
  Member States should improve the monitoring and detection systems applying to 
products  which  are  more  exposed  to  terrorist  financing  risks.  Financial 
institutions usually do not have access to relevant information (often held by law 
enforcement  authorities)  that  would  help  them  identify  terrorist  financing  risks 
before they materialise. Likewise, law enforcement authorities’ efforts to disrupt 
terrorist  activities  and  networks  can  be  hampered  by  their  inability  to  obtain 
information on financial flows that only financial institutions can provide; 

  As regards money laundering risks, it is essential that Member States develop and 
improve  their  beneficial  ownership  registers  to  assist  in  carrying  out  robust 
customer due diligence processes; 

  Member  States  should  continue  to  conduct  thematic  inspections,  focusing  on 
different  areas  depending  on  the  sector/product.  For  on-site  inspections  in 
relevant  companies  in  a  particular  sector,  it  is  more  time-efficient  to  select  risk 
areas than to conduct an overall inspection; this gives supervisors a clear picture 
of best practices and the most significant shortcomings; 

  Provision  of  training  and  guidance  on  risk  factors  such  as  non-face-to-face 
interaction,  offshore  professional  intermediaries/customers  and  complex/shell 
structures: and 

  Follow up on the findings of the report on the assessment of recent alleged money 

laundering cases involving EU credit institutions. 

55   For  more  details  on  the  recommendations  by  product/sector,  see  the  accompanying  Staff  Working 

Document SWD(2019) 650. 

18 

 
 
 
                                                           
(3) Non-financial  sector  and  products  —  Designated  non-financial  businesses  and 

professions  

  Member  States  should  ensure  that  competent  authorities/self-regulatory  bodies 
provide training and guidance on risk factors, with a specific focus on non-face-
to-face  business  relationships,  offshore  professional  intermediaries/customers  or 
jurisdictions, and complex/shell structures; 

  Member  States  should  ensure  that  self-regulatory  bodies/competent  authorities 
conduct thematic inspections on compliance with beneficial owner identification 
requirements; 

  Competent authorities/self-regulatory bodies should provide Member States with 
annual reports on measures carried out to verify the obliged entities’ compliance 
with  their  customer  due  diligence  obligations,  including  beneficial  owner 
requirements, Suspicious Transaction Reports and internal controls; and 

  Member  States  should  ensure  that  service  providers  offering  advice  to 
undertakings  on  capital  structure,  industrial  strategy  and  related  questions,  and 
advice and services relating to mergers and the purchase of undertakings comply 
with their beneficial owner obligations. 

(4) Gambling sector 
  Competent authorities should put in place programmes to raise awareness among 
(online)  gambling  operators  of  the  emerging  risk  factors  that  may  affect  the 
vulnerability of the sector, including the use of anonymous e-money and virtual 
currencies  and  the  emergence  of  unauthorised  online  gambling  operators. 
Feedback  from  Financial  Intelligence  Units  on  the  quality  of  the  Suspicious 
Transaction  Reports  would  improve  the  reporting  and  the  use  made  of  the 
information  provided.  Financial  Intelligence  Units  should  take  account  of  the 
specificities  of  the  gambling  sector  when  developing  standard  Suspicious 
Transaction Report templates at EU level. 

  In  addition  to  training  sessions,  Member  States  should  ensure  adequate  training 
focusing on appropriate risk assessments of relevant products/business models for 
staff, compliance officers and retailers; and 

  Further  guidance  should  be  given  to  obliged  entities  on  the  concept  of  ‘several 

operations which appear to be linked’. 

(5) Collection and transfers of funds through a non-profit organisation 
  Member States should ensure that non-profit organisations are more involved in 

national risk assessments; 

  Member  States  should  develop  information  and  awareness-raising  programmes 
risk  of  non-profit  organisations  being  abused  and  provide 

the 

on 
awareness-raising materials for them; and 

  Member States should further analyse the risks faced by non-profit organisations. 

(6) New products/sectors — professional football, free ports, investor citizenship and 

residence schemes 

  Professional  football  –  Member  States  should  consider  which  actors  should  be 
covered by the obligation to report suspicious transactions and what requirements 
should  apply  to  the  control  and  registration  of  the  origin  of  the  account  holders 
and the beneficiaries of money.  

  Free  ports  –  Member  States  should  implement  independent,  regular  anti-money 
laundering audits of agreed free zone operators’ compliance functions and ensure 
adequate  and  consistent  enforcement  of  the  anti-money  laundering  procedures 
and oversight already enshrined in law.  

19 

 
 
 
 
 
 
  Investor citizenship and residence schemes – Member States should consider the 

money laundering risks of investor citizenship and residence. 

5.  CONCLUSION 

The Commission will continue to monitor the implementation of the recommendations of 
this supranational risk assessment and report again by 2021. The review will also assess 
how EU and national  measures  affect  risk levels, and will examine the impact  of more 
recent changes to the regulatory framework. The Commission will also conduct a study 
on the effective implementation of the 4th Anti-Money Laundering Directive by Member 
States. 

20