On Wednesday 6 December, the joint committee of the three European supervisory authorities (ESAs: EBA, EIOPA and ESMA) published a draft set of regulatory technical standards (RTS) specifying how certain European financial establishments should manage the risks of money laundering and the financing of terrorism to which their branches and subsidiaries based in third countries are exposed.
The RTS are aimed at European financial establishments that belong to a group that is covered by the fourth directive on the laundering of capital and which have branches or subsidiaries under majority ownership established in third countries whose national legislations do not allow for the application of policies and procedures to tackle money laundering and the financing of terrorism at group level. They also apply in the event that the capacity of the competent authorities to check the group's compliance with the requirements of the said directive is hindered, as they do not have access to the relevant information held by these branches or subsidiaries.
The rules provide that, in such cases, European banks must take extra measures, for instance: - carrying out in-depth reviews to ensure that the branches and subsidiaries in third countries are able adequately to assess and manage risks of money laundering and the financing of terrorism; - restricting financial services and products offered by these branches and subsidiaries to those presenting a low risk and requiring approval from senior management at group level of all higher risk business relationships; - obtaining authorisation from customers to overcome restrictions on the ability to share and process customer data.
In these exceptional cases, the RTS provide that if, after having taken all possible measures, the risk of money laundering and the financing of terrorism cannot be effectively removed, European banks may go further and require their branches or subsidiaries to terminate certain commercial relationships or even to decide to terminate some or all of their operations in the third country.
These RTS are still to be adopted by the European Commission. They are available at: http://bit.ly/2AgIzpQ . (Original version in French by Marion Fontana)