On 16 June 2023, the European Banking Authority (“EBA”) published a report on money laundering and terrorist financing risks associated with EU payment institutions. The report finds that these risks may not be assessed and managed effectively by stakeholders.


1. Background

The EBA carried out an assessment of money laundering and terrorist financing risks in the payment institutions sector in 2022. This report contains the EBA’s findings, which will be of interest to market participants as it lists a number of areas where improvements are required.


2. Key findings relating to identified shortcomings

The EBA first provides an overview of money laundering / terrorism financing risks identified in the payment institutions sector, including emerging risks.

The EBA then explains that payment institutions across the EU do not seem to have the required level of risk awareness relating to money laundering and terrorist financing risks regarding their activities. This leads to a number of shortcomings, which can be summarised as follows:

  • Poor quality of business-wide and individual customer related risk assessments.
  • Inadequate or absent transaction monitoring systems.
  • Poor compliance with unusual transaction and suspicious transaction reporting requirements.
  • Insufficient implementation of restrictive measures regimes.
  • Weak internal governance arrangements, with unclear application of the three lines of defence model.
  • Insufficient management of terrorist financing risks.
  • Inappropriate implementation of remote customer onboarding leading to breaches of the regulatory framework, such as the non-detection of politically exposed persons.

3. Timeline and next steps

Luxembourg is home to a number of payment institutions, and they will need to verify if any of the identified shortcomings are relevant to them and whether improvements are required.


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