The European Banking Authority launches a central database for the fight against money laundering and terrorist financing

At January 31, 2022the European Banking Authority (“EBA”) has launched a central database for the fight against money laundering (“AML”) and the fight against the financing of terrorism (“CFT”).

The EBA was created on 1 January 2011 within the framework of the European System of Financial Supervision (“ESFS”). It is an independent European authority that ensures effective and consistent prudential regulation and supervision across the European banking sector. The EBA is responsible for contributing to the creation of the European Single Rulebook in Banking, which aims to provide a single set of harmonized prudential rules for financial institutions across the EU. In particular, EBA has a legal obligation under EU Regulation No 1093/2010 to help prevent the use of the EU financial system for money laundering and financing of terrorism.

The EBA has therefore established a central database for AML/CFT called EuReCa. The EBA states that EureCa will play a central role in coordinating the efforts of competent authorities to tackle the risks of money laundering and terrorist financing in the EU.

EuReCa will contain information on the material weaknesses of individual financial institutions that make them vulnerable to money laundering and terrorist financing. Competent authorities in the EU are required to report these weaknesses, as well as the measures they have imposed on financial institutions to address these material weaknesses. The following are examples of such hardware weaknesses:

  • lack of adequate AML/CFT policies and procedures
  • the lack of monitoring of transactions at group level
  • the absence of policies and procedures for high-risk customers, which increase the risks of money laundering or terrorist financing associated with the financial institution.

In addition, EuReCA will include internal audit findings identified by a prudential authority during an on-site inspection where senior management appears to have been made aware of a money laundering or terrorist financing risk and has decided not to remediate.

The EBA intends to use EuReCA to inform its views on money laundering and terrorist financing risks and to carry out risk assessments. It will also share relevant EuReCA information with the competent authorities, as appropriate, to support them in their supervisory activities and, in particular, in the event of the emergence of specific risks or trends in relation to money laundering and financing of terrorism. The EBA indicates that EuReCA will therefore act as an early warning tool, which will allow competent authorities to act before the risks of money laundering and terrorist financing materialise.

Money laundering and terrorist financing remain a major concern for the EU financial system and the security of its citizens. EuReCA is expected to further strengthen the EU framework in the fight against money laundering and terrorist financing in order to maintain the integrity and stability of the financial system.