Practical aspects of the application of the EBA guidelines AML/CFT Compliance Officer

On June 14, 2022, the European Banking Authority ("EBA") published Guidelines on compliance management strategies and procedures and the role and responsibilities of the AML/CFT Compliance Officer ("AMLCO Guidelines") issued pursuant to Article 8 and Chapter VI of Directive (EU) 2015/849 ("AML Directive"). The AMLCO Guidelines should apply from December 1, 2022.

PRACTICAL ASPECTS OF THE APPLICATION OF THE EBA GUIDELINES AML/CFT COMPLIANCE OFFICER

The contents of the the AMLCO Guidelines does not give a clear answer as to which entities are subject to the obligation to apply them.

Time order

EBA guidelines AMLCO: Guidelines on policies and procedures in relation to compliance management and the role and responsibilities of the AML/CFT Compliance Officer under Article 8 and Chapter VI of Directive (EU) 2015/849) – go to the content of the act on the publisher’s website (link active 09.02.2023)
14.06.2022 – passed
01.12.2022 – entry into force and validity

Highlights

Firstly, the list of entities obliged to apply the AMLCO Guidelines is indicated in two separate points (i.e. in Points 6 and 8 of the AMLCO Guidelines), which regulate the scope of application of the AMLCO Guidelines differently, once referring to credit and financial institutions within the meaning of the relevant regulations, and another times referring to credit and financial institutions, provided that they have the status of a financial sector entity within the meaning of Article 4 point 1a of Regulation (EU) 1093/2010 establishing the European Banking Authority (“EBA Regulation”).

Secondly, it needs to be clarified whether the scope of the AMLCO Guidelines also covers obliged institutions under the Act of March 1, 2018 on Counteracting Money Laundering and Terrorist Financing (“AML Act”), which are not subject to supervision in accordance with the legislative acts indicated in Article 1 sec. 2 of the EBA Regulation.

Subjective scope

Point 6 vs. Point 8 of the AMLCO Guidelines

Point 6 of the AMLCO Guidelines indicates that they apply to:

  • credit institutions within the meaning of Article 3 point 1 of the AML Directive – these are in particular banks and some investment firms;
  • financial institutions within the meaning of Article 3 point 2 of the AML Directive, i.e. undertakings carrying out at least one of the types of the activities listed in points 2-12 and in points 14 and 15 of Annex I to Directive 2013/36/EU – these are in particular lending institutions, leasing companies, insurance companies and insurance intermediaries in the field of life insurance activities and currency exchange offices.

On the other hand, point 8 of the AMLCO Guidelines limits the group of addressees of the AMLCO Guidelines to those credit institutions or financial institutions that are entities of the financial sector within the meaning of Article 4 point 1a of the EBA Regulation.

Pursuant to the EBA Regulation, financial sector entities are obliged entities under the AML Directive (i.e. basically obliged institutions under the AML Act), which are:

  • financial institutions subject to regulation and supervision in accordance with the EBA Regulation;
  • financial institutions regulated in accordance with Regulation (EU) 1094/2010 establishing the European Insurance and Occupational Pensions Authority (“EIOPA Regulation”); or
  • financial market participants subject to the requirement set out in EU acts, in accordance with Regulation (EU) 1095/2010 establishing the European Securities and Markets Authority (“ESMA Regulation”).

What is the subjective scope of the AMLCO Guidelines?

Considering that the group of entities obliged to apply the AMLCO Guidelines has been limited to credit institutions and financial institutions that are also entities of the financial sector, it seems that the EBA’s intention was to apply the AMLCO Guidelines only to entities indicated in Point 8 of the AMLCO Guidelines. Placement of Point 8 of the AMLCO Guidelines in the ‘Addressees’ section gives greater significance for Point 8 compared to Point 6 of the AMLCO Guidelines and additionally supports recognition of Point 8 as regulating the subjective catalogue of the AMLCO Guidelines, while Point 6 defines their subjective scope on a high level only.

The conclusion is that not all financial institutions will be required to comply with the AMLCO Guidelines. Such an obligation was imposed only on financial institutions having the status of financial sector entities. On the basis of the EBA Regulation, such entities will be entities that are subject to EBA regulation and supervision in accordance with the legislative acts indicated in Article 1 sec. 2 of the EBA Regulation, while the condition of being subject to regulation and supervision in accordance with the relevant legislative acts must be met cumulatively in order to qualify a given entity as a financial market entity, and thus to consider a given entity falling under the scope of the AMLCO Guidelines.

AMLCO Guidelines and lending institutions

Whether lending institutions should comply with the AMLCO Guidelines?

The answer to the question whether lending institutions are required to apply the AMLCO Guidelines is not clear. While analyzing the catalogue of entities that should apply the AMLCO Guidelines on the basis of Point 8 of the AMLCO Guidelines, it is possible to assume that lending institutions, as entities that are currently not subject to the supervision of the Polish Financial Supervision Authority (“KNF”), and to whom the EBA cannot issue guidelines and recommendations (Article 16(1) of the EBA Regulation) are not obliged to apply the AMLCO Guidelines. However, this state of affairs will change when the provisions of Chapter 5AB of the Act of May 12, 2011 on consumer credit, providing for the supervision of lending institutions by the Polish Financial Supervision Authority, enter into force, i.e. on January 1, 2024.

An additional aspect that should be taken into account is the fact that lending institutions are subject to control exercised by the General Inspector of Financial Information (“GIIF”) in the scope of their duties in the area of counteracting money laundering and terrorist financing (Article 130(1) of the AML Act ) and confirmation by the GIIF in the comply or explain procedure of the application of the AMLCO Guidelines in its supervisory processes.

In the light of the above, it is possible to formulate legal arguments both for and against the obligation to apply the AMLCO Guidelines in the activities of lending institutions in the transitional period, i.e. from December 1, 2022 to December 31, 2023.

The obligation to apply the AMLCO Guidelines by lending institutions in the transitional period is supported primarily by the confirmation by the GIIF of the application of the AMLCO Guidelines in supervisory processes (i.e. also towards the lending institutions subject to the GIIF’s control). On the other hand, the scope of the GIIF’s powers under Article 130 sec. 1 of the AML Act is limited to exercising control over lending institutions, instead of the supervision required by the definition of financial sector entities. Based on this argument, which appears convincing, it is possible to conclude that lending institutions are in fact not subject to the obligation to apply the AMLCO Guidelines in their activities.

Similar conclusions can also be drawn with regard to leasing companies, which are obliged institutions within the meaning of the AML Act, which, despite being subject to the regulations of the legislative acts indicated in the EBA Regulation (including the AML Directive), are not entities supervised by KNF, and, as a result, are not subject to supervision in accordance with the legislative acts of the EBA Regulation.

What we provide

As part of our services for financial institutions, we provide legal support in determining the obligation to apply the AMLCO Guidelines, based on a comprehensive legal analysis of an individual case, as well as consideration of arguments both for and against the obligation to apply the AMLCO Guidelines for a given entity.

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