Setting up the AML/CFT database for 2022

On 20 December 2021 EBA published the final report on the draft Regulatory Technical Standards (RTS) setting up the AML/CFT central database. In this report that followed the consultation on the RTS, EBA clarified the questions of the respondents and also modified the RTS based on the recommendations. In this article we want to answer the most important questions relating to the AML/CFT central database taking into account also the latest changes published by EBA.

What is the AML/CFT central database?

The AML/CFT central database is a platform that will collect information about financial institutions and the material weaknesses that make them vulnerable in the fight against ML/TF.

What is the name of the database?

 The AML/CFT central database will also be known as EuReCa, which stands for “The European Reporting system for material CFT/AML weaknesses”.

What are the updates of the EBA Draft RTS?

The EBA draft RTS contains clarifications on when weaknesses are material, the type of information collected and how the information will be analysed and shared by EBA.

What is EBA’s role in regards to the AML/CFT central database?

EBA has the role of preventing the use of the EU’s financial system for money laundering purposes and to lead, coordinate and monitor the EU financial sector’s fight against ML/TF.

EBA also has the role of establishing and keeping the database up to date.

The EBA will use the central AML/CFT database to:

  • Share relevant information proactively on its own initiative with competent authorities in support of their supervisory activities on a risk-based approach;
  • Answer ‘reasoned requests’ for information from competent authorities about financial sector operators to the extent that this information is relevant for competent authorities’ supervisory activities with regard to preventing the use of the financial system for the purpose of ML/TF;
  • Analyse information in the database on an aggregate basis to inform the Opinion on ML/TF risk and to perform risk assessments;
  • Support the EBA’s work to lead, coordinate and monitor the EU financial sector’s AML/CFT efforts.

What will the database include?

The central database will contain three types of information:

General

  • Identification of the competent authority;
  • Identification of the financial institutions affected by the material weakness or control measures;
  • Identification of the central contact point;
  • Any relevant information regarding the financial institution (structure, size, clients, authorisations, etc.)

Information to be submitted for the material weakness

  • Type of weakness
  • Reason for materiality
  • Description of the material weakness
  • The situations where the weakness occurred
  • The timeline
  • Type of products, services, activities affected
  • Other relevant information provided in the standards

Type of information transmitted in relation to measures taken in response to material weaknesses

  • The control measure and the corresponding material weakness
  • Date
  • Type of measure
  • Description of the measure
  • Other relevant information provided in the standards

Who has reporting obligations regarding the required information?

The competent authorities across the European Union will have to report the weaknesses of financial institutions in terms of AML/CFT and the control measures taken to rectify these situations.

What is the importance of the database?

The AML/CFT central database is a crucial step in setting up a complete and uniform AML/CFT framework across the European Union. Given that the database, EuReCa, will collect information about the ML/TF risks affecting the financial institutions, it will work as a warning tool that will help competent authorities to take action before the actual risks occur.

Will the database be available publicly?

The information will be made available by the EBA in two different ways:

  • Reactively, following a request by a competent authority, and
  • Proactively, on the EBA’s own initiative, where appropriate as part of a risk-based approach

What are the relevant dates of this database?

At this moment we know that EuReCa will become operational and start to receive data in the first quarter of 2022.

Regarding the new updates of EBA, the draft RTS will be submitted to the European Commission for approval. Once approved, the RTS will be directly applicable in all Member States.

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