The European Banking Authority (“EBA”) published a new consultation paper in February 2020 on revised guidelines on money laundering and terrorism financing guidelines (“Consultation Paper”). Following on from our overview of the Consultation Paper in our last post in this series (“The EBA’s new consultation paper on the risk factors associated with combating money laundering – what is this about?“), we would now like to look into the actual changes which the EBA proposes. As part of this and future posts, we will be particularly looking at the sector-specific guidelines contained in the second Title of the Guidelines. This includes guidelines addressed to a specific group, e.g. retail banks or wealth management. In this post we will consider the planned amendments contained in Guideline 10 that specifically target e-money issuers.
Amendment proposals for the Guidelines applicable to e-money issuers
Guideline 10, which is contained in the Consultation Paper, targets e-money issuers as defined in Article 2 para. 3 of the E-Money Directive (2009/110/EC). The respective rules are contained in Chapter 3 of the current Guidelines. The Consultation Paper proposes a set of additions and amendments to the existing rules:
- Guideline 10.9 contains new customer-related risk factors. E-money issuers are required to understand the nature and the purpose of the merchant’s business prior to signing a distribution agreement with a merchant. The idea behind this is that e-money issuers should check if the goods and services offered are legal and be able to estimate the money laundering or terrorism financing risk connected with the merchant’s business. If the merchant is an online merchant, e-money issuers are also required to understand what type of customer the merchant targets. Additionally, they need to determine the expected transaction volume in order to recognise suspicious or unusual transactions.
- Guideline 10.11 is also new. It clarifies to whom e-money issuers need to apply the customer-related due diligence obligations. The Guideline lists owners of e-money accounts or products as well as other potential additional cardholders. In respect to products connected to numerous cards, e-money issuers are required to check whether they have entered into one or more business relationships and whether there are further cardholders that could be beneficial owners.
- Guideline 10.14(e) is also new. This is a (further) example of a monitoring system that e-money issuers are required to set up. It is a system that connects e-money products with devices or IP addresses for web-based transactions.
- Guideline 10.15 is also new and reflects the rule contained in Article 18a of the 5th Anti-Money Laundering Directive (Directive (EU) 2018/843 – “AMLD5”) regarding high-risk third countries. Pursuant to the draft, e-money issuers are required to apply the enhanced customer due diligence obligations contained in Title I in Guidelines 4.53 to 4.57. For example, as part of their risk assessment, e-money issuers are now required to also consider those countries and geographical areas in which their business partner or the respective beneficial owner has a financial or legal interest.
- Guideline 10.18 deals with simplified customer due diligence obligations. The example contained in 10.18(a) regarding the possibility to apply simplified due diligence obligations was amended so that the wording matches that of Article 12 AMLD5: According to the current version of the Guidelines, the verification of the customer’s or beneficial owner’s identity can be postponed until a certain (low) monetary threshold is exceeded. The following monetary thresholds apply:
- 250 EUR if the product cannot be charged up again or if it can be used in other legal systems or for cross-border transactions,
- or 500 EUR if the national laws allow this (in this case, the product can only be used domestically).
In the draft, the first threshold was decreased to 150 EUR and the threshold of 500 EUR was entirely taken out.
What do e-money issuers have to do?
Due to the Corona crisis, the deadline for comments was extended until the beginning of July 2020. The EBA will now review all comments submitted and will then finalise and publish the Guidelines. The new Guidelines will then repeal the current Guidelines.
If the planned amendments to Guideline 10 are implemented, this will have consequences for e-money issuers. Risk analyses as well as existing technical and organisational measures to prevent money laundering and terrorism financing will have to be reviewed and potentially revised. E-money issuers are therefore advised to keep an eye on the consultation process.
Our series of posts continues: In our next post, we will be looking at Guideline 11, which is aimed at companies in the money remittance business, and take a closer look at the amendments proposed in this area.
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