The European Banking Authority (EBA) said European Union banks are blocking asylum seekers and other customers in misguided attempts to adhere to anti-money laundering (AML) regulations.
As Reuters reported on Wednesday, January 5, banks have become much more cautious as regulators around the world tackle ineffective know-your-customer (KYC) systems, leading some clients to say they have been unfairly excluded. of the market. system.
In one declaration Released on Wednesday, the EBA said its research shows this ‘risk reduction’ by banks and payment companies is taking place across the EU and appears to have a particular impact on nonprofits and applicants asylum.
Banks engaged in risk reduction are banning certain clients because their profile indicates that they may have links to money laundering or terrorist financing.
See also: EU aims to create anti-money laundering authority
The EBA also said that its findings show that “risk reduction has a negative impact on the achievement of the EU’s objectives, in particular as regards the effective fight against financial crime and the promotion of inclusion financial, competition and stability in the single market “.
The authority has issued instructions to national regulators and banks on how to properly monitor money laundering risks, and said it would check with those regulators on the steps they are taking to do so. deal with unnecessary risk reduction before reporting next year.
The European Commission put forward proposals last year to create an organization called the Anti-Money Laundering Authority (AMLA), along with other measures to help end unwarranted risk reduction.
If approved, AMLA would begin operations in 2024 and have the capacity to supervise certain cross-border financial companies and impose taxes on companies that violate money laundering rules by 2026.
However, the EBA says the Commission can go further in the fight against unnecessary risk reduction by clarifying the situations in which a bank account with basic functionality should be closed or rejected.
Read more: Danske Bank reprimanded for lack of money laundering controls
The Commission’s increased anti-money laundering efforts came in the wake of the money laundering scandal at Danske Bank of Denmark.
The scandal involved the apparent payment of 235 billion dollars in transactions deemed suspicious at a small branch in Estonia between 2007 and 2015. The fallout from the investigation led the bank to cut hundreds of jobs.