EU AML Infrastructure to fight and prevent ML/TF

In the diagram below we can see the EU AML infrastructure. Although the European Banking Authority is responsible to set guidelines, the European Commission is the one setting the policies. A recent example is the new European Commission Action Plan published on the 24th of July 2019 and which can be found on this link. If you would like to learn more how, in my opinion, the new EC action plan will affect Cyprus please visit my publication.

https://ec.europa.eu/info/sites/info/files/diagram_aml_2018.07_ok.pdf

So who is responsible for the EU AML Infrastructure?

At the very top of the diagram is the European Banking Authority (“EBA”), as per the diagram, the EBA sets guidelines on supervision of financial instruments and identifies breaches of EU Law. In September 2018 the European Council proposed the expanding of EBA’s mandate and entrusting it with financial sector antimoney-laundering responsibilities.

National Supervision

Further down the line is the national supervisory authority. The role of the national supervisory authority is to centralize supervision all obliged entities, to effectively manage such supervision and more importantly to ensure consistency throughout the member state.

Obliged Entities

Obliged Entities is any type of business designated as being a risk to allowing money laundering and terrorist financing. At the moment in Cyprus, such business includes:

  • Banking Institutions
  • E-money Business
  • Payment Business
  • Investment Firms
  • Undertakings for Collective Investments
  • UCITS Management Companies
  • Alternative Investment Fund
  • Managers of Alternative Investment Funds
  • Insurance Companies
  • Accountants and Auditors
  • Lawyers
  • Real Estate Agents
  • Casinos
  • Others

Obliged entities play an important role within the fight against money laundering and terrorist financing across the EU since they are the first line of defence. Furthermore, they are the once to be approached by criminals for placement, layering or/and integration of illicit proceeds.

Furthermore, the obliged entities are required to apply customer due diligence, ensuring that they know who their customers are. The European Commission will determine the list of high-risk third countries presenting a money laundering risk for the Union however the obliged entities are allowed to adopt a model suitable for their risk appetite. Another fundamental obligation of the obliged entity is to identify and report suspicious transaction reporting. If such suspicion is identified then a report is to be sent to the Financial Intelligence Unit in the member state.

Financial Intelligence Unit

In Cyprus the Financial Intelligence Unit is MOKAS. Its role is to analyse the suspicious reports received and share this information with the FIUs of other Member states. Furthermore, if a credible suspicion is identified then the Financial Intelligence Unit will report this to the law enforcement agency (Police) which is obliged to carry on further investigations.

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