The European Banking Authority (EBA), the European regulator responsible for addressing weaknesses in Europe’s banking sector, has published two sets of guidelines, including specific guidance for payment service providers (PSPs) and crypto-asset service providers (CASPs).
On November 14, the EBA issued detailed guidance on what PSPs and CASPs must do to comply with EU and national restrictive regimes on money transfers or cryptocurrencies. According to the EBA, the guidance ensures the enforcement of EU and national sanctions. The EBA writes:
“These Guidelines clarify how restrictions, policies and procedures interact with financial institutions’ broader governance and risk management frameworks, to avoid operational and regulatory risks for financial institutions and ensure effective enforcement of restrictions.”
The EBA argues that weaknesses in controls, internal policies and procedures could pose legal and reputational risks to financial institutions, including PSPs and CASPs.
Furthermore, weaknesses in these areas of financial institutions could also “undermine the effectiveness” of the EU’s restrictive measures regime. This could lead to circumvention of the rules, the EBA stressed, affecting the stability of the EU’s financial ecosystem.
According to the ECA, the guidelines will be applicable from December 30, 2025.
Cryptocurrency providers must comply with EU restrictions
According to the EBA, PSPs and CASPs conducting money or electronic money transfers must choose a reliable screening system to meet their ‘restrictive measures’ obligations.
The guidelines also require PSPs and CASPs to conduct background checks to manage the risk of organisations or individuals breaching EU restrictions. In addition, PSPs and CASPs must also manage the risk that users may circumvent restrictions imposed by EU regulators.
Legal basis and context of the guidance
The EBA notes that in 2021, the European Commission introduced a legislative package to reform the EU’s Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) framework. This includes a proposal for new rules on information in money transfers and cryptocurrencies.
The regulations were adopted on June 9, 2023, and will come into force on December 30, 2024. The rules also require the EBA to issue guidelines to assist financial institutions in complying with the upcoming regulations.
Follow me @TinTucBitcoin #tintucbitcoin