The 4th EU AML Directive entered into national law yesterday, with clear guidelines on how banks should tackle crime, but huge obstacles remain, including cost, IT and personnel.

The 4th AMLD/Directive 2015/849 entered into force two years ago and entered into national law for EU member states yesterday. The directive incorporates new recommendations into the existing 3rd AMLD and places greater emphasis on risk analysis and adequate safeguards in financial institutions.

Strengthening fight against money laundering

And yesterday the three European financial authorities, (EBA, EIOPA and ESMA – jointly known as the ESAs), published guidelines for financial institutions on anti-money laundering and countering the financing of terrorism (AML/CFT). They say that the guidelines “are essential to the European Union's fight against ML/TF. They set clear, regulatory expectations of the way credit and financial institutions should discharge important AML/CFT obligations and pave the way for a more effective and proportionate European AML/CFT regime that is consistent with international best practice and guidance.”

The ESAs state that this will “promote a common understanding of the risk-based approach to AML/CFT and set out how it should be applied.” The European Banking Authority (EBA) stated: “The guidelines cover the factors credit and financial institutions should consider when assessing the ML/TF risk associated with a business relationship or occasional transaction. In addition, they set out how credit and financial institutions can adjust the extent of their customer due diligence measures to mitigate the ML/TF risk they have identified.”

Uphill struggle against financial crime

A recent survey by LexisNexis Risk Solutions found that almost three-quarters of financial AML/CFT professionals working in UK financial services think that the 4th AMLD will make it easier for companies to prevent money laundering. However, as CTMfile wrote in this article covering the LexisNexis Future of financial crime risks 2017 report, financial institutions are also facing huge challenges in the fight against money laundering, financial crime and terrorist financing. Not least of the challenges is overcoming legacy technology, which makes it hard to keep up with the evolving methods used by financial criminals. Other challenges include the fragmentation of IT systems across different jurisdictions, the cost of AML compliance and hiring the right financial risk professionals.