On July 13th, 2023, the European Banking Authority (EBA) released its fourth biennial opinion concerning the risks associated with money laundering and terrorist financing (ML/TF) that impact the European Union’s financial sector. The opinion presents measures that competent authorities and EU co-legislators can implement to mitigate these risks.

The opinion highlights several key issues, including:

• There are significant challenges in effectively monitoring and reporting suspicious transactions.
• Efforts to address human trafficking through financial inclusion are disjointed and often inadequate.
• There are deficiencies in the process of identifying Ultimate Beneficial Owners (UBOs).
• Collaboration between competent authorities, ESG supervisors, and environmental agencies is necessary to combat money laundering from environmental crime proceeds.
• The identification of Politically Exposed Persons (PEPs) remains crucial in the fight against corruption.
• Non-compliance with regulations exposes financial institutions to operational and legal risks, potentially leading to unwarranted de-risking.
• The lack of internal skills and experience in financial institutions to develop or adopt RegTech solutions poses a moderately significant risk.
• While BigTech firms can offer financial services, they may not always be subject to Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) rules and supervision.
• Virtual IBANs can be exploited for ML/FT purposes.
• Large cross-border cash transactions present substantial ML/FT risks.