The European Banking Authority (EBA) has released new guidelines that will affect both payment service providers (PSPs) and crypto-asset service providers (CASPs).
According to the 14 November 2024 EBA release, the guidelines “contain provisions that are necessary to ensure that financial institutions’ governance and risk management systems are sound and sufficient to address the risk that they might breach or evade restrictive measures.”
Importantly, it will ensure that financial institutions comply with the European Union’s (EU) restrictive measures regimes when transferring funds or crypto-assets.
The new rules will come into effect on 30 December 2025.
Guidelines Will Ensure Compliance With Restrictive Measures Imposed EU, Individual Member States
EU has been looking to strengthen its regulatory framework around anti-money laundering (AML) and countering the financing of terrorism (CFT).
The new guidelines will particularly focus on ensuring that PSPs and CASPs have robust internal policies and procedures. Furthermore, it requires controls in place to comply with restrictive measures imposed by both the EU and individual member states.
Notably, the guidelines aim to harmonize practices across the EU. Will this ensure that financial institutions operate within its jurisdiction and follow a common set of rules? We’ll have to wait and watch.
According to the EBA, weaknesses in internal governance and risk management frameworks could expose financial institutions to legal and reputational risks. Going ahead, it could potentially undermine the effectiveness of the EU’s restrictive measures regimes.
Related: Non-EU Crypto Firms Under Scrutiny For MiCA Compliance, ESMA Warns
What Are New Requirements For PSPs, CASPs?
Under these new guidelines, PSPs and CASPs that carry out transfers of funds or crypto-assets must adopt reliable screening systems. This will ensure compliance with EU-imposed sanctions.
Furthermore, the systems must be able to screen datasets against restrictive measures adopted by the EU under Article 29 of the Treaty on European Union (TEU) or Article 215 of the Treaty on the Functioning of the European Union (TFEU).
Importantly, financial institutions will have to manage risks associated with potential violations or circumventions of restrictive measures. This includes developing procedures for handling alerts generated by their screening systems.
Finally, the guidelines insists on the need for a sound governance structure where responsibility for compliance with restrictive measures is clearly allocated within an organization.
Related: EU Watchdog Warns Crypto Firms of Offshore Risks Under MiCA
The Markets in Crypto-Assets Regulation (MiCA), which will fully apply from December 2024, provides a comprehensive framework for regulating crypto-assets across the EU. And, EBA’s new guidelines complement MiCA by specifying what CASPs must do to comply with restrictive measures when performing transfers of crypto-assets.
MiCA Regulation: France Adapts to a Unified EU Framework for Crypto
1/ The EU’s MiCA regulation takes effect in Dec 2024, transforming France's existing crypto-asset rules!
2/
AMF has already begun accepting preliminary CASP applications to ensure a smooth transition.… pic.twitter.com/pRiyaMhNAz
— Wyden (@wyden_io) November 14, 2024
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