Anti-money laundering and counter-terrorist financing policies and procedures

From Open Risk Manual

Anti-money laundering and counter-terrorist financing policies and procedures

Institutions should[1] also specify in their policies how they identify, assess and manage the money laundering and terrorist financing (ML/TF) risks to which they are exposed as a result of their credit-granting activities.

In particular, institutions should:

  • at the level of their business, identify, assess and manage the ML/TF risk associated with the type of customers they serve, the lending products they provide, the geographies to which they are exposed and the distribution channels they use;
  • at the level of the individual relationship, identify, assess and manage the ML/TF risk associated with this relationship — as part of this, institutions should:
    • consider the purpose of the credit;
    • consider the extent to which the association of a natural person or legal person that is neither the borrower nor the institution with the credit facility gives rise to ML/TF risk;
    • in particular, in situations in which the ML/TF risk associated with the individual relationship is established, institutions should take risk-sensitive measures to understand if the funds used to repay the credit, including cash or equivalents provided as collateral, are from legitimate sources. When considering the legitimacy of the source of funds, institutions should have regard to the activity that generated the funds and whether this information is credible and consistent with the institution’s knowledge of the customer and the customer’s professional activity.


Institutions should have internal processes to ensure that the information obtained for the purposes of creditworthiness assessment, such as the information specified in Section 5.1 and Annex 2 of these guidelines, also informs their anti-money laundering and countering financing of terrorism (AML/CFT) processes.

Institutions should have policies and procedures in place to ensure that the disbursement of loans is made in line with the credit decision and the loan agreement. They should also ensure that there are appropriate checks in place to identify, assess and manage ML/TF risks, and that relevant records are kept, in line with institutions’ wider AML/CFT obligations under Directive (EU) 2015/849.

See Also

References

  1. EBA, Guidelines on loan origination and monitoring EBA/GL/2020/06

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