DOC 0998/05 Brussels, 24 October European Savings Banks Group (ESBG)

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1 EUROPEAN SAVINGS BANKS GROUP GROUPEMENT EUROPEEN DES CAISSES D EPARGNE EUROPÄISCHE SPARKASSENVEREINIGUNG DOC 0998/05 Brussels, 24 October 2005 V 1.1 CAL European Savings Banks Group (ESBG) Comments on the European Commission s informal consultation on the Working document in relation to the Directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing Rue Marie-Thérèse, 11 B-1000 Bruxelles Tél: ( ) Fax: ( ) first name.surname@savings-banks.com Website :

2 Profile European Savings Banks Group ESBG (European Savings Banks Group) is an international banking association that represents one of the largest European retail banking networks, comprising about one third of the retail banking market in Europe, with total assets of 4,345 billion (1 January 2004). It represents the interests of its members vis-à-vis the EU Institutions and generates, facilitates and manages high quality cross-border banking projects. ESBG members are typically savings and retail banks or associations thereof. They are often organised in decentralised networks and offer their services throughout their region. For decades ESBG members reinvest responsibly in their region and are one distinct benchmark for corporate social responsibility activities throughout Europe and the world. 2

3 1. GENERAL ASSESSMENT The European Savings Banks Group (ESBG) welcomes the Commission s initiative to consult with market participants on the proposed implementing measurers for the Third EU AML Directive. On the basis of the expertise of savings and retail banks and their longstanding commitment to the fight against money laundering and the financing of terrorism, we would like to draw the Commission s attention to the comments below, which we believe would contribute to a better implementation of the Third EU AML Directive. As a general remark we would like to underline the fact that credit and financial institutions should not be faced with overly detailed measures which are in the end difficult to implement. Any implementation measures should be thoroughly considered in order to respect the risk based approach, which lies at the core of the Third EU AML Directive. 2. QUESTIONS 2.1. SIMPLIFIED CUSTOMER DUE DILIGENCE (CDD) The ESBG believes that the risk based approach in connection with normal CDD procedures should be enough for institutions and persons covered by the directive to deal normally with the low risk situations. Nevertheless, the establishment of additional technical criteria could be useful as a complementary approach. Without prejudice to our remark to question 1, we deem that technical criteria identified by the document would only cover entities already subject to the directive. Therefore, broader non cumulative technical criteria would be preferable. 3

4 We agree with such approach. Regarding public authorities however, we believe that they should be considered low risk customers at both domestic and EU level, since their supervisory requirements across the EU should be regarded as sufficient. The ESBG generally agrees with the set of technical criteria proposed in the document. Some aspects of the criteria however, may be regarded as excessive. In particular, when the beneficiary is a public authority, as provided in the second bullet point of the first set of criteria, any additional cumulative criteria does not seem necessary. On the other hand, the criteria should make a reference to the fact that the payee's account needs to be an ordinary account normally used for these types of payments (to avoid that illegitimate funds are used for paying taxes etc). We agree with the suggested approach. However, inserting a reference to the need to avoid CDD duplication in special situations may be considered FINANCIAL ACTIVITY ON AN OCCASIONAL OR LIMITED BASIS We agree that the criteria for exempting certain legal and natural persons from the scope of the Directive ought to be rather strict, and consider that the proposed criteria are reasonable and precise. We would like to point out however, that such a provision may not be de facto applicable in a number of countries (e.g. Spain). 4

5 Mindful of our comment to question 6, we agree with DG Internal Market that certain financial activities which may be more likely used for the purpose of money laundering or terrorist financing should not be exempted from the scope of the Directive (for instance, money transmission and remittance services) POLITICALLY EXPOSED PERSONS (PEPS) We consider that a list of individual persons would be the best option. As a second best, we would suggest a close list of categories of persons, to be established by the Commission. Although it is true that the drawing up of such a list could be a very rigid approach, it would provide the necessary level of legal certainty. In general terms, we agree with the definition. We would however like to reiterate the need for the concept of prominent public functions to focus on individuals with functions at State administration level. Furthermore, we estimate that 4 years could be a reasonable threshold for persons having held public functions to no longer be included in the PEP category. 5

6 We consider that the definition of immediate family member should be restricted to the spouse (or legal equivalent), children and parents. Therefore, legal entities and legal arrangements should not be included in this category. We agree with the proposed definition. Yes, we consider them useful. We would welcome moreover any explanation as regards how the Commission weighs the different indicators to evaluate the risk of corruption. Yes, we can agree with the approach INFORMATION ON CONDITIONS IN THIRD COUNTRIES While we do not have comments at present regarding this issue, we would encourage the Commission to set up a list of countries which do not meet the AML standards ANY OTHER POSSIBLE IMPLEMENTATION MEASURES The ESBG believes that it should be left to the credit and financial institutions to assess the risks involved in the context of these relationships. 6

7 We agree with Commission s proposal to prioritise the subjects on those measures that are essential for the effective entry into force of the Directive. So, we do not consider it necessary to address, at this stage, further implementing measures presented in Article 40. 7