EBA ¦ Report on the functioning of AML/CFT colleges in 2023

European Banking Authority Highlights Progress and Challenges in AML/CFT Colleges in 2023

Ongoing Improvements Amid Key Challenges

The European Banking Authority (EBA) has published its latest report on the functioning of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) colleges, showing that while competent authorities continue to improve cooperation and effectiveness in 2023, significant challenges remain. AML/CFT colleges, permanent structures designed to facilitate cooperation among supervisors of cross-border financial institutions, are critical tools in fighting financial crime within the EU. The report acknowledges important strides in organizing AML/CFT colleges, increasing participation from financial intelligence units (FIUs) and prudential supervisors, and exchanging relevant information to enhance supervision. However, two key areas require urgent attention: implementing a risk-based approach to the organization of colleges and fostering meaningful, systematic discussions on the need for common approaches or joint actions.

Risk-Based Organization of AML/CFT Colleges Needs Strengthening

A primary concern identified by the EBA is that many AML/CFT colleges have not sufficiently adapted their meeting frequency or information exchange formats to the specific money laundering and terrorist financing (ML/TF) risks faced by the institutions they supervise. This lack of tailored organization hampers strategic resource allocation, leading to some colleges over-consuming supervisory resources despite overseeing lower-risk firms, while others related to higher-risk institutions may not receive adequate attention.

The report recommends lead supervisors consider a broader set of criteria when setting meeting frequencies and formats. These include the firm’s risk ratings by multiple members, the scale of cross-border activities, the centralization of AML/CFT controls, recent supervisory actions, and any significant developments affecting the group. In some cases, periodic written exchanges supplemented by ad hoc meetings may be more appropriate, especially for firms with limited cross-border operations and centralized controls.

Need for More Meaningful Discussions on Common Risks and Joint Action

One of the central purposes of AML/CFT colleges is to identify common ML/TF risks and coordinate supervisory actions. Yet, the report finds that few colleges hold substantive discussions focused on common concerns or coordinated responses.

To address this gap, the EBA urges lead supervisors to proactively guide discussions by summarizing shared concerns, proposing possible coordinated approaches — whether investigative (e.g., joint inspections) or corrective (e.g., aligned enforcement measures) — and following up on agreed actions. Members are encouraged to attend well-prepared and with sufficient authority to commit to decisions on common approaches.

Bastian Schwind-Wagner_Follow "The 2023 EBA report shows continued progress in AML/CFT colleges but highlights critical gaps in risk-based organization and coordinated supervisory action. Addressing these will be essential for more effective cross-border cooperation against money laundering and terrorist financing."

Insights from Thematic Monitoring of FinTech-Oriented Firms

The EBA’s thematic review focused on AML/CFT colleges related to banking, payment, and e-money firms with FinTech-oriented business models.

Key findings include:

• Innovative RegTech tools are rarely used effectively; one case showed poor calibration leading to excessive irrelevant alerts, limiting effective transaction monitoring.
• Outsourcing to RegTech providers is widespread but often lacks adequate supervisory assessment of associated risks and safeguards.
• Many firms have insufficiently staffed and trained AML/CFT compliance teams, struggling to manage alerts and risks effectively.
• Several neobanks have integrated anti-fraud and AML/CFT frameworks, which can improve effectiveness if balanced correctly without overemphasizing fraud at the expense of AML/CFT compliance.

These findings highlight emerging vulnerabilities in technology-driven financial firms that supervisors need to consider closely.

The Path Forward: Recommendations for Competent Authorities

To unlock the full potential of AML/CFT colleges under the upcoming AMLD6 framework (effective July 2027), the EBA recommends:

• Lead supervisors broaden risk criteria when organizing colleges and adjust meeting formats accordingly.
• Scheduling focused agenda items for identifying common issues, discussing possible joint actions, and ensuring follow-up.
• Encouraging members to send comprehensive information ahead of meetings and actively participate with well-prepared representatives.
• Considering various types of common approaches — from joint investigations to coordinated enforcement — to ensure consistent risk mitigation across borders.

The EBA will continue supporting competent authorities through monitoring, technical assistance, and updating guidance on cooperation within AML/CFT colleges.

Dive deeper

• EBA ¦ Colleges on AML and CFT have become more effective but further progress is needed, the EBA finds ¦ Link