Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
European Banking Authority Adressing Crowdfunding and Money Laundering, Terrorist Financing Risk
The European Banking Authority has published a document that addresses anti-money laundering (AML) and counter-terrorist financing (CFT) when it comes to crowdfunding. The guidelines for crowdfunding platforms are incorporated into the Final Report “on customer due diligence and the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions.” The report was part of a consultation regarding KYC requirements.
The first section of the report is described as generic and applying to all firms. The second section, Title II, is sector-specific and designed to “complement” the first section. Specifically:
“[Title II] sets out risk factors that are of particular importance in certain of those sectors and provides guidance on the risk-sensitive application of Customer Due Diligence measures by firms in those sectors. So as to foster greater convergence of supervisory expectations of the measures firms should take to tackle emerging risks, additional sectoral guidelines have been added to the original Risk Factors Guidelines on crowdfunding platforms, providers of currency exchange services, corporate finance, and payment initiation services providers (PISPs) and account information service providers (AISPs). Therefore, in total Title II now contains thirteen sectoral guidelines about very different key financial sectors such as for instance correspondents banking, retail banking, electronic money, money remittance, life insurance and investments firms.” [emphasis added]
The EBA posits that crowdfunding service providers (CSPs) should recognize the risk of the borderless nature of their transactions as customers may be located anywhere in the world, including high-risk locations. The EBA states that CSPs should know their customers as to not be utilized for illicit activities as funds could be used to finance a terrorist attack.
See: European Union Approves New Crowdfunding Rules that Apply to Member States, Funding Cap Set at €5 Million
The advent of pan-European crowdfunding rules, where an issuer may raise up to €5 million across all EU member states, may have compelled the EBA to address online capital formation in regards to securities crowdfunding.
Continue to the full article --> here
Download the 225 page PDF report --> here
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