From the Regulators

The draft technical standards aim to help financial services firms manage money laundering and terrorist financing risks in situations in which they have subsidiaries in certain countries

By James Langton |

The Joint Committee of European Supervisory Authorities, a collection of banking, securities and pension regulators, has issued a set of draft technical standards designed to provide guidance on how financial services institutions should manage money laundering and terrorist financing risks where they have subsidiaries in countries that don't allow firms to adopt certain group-wide policies.

The regulators indicate that addressing these added risks may require firms to take measures such as obtaining client consent to overcome restrictions on the ability to share and process customer data; carrying out enhanced branch reviews; restricting the products and services offered; requiring senior management approval for higher-risk business relationships; and limiting their reliance on due diligence measures carried out in these jurisdictions.

The proposals also specify that in cases in which these risks cannot be addressed adequately, firms must take more extreme steps, such as terminating certain business relationships, declining transactions, or even shutting down their operations in countries that may be preventing firms from guarding against these risks properly.

The Joint Committee includes the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA).