The ABBL pushes for more proportionality in AML rules in EU consultation process

Supporting effective and proportionate AML supervision

The EBA’s consultation covers a wide range of technical rules related to the direct supervision of selected entities by AMLA, as well as customer due diligence requirements, screening obligations, and the criteria for sanctions and penalties. These rules are essential to ensure clarity, harmonisation, and effectiveness in AML/CFT supervision across Member States.

The ABBL welcomed the opportunity to engage with the EBA and provide feedback informed by Luxembourg’s diverse banking sector. The response reflects a shared concern for ensuring proportionality, clarity, and operational feasibility in the future regulatory environment.

Key messages in ABBL’s response

Some of the key points raised in ABBL’s submission include:

• Materiality thresholds for direct supervision: ABBL recommended adjusting thresholds to avoid disproportionate inclusion of wholesale and private banking institutions and suggested using cumulative criteria for assessing materiality. It also proposed clarifying the applicable reference periods for assessment.
• Customer due diligence requirements: The Association stressed the importance of a genuine risk-based approach, criticising overly rigid documentation requirements and the lack of flexibility in low-risk scenarios. ABBL urged regulators to consider the cost-benefit ratio of proposed obligations, warning of negative impacts on customer experience and financial inclusion.
• Complex structures and senior managing officials: ABBL called for more nuanced treatment of complex ownership structures, especially when involving regulated intermediaries or listed entities, and advocated for a distinction between beneficial owners and senior managing officials in terms of data collection.
• Clarification on group supervision scope: ABBL highlighted the operational challenges posed by the unclear definition of the group-wide perimeter and stressed the need for clear rules on data consolidation, treatment of non-EU entities, and standardisation of reporting.
• Sanctions and penalties: The ABBL pointed out that some proposed indicators for assessing the severity of breaches lack discriminatory value and called for more refined criteria that distinguish between actual and potential breaches.

A collaborative effort

The ABBL would like to extend its sincere thanks to all members who contributed to this important consultation. The collective input of the compliance community was vital in ensuring a response that is both robust and representative of the Luxembourg financial industry’s operational realities.