EBA issues Guidelines to challenge unwarranted de-risking and safeguard access to financial services to vulnerable customers

The European Banking Authority (EBA) has published new guidelines aimed at ensuring customers have access to financial services necessary for their full participation in society.
The guidelines aim to prevent customers from being denied access to financial services without valid reasons, particularly in cases where access to these services is critical, such as for the most vulnerable, including refugees and homeless people. The guidelines will also help foster a common understanding between institutions and anti-money laundering and countering the financing of terrorism (AML/CFT) supervisors of effective money laundering and terrorist financing (ML/TF) risk management practices.
The guidelines were developed in response to an EBA Opinion, on de-risking published in January 2022. The Opinion assessed the impact of institutions‘ decisions to de-risk and found that not-for-profit organisations were particularly vulnerable (eventid=14313). The European Commission welcomed the EBA’s Opinion and asked for guidelines on how institutions can facilitate access to financial services for these customers.
The EBA’s assessment of the impact of de-risking, which refers to decisions made by credit and financial institutions to refuse to enter into or terminate business relationships with individual customers or categories of customers associated with higher ML/TF risk, highlighted the need to clarify regulatory expectations to prevent unwarranted de-risking. Two sets of guidelines to address these issues were published:
The first set of guidelines (EBA/GL/2023/03) is an Annex to the EBA ML/TF risk factors Guidelines, which provides financial institutions with guidance on identifying and assessing ML/TF risk associated with customers who are not-for-profit organizations. The annex clarifies the steps that institutions should take to carry out customer due diligence (CDD) and assess the ML/TF risks associated with NPOs. It highlights that institutions should consider the specific characteristics of NPOs, including their legal form and governance structure, and that institutions should adopt a risk-based approach that takes into account the nature and purpose of the business relationship.
The second set of guidelines (EBA/GL/2023/04) provides guidance on effective management of ML/TF risks by financial institutions when providing access to financial services. These guidelines clarify the interaction between access to financial services and institutions’ AML/CFT obligations, including in situations where customers have legitimate reasons to be unable to satisfy Customer Due Diligence__ (CDD) requirements. The guidelines also set out the steps institutions should take when considering whether to refuse or terminate a business relationship with a customer based on ML/TF risk or AML/CFT compliance grounds.