The European Banking Authority (EBA), the regulatory body responsible for tackling vulnerabilities in the banking industry, recently launched two sets of guidance, one of which is directed towards payment service providers (PSPs) and crypto-asset service providers (CASPs). These guidelines, launched on November 14, outline the obligations of PSPs and CASPs in relation to the European Union’s and national restrictive measures policies when transferring funds or cryptocurrencies.
The aim of these new guidelines is to diminish operational and legal risks for financial institutions by ensuring effective implementation of restrictive measures. Inadequacies in controls, internal policies, and procedures could potentially pose legal and reputation risks to such institutions, including PSPs and CASPs. Furthermore, these weaknesses could impact the effectiveness of the EU’s restrictive measures policies, creating potential loopholes that could destabilize the EU’s financial ecosystem.
The EBA’s guidelines will be enforced from December 30, 2025. The crypto and payment service providers that conduct money or crypto movement must adopt a reliable screening process to comply with the so-called “restrictive measures” obligations. The guidelines emphasize the need for PSPs and CASPs to screen information carefully to mitigate the risks of entities or individuals violating these measures.
In 2021, the European Commission launched legislation to reform the EU’s Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) framework. This included proposals for new rules governing the transfer of funds and crypto. These new regulations, adopted on June 9, 2023, are set to take effect on December 30, 2024. The EBA is also mandated to issue guidelines to assist financial institutions in complying with these upcoming rules.