EuReCA, the new database of the Banking Authority

On January 30, the European Banking Authority (EBA) launched its database for combating money laundering and terrorist financing, accompanied by a draft of regulatory technical standards submitted to the European Commission.

The European Banking Authority was established in 2010 through Regulation 1093/2010. Its main objective is “to protect the public interest by contributing to the stability and effectiveness of the financial system,” granting it specific powers related to the prevention of money laundering and terrorist financing.

This regulation not only grants the EBA powers but also assigns it specific functions related to prevention. Among these is the collection of information on deficiencies or weaknesses in preventive systems—Article 9bis 1.a). This task, mandated by European law, led to the expected creation of the EuReCA database.

It is named after its English designation: The European Reporting system for material CFT/AML weaknesses.

What information will it contain?

To answer this, we must first look at the Regulation establishing the European Banking Authority, Regulation 1093/2010. It defines a “deficiency or weakness” as:

• the failure of a financial sector operator to comply with anti-money laundering and counter-terrorist financing provisions,
• the potential non-compliance of a financial sector operator,
• or the inadequate or ineffective application of its policies and procedures designed to comply with prevention regulations.

This information will be provided by the competent authorities of the Member States, who would have gathered this data during supervisory and authorization procedures.

The draft Delegated Regulation proposed by the EBA defines when a weakness is considered to have materialized, stating that weaknesses arise when “significant failures are revealed or may result in the financial sector operator, or the group to which the financial sector operator belongs, failing to meet its anti-money laundering and counter-terrorist financing requirements.” It also establishes a list of criteria to apply this concept, such as repeated occurrences, persistence over significant periods, or serious and notable non-compliance.

The information provided by the competent authorities will be structured into three blocks: general information, details on the identified weakness, and measures taken to address the weakness. Each will have specific information to be submitted, and in the case of the last two blocks, a specific form must be completed, which is included in the draft technical regulatory standards presented by the Authority.

What will this information be used for?

The ultimate purpose of this database is to compile information gathered by the competent authorities on the vulnerabilities of the financial sector in one central location. The EBA will use this information to create its own risk map of the financial sector and share the data with other authorities.

Specifically, the document highlights that the EBA will use the database to:

• share information with competent authorities to support their supervisory activities;
• respond to “reasoned requests” for information from competent authorities about financial sector operators;
• analyze the data in the database to conduct risk assessments;
• support the EBA’s general work on combating money laundering and terrorist financing.