The European Banking Authority (EBA), Europe’s regulatory agency in charge of addressing weaknesses in the banking sector, published two sets of guidelines, including a specific guide for payment service providers (PSPs) and crypto-asset service providers (CASPs).
On Nov. 14, the EBA released guidelines that specify what PSPs and CASPs must do to comply with the European Union’s and national restrictive measures regimes when transferring funds or crypto. According to the EBA, the guidelines ensure the implementation of EU and national sanctions. The EBA wrote:
“These Guidelines clarify how restrictive measures policies and procedures interact with financial institutions’ wider governance and risk management frameworks, to avoid operational and legal risks for financial institutions and ensure an effective implementation of restrictive measures.”
The EBA said that weaknesses in controls, internal policies and procedures can pose legal and reputation risks to financial institutions, including PSPs and CASPs.
In addition, the weaknesses in these areas within financial organizations could also “undermine the effectiveness” of the EU's restrictive measures regimes. The EBA highlighted that this could lead to circumvention of the rules, affecting the stability of the EU's financial ecosystem.
According to the ECA, the guidelines will apply from Dec. 30, 2025.
Crypto providers must comply with the EU’s restrictive measures
According to the EBA, PSPs and CASPs that carry out fund or crypto transfers must choose a reliable screening system that will allow them to comply with their “restrictive measures” obligations.
The guidelines also compel PSPs and CASPs to screen information to manage the risks of entities or individuals violating the EU’s restrictive measures. In addition, PSPs and CASPs must also manage the risks of users potentially circumventing the restrictive measures set by the EU regulators.
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Legal basis and background of the guidelines
The EBA noted that in 2021, the European Commission issued a legislative package to reform the EU's Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) framework. This includes a proposal for new rules on information in transfers of funds and crypto.
The regulations were adopted on June 9, 2023 and will apply on Dec. 30, 2024. The rules also mandate that the EBA issue guidelines to help financial institutions comply with forthcoming regulations.
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