Give Ukrainians Payment Accounts, EBA Says (Again)

April 28, 2022
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The European Banking Authority (EBA) has published a diktat to supervisors and financial institutions, stressing the need to ensure they use “every best effort” to offer Ukrainian refugees financial access.

The European Banking Authority (EBA) has published a diktat to supervisors and financial institutions, stressing the need to ensure they use “every best effort” to offer Ukrainian refugees financial access.

Since the Russian invasion of Ukraine in March, almost 5.3m citizens are believed to have left the country, with many crossing into EU countries with which it shares borders, such as Poland and Romania.

Within the new statement, the EBA has said that the financial industry needs to provide at least basic access to financial services and products.

Data from EU member states regarding how many accounts have been opened so far is limited.

However, last week, the Dutch Payments Association said that 12,000 Ukrainian refugees have been able to open a current account in the country, which is almost one third of the 39,000 who have arrived in the Netherlands.

Although the latest announcement from the EBA is only words, rather than something more actionable, the EU had on March 4 this year enacted the Temporary Protection Directive (2001/55/EC).

This directive gives refugees from Ukraine temporary EU residency and an associated right to access and use a payment account with basic features in line with Article 16 of the 2014 Payment Accounts Directive.

In its statement, the EBA welcomes efforts from competent authorities to clarify how financial institutions can provide refugees from Ukraine with access to financial products and services under their national legal framework and calls on other competent authorities to take similar steps.

“The EBA considers that compliance with AML/CFT [anti-money laundering/counter-terror financing] obligations should not lead to the financial exclusion of legitimate customers,” said the EBA.

This is because, the EBA says, the trading bloc’s anti-money laundering/counter-terrorism financing (AML/CTF) framework is sufficiently flexible to allow financial institutions to comply with their AML/CTF obligations effectively in different ways.

Under EU law, one rule that may aid financial institutions in dealing with Ukrainian refugees is the simplified customer due diligence measures that can be used when taking on new customers or before carrying out an occasional transaction in situations where the money laundering and terrorist financing (ML/TF) risk is reduced.

This could, for example, be the case where a financial product’s functionalities are very limited or available to customers meeting a set of narrowly defined criteria only.

Promoting financial inclusion can also help protect refugees from the impact of bad actors, such as traffickers, the EBA has said.

The EBA further called for close cooperation among competent authorities in managing this issue.

“The EBA encourages competent authorities to cooperate closely with financial institutions, Financial Intelligence Units and law enforcement agencies in this regard and to raise awareness of the ML/TF risks associated with human trafficking and exploitation, and the steps financial institutions can take to detect and report it,” the statement says.

Sanctions no excuse for financial exclusion

The EBA has also touched upon the sanctions regime that has been gradually evolving since the conflict began.

“As the sanctions regime expands, the EBA considers that financial institutions should pay particular attention to apparent attempts by customers to obfuscate relationships with sanctioned persons and those who are at risk of being sanctioned or to conceal the ultimate beneficial owner, through, for example, sudden changes in the customer’s ownership or control structure,” the Paris-based watchdog advises.

However, the EBA emphasised that achieving compliance with the EU’s financial sanctions regime should not lead to the financial exclusion of legitimate and potentially vulnerable customers, including customers with links to Russia or Belarus that are legally resident in the EU.

“It should also not hamper efforts by EU organisations, including non-governmental organisations, to provide humanitarian relief in those areas,” the statement warns.

The influx of refugees is a likely headache for regulators and private sector actors that have struggled to find the right approach to de-risking in recent years, prompting consultative work by both the EBA and national regulators, such as the Bank of Lithuania.

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