Developing a risk-based methodology for an automatic anti-money laundering/counter terrorist financing (AML/CTF) risk categorization for supervised entities in Portugal

The Commission supported Banco de Portugal in enhancing its anti-money laundering/counter terrorist financing (AML/CTF) risk-based supervision of credit and financial institutions.

Due to the growing complexity of the financial ecosystem and the fast pace of innovations in the field, supervisory blind spots are more likely to happen. Proactive engagement is needed for the AML/CFT authorities to quickly adapt the supervisory practices and approaches and tackle the emerging areas of risk (FinTech, virtual assets, etc.).

Context

The current models for AML/CFT risk-based supervision in Banco de Portugal needed to be updated and better aligned with the multiple ML/FT threats and systemic vulnerabilities, as well as with the rapid changes in the AML/CFT framework stemming from the EBA guidelines and the EU AML/CFT legal framework on risk-based supervision.

Support delivered

The project was carried out with the support of the Economic Crime and Cooperation Division in the Council of Europe, which has substantial experience in AML-CFT supervision.

The project provided the Portuguese authorities with new methodologies to enhance the effectiveness of risk-based supervision through, namely, a proposed set of new requirements for data collection and risk-assessment processes.

Experts from the Council of Europe assisted Banco de Portugal in developing a better understanding of how to measure AML/CFT risks affecting the targeted sectors, elaborating and integrating relevant AML/CFT risk factors in Banco de Portugal’s supervision methodology.

Results achieved

The project contributed to a better understanding of AML/CFT risk-assessment processes and of the tools needed to better identify and mitigate the major new and emerging risks affecting the entities supervised by Banco de Portugal. The outcomes of this project will allow Banco de Portugal to work on the improvement of the existing supervision model and, consequently, contribute to a greater effectiveness of the application of the EU AML/CTF legal framework and the EBA guidelines on risk-based supervision.