Opinion of the European Central Bank of 11 November 2024 on the supervision of compliance with sanctions by credit and financial institutions (CON/2024/37)
OPINION OF THE EUROPEAN CENTRAL BANK of 11 November 2024 on the supervision of compliance with sanctions by credit and financial institutions (CON/2024/37) Introduction and legal basis
On 15 October 2024 the European Central Bank (ECB) received a request from the Austrian Ministry of Foreign Affairs for an opinion on a draft federal law adopting a Law on sanctions 2024 and amending the Law on sanctions 2024, the Law on banking, the Law on e-money 2010, the Law on the Financial Market Authority, the Law on consumer payment accounts, the Law on foreign exchange 2004, the Law on state protection and the intelligence service and the Law on the Austrian Accounts Register and accounts inspection (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union (TFEU) and Article 2(1), third indent, of Council Decision 98/415/EC , as the draft law relates to the Oesterreichische Nationalbank (OeNB) and the tasks conferred upon the ECB concerning the prudential supervision of credit institutions pursuant to Article 127(6) TFEU. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.
1. Purpose of the draft law
1.1 The draft law regulates the implementation of international sanctions by the United Nations (UN) and the Union in Austria as well as the imposition and implementation of national sanctions (hereinafter collectively referred to as ‘sanctions’). As noted in the explanatory memorandum accompanying the draft law , the draft law aims to implement the recommendations of the Financial Action Task Force (FATF) and rectify certain issues related to the practical application of the Law on sanctions 2010 . 1.2 In particular, the draft law revises the distribution of responsibilities among the Austrian authorities concerning sanctions. The Federal Minister for Finance and the Financial Market Authority (FMA) will assume the duties currently performed by the OeNB under the Law on sanctions 2010 . Under the draft law, the FMA will henceforth oversee compliance with sanctions by various financial market participants, including credit, financial, and payment institutions, which are presently supervised in
1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).
2 See Article 1 of the draft law, proposing Section 1 of the Law on sanctions 2024.
3 Page 1 of the explanatory memorandum accompanying the draft law.
4 Bundesgesetz vom 15.06.2010 über die Durchführung internationaler Sanktionsmaßnahmen (Sanktionengesetz 2010 – SanktG), BGBl. I Nr. 36/2010.
5 Section 8 of the Law on sanctions 2010. this respect by the OeNB in its capacity as the authority responsible for monitoring compliance with sanctions. 1.3 As outlined in the explanatory memorandum accompanying the draft law , the transfer of powers from the OeNB to the FMA is intended to enhance efficiency and capitalise on potential synergies stemming from the FMA’s existing role as the Austrian Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) supervisory authority.
2. Observations
2.1 Cooperation with the ECB in its prudential supervisory function 2.1.1 Article 127(6) of the Treaty and the provisions of Council Regulation (EU) No 1024/2013 (hereinafter the ‘SSM Regulation’) confer various specific tasks concerning the prudential supervision of credit institutions upon the ECB. For significant credit institutions directly supervised by the ECB, the ECB has the task, inter alia, of supervising compliance with relevant Union law imposing prudential requirements on credit institutions, including the requirement to have in place robust governance arrangements, such as sound risk management processes and internal control mechanisms . In this context, the ECB notes that on 21 December 2023 the European Banking Authority published a consultation paper on two sets of draft guidelines on internal policies, procedures and controls to ensure the implementation of Union and national restrictive measures which are addressed, inter alia, to prudential supervisors, including the ECB. These draft guidelines aim to 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 the effective implementation of restrictive measures. The draft guidelines may affect cooperation between prudential supervisors of credit institutions and the national authorities monitoring compliance of credit institutions with restrictive measures. 2.1.2 The ECB neither imposes sanctions within the meaning of the Law on sanctions 2024 nor has it received the task of monitoring compliance with them, even if significant institutions directly supervised by the ECB must comply with them. It is for those entities to implement and ensure compliance with the relevant sanctions regimes . Meanwhile, Member States are responsible for laying down the rules on penalties applicable to infringements of sanctions applicable within the Union, take all measures necessary to ensure that they are implemented, and provide for appropriate measures concerning confiscation of the proceeds of such infringements. The Commission assists them as necessary with the interpretation of the Union’s restrictive measures. 2.1.3 Consequently, the draft law does not concern the exercise of the ECB’s prudential supervisory tasks or underpin a prudential supervisory function under Union law . The competences and powers under
6 Page 1 of the explanatory memorandum accompanying the draft law.
7 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).
9 Available on the European Banking Authority’s website at www.eba.europa.eu. The consultation has now been closed.
10 See paragraph 2.1.2 of Opinion CON/2024/27. All ECB opinions are published on EUR-Lex.
11 See paragraphs 2.4 and 2.5 of Opinion CON/2022/13. the draft law are therefore distinct from, and without prejudice to, the ECB’s prudential supervisory tasks under the SSM Regulation. Although the subject matter of the draft law accordingly falls outside the ECB’s fields of competence, the exercise of competences by the FMA under the draft law could have prudential repercussions for credit institutions concerned, which would need to comply with the modalities of the application of sanctions envisaged by the FMA on the basis of the applicable Union legislation. Therefore, the ECB would welcome the introduction of a possibility to inform the ECB of measures taken under the draft law insofar as such measures could be relevant for the exercise of the ECB’s prudential supervisory tasks under the SSM Regulation; for example, if they have prudential repercussions for institutions that fall under the supervision of the ECB . Such information could be shared using the channels well established and in existence for the AML/CFT information flow. Also for this reason, the Austrian legislator may want to consider clarifying that the draft law is without prejudice to the tasks and powers conferred on the ECB for prudential supervisory purposes under the Treaty and the SSM Regulation . 2.1.4 The current national legal framework in Austria does not explicitly provide for cooperation and information exchange between the OeNB and the ECB in relation to sanctions . The ECB welcomes that the draft law will enable the FMA to share information acquired in the conduct of FMA’s supervisory role related to sanctions with the ECB in its prudential supervisory function in the future . In this respect, the ECB understands that the information exchange regime applicable to the AML/CFT supervision will also apply to information obtained in the field of monitoring compliance with sanctions. 2.1.5 First, the ECB understands that the FMA will have at its disposal the same supervisory powers and measures as set out in the relevant provisions of the Law on money laundering to monitor and enforce compliance with internal governance requirements on financial market participants , 19 20 relevant legal acts and directly applicable sanctions measures of the Union . The relevant provisions of the Law on money laundering contain, inter alia, provisions on cooperation and information exchange between the FMA and other authorities. In this respect, the ECB understands that the FMA may exchange information and engage in mutual cooperation with certain other authorities insofar as this is useful for the performance of tasks relating to the prevention of money laundering and terrorist financing or for other statutory tasks as part of the supervision of the financial market. This also explicitly includes exchanges and cooperation with the ECB when the ECB is acting in accordance with the SSM Regulation . Based on this, the ECB understands that the draft law will
12 For example, the imposition of fines under the third chapter of the Law on sanctions 2024, as proposed by Article 1 of the draft law, proposing Sections 16 to 18 of the Law on sanctions 2024.
13 See paragraphs 2.1.3 and 2.1.4 of Opinion CON/2024/27.
14 See Section 9 of the Law on sanctions 2010.
15 See paragraph 2.1.5 of Opinion CON/2024/27.
17 See Chapter 7 of the Bundesgesetz zur Verhinderung der Geldwäscherei und Terrorismusfinanzierung im Finanzmarkt (Finanzmarkt-Geldwäschegesetz – FM-GwG), BGBl. I Nr. 118/2016.
18 See Article 1 of the draft law, proposing Section 7 of the Law on sanctions 2024.
19 See Article 1 of the draft law, proposing Sections 2 and 4 of the Law on sanctions 2024. enable the FMA, once it assumes its function as competent authority for monitoring compliance with sanctions, to cooperate and exchange information in the field of sanctions with the ECB when the ECB is acting in accordance with the SSM Regulation. 2.1.6 Second, the ECB understands that the transmission to the ECB of information, documents and data which the FMA obtained in accordance with its tasks is permitted insofar as the requested information is necessary for the discharge of the ECB’s statutory tasks . By extending the FMA’s banking supervisory mandate to also cover the monitoring of compliance with sanctions, the FMA will be able to obtain information and data in that field . Therefore, the ECB understands that information gathered by the FMA in its function as the authority monitoring compliance with sanctions under its banking supervisory mandate would in principle, subject to an assessment in each individual case, not be excluded from the scope of information which may be transmitted to the ECB . 2.1.7 The draft law also introduces a new provision on cooperation and information exchange with the ‘European Union’ . This provision provides that enquiries under the Law on sanctions 2024 may also be carried out at the reasoned request of the Union and authorises the transmission of the information collected to the Union, unless such transmission is contrary to overriding public interests and, in the case of personal data, to the extent that the transmission is necessary for the purpose of performing the duties under the Law on sanctions 2024. This provision does not define the term ‘European Union’ for this purpose; it could therefore be interpreted to cover all Union institutions, including the ECB. The explanatory memorandum accompanying the draft law makes it apparent that the legislator at least intended to cover the Commission which, as the guardian of the Treaties, also monitors the implementation of Union restrictive measures. The ECB would welcome clarification of whether the legislator intends to create a separate legal basis in the Law on sanctions 2024 – in addition to those referred to in paragraphs 2.1.5 and 2.1.6 – enabling the ECB to request the information acquired by the FMA in connection with the FMA’s supervisory role related to sanction measures adopted by the UN or the Union. 2.2 Cooperation with ECB in its central banking function The ECB welcomes that the draft law will also enable the FMA to share information related to sanctions directly with the ECB in its central banking function in the future. In this respect, the ECB understands that the transmission of information, documents and data which the FMA obtains in accordance with its tasks is permitted in crisis situations to central banks of the European System of Central Banks and other bodies in the Member States with a similar function in their capacity as monetary authorities when this information is relevant for the exercise of their respective statutory tasks, including the conduct of monetary policy and related liquidity provision, oversight of payments,
22 See Section 77(5), point (1), of the Bundesgesetz über das Bankwesen (Bankwesengesetz – BWG), BGBl. Nr. 532/1993 (hereinafter the ‘Law on banking’).
23 See, in particular, Article 5 of the draft law, which amends the scope of banking supervision as outlined in Section 2(1) of the Law on the Financial Market Authority by including the official functions and powers of the FMA set out in the Law on sanctions 2024. The ECB therefore understands that the monitoring of compliance with international sanctions will be conducted by the FMA as part of its banking supervisory activities.
26 See page 14. clearing and securities settlement systems, and the safeguarding of stability of the financial system . As noted above, under the draft law the FMA’s banking supervisory mandate will also cover the monitoring of compliance with sanctions, and the FMA will be able to obtain information and data in this field. Therefore, the ECB understands that the draft law could enable disclosures to the ECB’s central banking arm in crisis situations of information that the FMA has obtained in its function as the authority monitoring compliance with sanctions. 2.3 The OeNB’s access to supervisory information in the field of sanctions Finally, the ECB welcomes that, following the transfer of powers from the OeNB to the FMA under the draft law, the OeNB will retain access to relevant information gathered by the FMA in the context of its banking supervisory activities in the field of sanctions via a joint database for the purpose of conducting supervisory analyses in line with the OeNB’s mandate . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 11 November 2024. [signed] The President of the ECB Christine LAGARDE
27 See Section 77(5), point (4), of the Law on banking, which transposes into Austrian law Article 114 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).
29 Section 79(4a) of the Law on banking as amended by Article 3 of the draft law.