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FMA Director Ettl highlights the importance of conduct supervision for limiting operational risk. WKO’s Rudorfer welcomes possibility of video-based identification from 2017

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“Functioning Compliance and Anti-Money Laundering divisions are able to make a significant contribution towards strengthening confidence in market participants in the Austrian financial market” highlighted FMA Executive Director Helmut Ettl in his address to the “2nd FMA Workshop on Compliance & the Prevention of Money Laundering: learning from one another through dialogue”, at which more than 450 experts were participating. Franz Rudorfer, Head of the Division for Banking and Insurance at the Austrian Economic Chambers (WKO), also emphasised the importance of conduct supervision: “Compliance and the prevention of money laundering are the hallmarks of a bank, and therefore enjoy a correspondingly high profile. In light of ever more complicated requirements, both with regard to compliance in relation to securities as well as the prevention of money laundering, the challenges they present can only be tackled together and by means of dialogue – also bringing the challenges faced ‘to life’.”


EUR 71 billion of costs arising from operational risk are caused by misconduct

Highlighting the significance of conduct supervision within financial markets, Ettl quoted some figures from the European Central Bank’s (ECB’s) latest Financial Stability Review: “In relation to operational risk, the losses arising from legal disputes and misconduct, collectively known as ‘conduct risk’, amount to EUR 71 billion out of a total of EUR 105 billion. In other words, two thirds of operational risk can be assigned to risks arising from misconduct.” Subsequently the supervisor places particular significance of compliance with rules of conduct, the principles of good governance and well as prevention of legal breaches, in particular in relation to money laundering. This area in particular shows that all financial market participants are subject to the same requirements – regardless of whether they are banks, insurance undertakings or investment services: “there is a need for a ‘level playing field’, with identical and fair conditions for competition for all market participants, otherwise the threat exists of a flight from regulation and supervisory arbitrage,” Ettl commented.


The FMA, as an integrated supervisory authority, always keeps sight of the close interplay between prudential risks and conduct risks, and pools together the information gained from classical banking supervision, securities compliance and the prevention of money laundering to form an overall risk profile. “We know of course, that it is not just classic credit risks and market risks that can endanger financial institutions and ultimately financial stability – systematic errors in the selling of products and the prevention of money laundering can also be responsible for pushing an institution into the abyss,” remarked Ettl. In illustrating the challenge posed for the supervisors, he used the bail-in concept in the case of bank resolution as a prime example. “The fine line between success and failure or this concept hinges on the way that a large volume of financial instruments that are eligible for application for a bail-in can be launched by institutions. From the experiences of neighbouring countries we know that if such products are sold unchecked to small investors, then it will not be possible to execute the bail-in.” Effective supervision, that holds a complete picture of the risks as a whole, is required.


Video-based identification will be possible from 1 January 2017

Cases that have attracted attention and have appeared in the media, where investors have incurred losses as a result of inadequate advice about securities, inappropriately high commission payments or a lack of transparency, have shown that it is nowadays essential for successful financial market players to integrate securities compliance and a money laundering prevention system into the companies organisation and its structure in an efficient and sustainable manner, as Ettl also remarked. Great advances have been made since 2011, when competences for the prevention of money laundering and terrorist financing were integrated into the FMA, as the latest Financial Action Task Force on Money Laundering (FATF) Country Report also notes. “During the publication of the Panama Papers, the FMA was again able to illustrate its zero-tolerance policy, and to reiterate our position that the Austrian financial market is not an arena for money laundering”, the FMA’s Executive Director remarked. Such a system must always continue to be developed further, and adapted to the changing market, for which reason the option of online video-based identification has also been created for the conducting of financial transactions. Dr. Rudorfer, Head of the WKO’s Division for Banks and Insurance, commented that “making video-based identification available so rapidly, to allow banks to start using it at the start of 2017, is another example of the fruitful cooperation between the FMA and the banking industry.”


Journalists may address further enquiries to:

Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)676/882 49 516

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