European Banking Authority peer review finds supervisors largely applied benchmarks on tax integrity and dividend arbitrage schemes

The European Banking Authority published a peer review on supervisory convergence and effectiveness in addressing tax integrity and dividend arbitrage trading schemes following its 2020 action plan. It found that most reviewed supervisors largely or fully applied the assessed benchmarks and, overall, supervised these areas adequately, indicating that the action plan has strengthened supervision. The review sampled six national prudential authorities and supervisors responsible for anti-money laundering and countering the financing of terrorism (AML/CFT), assessing how tax integrity is integrated into risk-based AML/CFT supervision, sectoral and institution-specific money laundering and terrorist financing (ML/TF) risk assessments, reviews of institutions’ internal governance arrangements, and fit-and-proper assessments of management body members and key function holders. The scope covered tax integrity issues broadly, not only dividend arbitrage schemes such as cum-cum or cum-ex, and did not assess national frameworks for identifying or investigating tax crimes. The EBA also identified general and individual follow-up measures aimed at improving consistency and effectiveness of supervisory outcomes across the EU and limiting the financial system’s exposure to illegal tax schemes and other tax evasion. Under its peer review framework, it is required to assess the adequacy and effectiveness of actions taken by competent authorities in response to follow-up measures after two years.