6. Adequate knowledge, skills and experience

Members of the management body should have an up-to-date understanding of the business of the institution and its risks, at a level commensurate with their responsibilities. This includes an appropriate understanding of those areas for which an individual member is not directly responsible but is collectively accountable together with the other members of the management body.

Members of the management body should have a clear understanding of the institution’s governance arrangements, their respective role and responsibilities and, where applicable, the group structure and any possible conflicts of interest that may arise therefrom. Members of the management body should be able to contribute to the implementation of an appropriate culture, corporate values and behaviour within the management body and the institution²¹ .

²¹ See also the EBA’s Guidelines on Internal Governance: https://www.eba.europa.eu/regulation-and-policy/internal-governance

Without prejudice to the national transposition of Directive 2015/849/EU, the member of the management body identified as responsible for the implementation of the laws, regulations and administrative provisions necessary to comply with Directive (EU) 2015/849²² should have good knowledge, skills and relevant experience regarding ML/TF risk identification and assessment, and AML/CFT policies, controls and procedures. This person should have a good understanding of the extent to which the institution ’ s business model exposes it to ML/TF risks.

²² The identification of a member of the management body as responsible for AML is for the purpose of allocation of duties and is without prejudice to the final responsibility of the management body in its management function for the day-to-day management of the institution and its responsibility for all activities of the institution.

In this respect, the assessment of adequate knowledge, skills and experience should consider:

• a. the role and duties of the position and the required capabilities;
• b. the knowledge and skills attained through education, training and practice;
• c. the practical and professional experience gained in previous positions; and
• d. the knowledge and skills acquired and demonstrated by the professional conduct of the member of the management body.

To properly assess the skills of the members of the management body, institutions should consider using the non-exhaustive list of relevant skills set out in Annex II to these Guidelines, taking into account the role and duties of the position occupied by the member of the management body.

The level and profile of the education of the member and whether or not it relates to banking and financial services or other relevant areas should be considered. In particular, education in the areas of banking and finance, economics, law, accounting, auditing, administration, financial regulation, information technology and quantitative methods can in general be considered to be relevant for the financial services sector.

The assessment should not be limited to the educational degree of the member or proof of a certain period of service in an institution. A more thorough analysis of the member’s practical experience should be conducted, as the knowledge and skills gained from previous occupations depend on the nature, scale and complexity of the business as well as the function that the member performed within it.

When assessing the knowledge, skills and experience of a member of the management body, consideration should be given to theoretical and practical experience relating to:

• a. banking and financial markets;
• b. legal requirements and regulatory framework;
• c. strategic planning, the understanding of an institution’s business strategy or business plan and accomplishment thereof;
• d. risk management (identifying, assessing, monitoring, controlling and mitigating the main types of risk of an institution including environmental, governance and social risks and risk factors);
• e. accounting and auditing;
• f. the assessment of the effectiveness of an institution’s arrangements, ensuring effective governance, oversight and controls;
• g. the interpretation of an institution’s financial information, the identification of key issues based on this information, and appropriate controls and measures.

Members of the management body in its management function should have gained sufficient practical and professional experience from a managerial position over a sufficiently long period. Short-term positions may be considered as part of the assessment, but such positions alone should not be sufficient to assume that a member has sufficient experience. When assessing the practical and professional experience gained from previous positions, particular consideration should be given to:

• a. the nature of the management position held and its hierarchical level;
• b. the length of service;
• c. the nature and complexity of the business where the position was held, including its organisational structure;
• d. the scope of competencies, decision-making powers and responsibilities of the member;
• e. the technical knowledge gained through the position;
• f. the number of subordinates.

Members of the management body in its supervisory function should be able to provide constructive challenge to the decisions and effective oversight of the management body in its management function. Adequate knowledge, skills and experience for fulfilling the supervisory function effectively may have been gained from relevant academic or administrative positions or through the management, supervision or control of financial institutions or other firms.