ITFA warns AMLA that the draft Regulatory Technical Standards (RTS) could burden trade finance banks with millions of unnecessary due diligence checks

By: Scott Sanchon, Trade Treasury Payments 

The International Trade Forfaiting Association (ITFA) has submitted a formal response to the European Anti-Money Laundering Authority (AMLA) consultation on draft Regulatory Technical Standards (RTS) under Article 19(9) of Regulation (EU) 2024/1624, governing business relationships, occasional transactions, and linked transactions.

ITFA’s message to the regulation is that a key issue is the treatment of counterparties in supply chain finance (SCF) structures. While the draft RTS provides useful guidance, ITFA has highlighted a number of concerns with the core guidance in Articles 2 and 3 of the draft RTS, as the current draft is creating an unworkable compliance burden in the trade and supply chain finance sectors.

Under Regulation (EU) 2024/1624, a business relationship is broadly defined as any business, professional, or commercial relationship connected with an obliged entity, which is set up between an obliged entity and a customer, including the absence of a written contract that is expected to carry an element of repetition or duration.

ITFA argues that this definition, if applied without nuance to SCF, would sweep up a large number of non-client counterparties, and potentially require due diligence that could run into the millions across Europe.

“Obliged entities also engage in commercial relationships with external parties who may not fully qualify as customers. Examples include beneficiaries of letters of credit or guarantees, warehouses holding pledged inventory, sellers or buyers in Supply Chain Finance/Reverse Factoring structures, and sub-suppliers in Deep Tier Supply Chain Finance arrangements.” 

     – ITFA Consultation Response, April 2026

ITFA further recommends introducing additional criteria for business relationships, especially for sellers and buyers in supply chain finance and reverse factoring contexts, given established practices.

In a typical reverse factoring program, the debtor is the bank’s fully adopted client and is already subject to comprehensive due diligence. The debtor decides which suppliers can participate in the program and which payables are eligible. Suppliers cannot assign receivables without the debtor’s approval, and often, there is no credit facility or manager responsible for managing the relationship with the bank. ITFA noted that this typical structure makes the business relationship in this environment questionable, requiring full customer due diligence (CDD).

Given how reverse factoring is used across Europe, ITFA estimates that the number of stakeholders that could fall under CDD in the draft RTS will exceed a million. This would represent a burden for banks that have no structured commercial relationship with their clients. 

The response from ITFA raises an unnecessary CDD in the European market, as its definition of participants is too broad and inefficient. ITFA recommends that the RTS must have a clear differentiation between customer and non-customer relationships. For non-customer counterparties, ITFA proposes a risk-based approach which is aligned with the Wolfsberg Group’s Trade Finance Principles. This includes collecting the client’s name and address, sanction screening, and reviewing internal and external flag lists.

ITFA has shared its full submission and a condensed version formatted to AMLA, and encourages members to engage with the consultation before the deadlines. As the 8 May 2026 deadline approaches, the association’s board members have demonstrated that industry participants are essential for providing input to ensure the final RTS framework can be practically implemented.