When financial service providers detect suspicious activity, their understanding of that activity may be limited by their own perspective, and represent only a glimpse of a wider criminal enterprise. That limitation offers criminals the chance to use different financial institutions to perpetrate money laundering schemes, layering deposts of illegal funds and exploiting a lack of awareness between organisations to evade anti-money laundering (AML) or counter-financing of terrorism (CFT) controls.
To address the money laundering threat, banks and other financial institutions must participate in a collaborative culture, sharing data and information (within the parameters of data protection laws) that might aid in the detection of money laundering. The Financial Action Task Force (FATF) includes information sharing in its 40 Recommendations, and releases guidance on how governments may facilitate information sharing in the private sector. In July 2022, the FATF released a report into data sharing between private institutions with the goal of helping jurisdictions “responsibly enhance, design and implement information collaboration initiatives”.
The 2022 report sets out the potential benefits and challenges involved in information sharing, along with advice on the integration of technology platforms to help firms better collaborate in the fight against money laundering.
Why is sharing information important for AML?
The FATF report included a range of case studies that demonstrated the effectiveness of information sharing for AML/CFT purposes. In particular, the report highlighted examples of firms struggling to identify a “complex suspicious transaction pattern” but then using shared information from other institutions to expose money laundering activity – or, conversely, remediate transactions as safe. Information sharing is even more important on a global scale, since money launderers may seek to use regulatory disparities between jurisdictions to move illegal funds across borders without triggering AML alerts.
What are the benefits and challenges of information sharing?
Information sharing delivers a number of important AML compliance benefits including:
- Structuring and layering: Closer coordination between financial service providers may prevent criminals from introducing illegal funds into the financial system in different accounts or via different institutions, in amounts below AML reporting thresholds.
- Identity verification: Where money launderers falsify their identities or submit incomplete documentation during onboarding, financial institutions may be able to collaborate to alert each other to the elevated AML risk.
- Cybercrime: When criminals use internet-enabled fintech products to launder money or commit cyber-crimes, firms may be able to identify them by sharing certain data, including, for example, IP addresses that have previously been associated with criminal activity.
- Criminal methodologies: Financial institutions may be able to share information about new money laundering methodologies or compliance blindspots that helps the wider financial community identify criminal activity.
Despite the clear AML utility, inter-organisational information sharing also involves a spectrum of administrative and legal challenges:
- Data privacy: Most jurisdictions have implemented strict data privacy regulations, such as the EU’s General Data Protection Regulation (GDPR) that limit what organisations can do with the information they hold on their customers. While firms may use personal data to meet AML/CFT compliance obligations they must be careful to adhere closely to data handling rules.
- Technology limitations: While firms may be willing to share information, their technological infrastructure may prevent them from doing so. Technology limitations may require firms to upgrade or change compliance software.
- Scope: Firms may struggle to determine the scope of their information sharing requirements and capabilities. Data privacy regulations may also limit the scope of the information that can be shared.
- Competition: Firms may be reluctant or unwilling to share information out of caution that they suffer adverse business consequences for doing so, or lose a competitive edge against rivals.
Information sharing initiatives between financial institutions
The FATF’s report suggests that private sector firms may be encouraged to participate in information sharing practices via specially designated government initiatives. These initiatives provide secure platforms for private sector institutions to collaborate within clear regulatory objectives and data protection limitations.
In 2015, the UK established the Joint Money Laundering Intelligence Task Force (JMLIT), characterised as “a partnership between law enforcement and the financial sector to exchange and analyse information relating to money laundering and wider economic threats”. JMLIT currently has over 40 private sector financial institutions that work with the UK’s Financial Conduct Authority (FCA) and law enforcement agencies such as the NCA and HMRC.
In order to prepare to participate in information sharing initiatives, the FATF suggests that firms should:
- Become familiar with the data sharing technologies that the initiative will involve, including understanding interoperable data formats.
- Assess internal data protection and privacy (DPP) policies to ensure alignment with national regulatory standards.
- Implement data sharing agreements with other parties involved in the initiative in order to set out participatory expectations.
- Engage and communicate regularly with the financial and law enforcement authorities tasked with supervising the data sharing initiative.
- Develop indicators or metrics for measuring success as participants in the data sharing initiative.
Innovations in data sharing
Information sharing initiatives encourage a culture of collaboration and strengthen collective efforts to detect and prevent financial crimes across the world. Similarly, collaborative initiatives may offer individual financial institutions access to valuable AML innovations.
In 2022, for example, the FCA launched a study into the potential for algorithmically-generated “synthetic data” as a way to expand access to data in the private sector, and create novel opportunities for firms to share data. Synthetic data would also avoid many of the data protection challenges that affect or prevent firms sharing personal customer data. The US is also exploring data and information sharing innovations: in January 2021, the Anti-Money Laundering Act 2020 introduced new requirements for US financial institutions and authorities to develop “appropriate frameworks for information sharing” backed by suitable security measures.
To learn more about managing data for AML compliance, contact Ripjar today.
One of the wealthiest countries in Europe and the world, France has an economy that attracts diverse business interests, including international banks and fintechs. Unfortunately, the prominence of its economy also makes France a target for criminals, who seek to launder money, finance terrorist activities, and commit financial crimes.
In response to that criminal threat, the French government imposes a range of strict anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations on its financial institutions. In order to avoid compliance penalties and contribute to the fight against financial crime, firms operating in France should understand how to meet those compliance obligations efficiently.
Who are France’s Financial Regulators?
France has established a number of financial supervisory authorities. These include:
Autorité des Marchés Financiers
The Autorité des Marchés Financiers (AMF) is France’s main financial supervisory authority and is responsible for regulating the country’s “financial marketplace, its participants, and the investment products distributed via its markets”. The AMF has the authority to “monitor and where necessary, inspect, investigate and enforce” in order to ensure that firms within French jurisdiction operate in compliance with financial regulations. The AMF also participates in the development of AML/CFT regulations in Europe, and plays a role in the European Securities and Markets Authority (ESMA).
Autorité de Contrôle Prudentiel et de Résolution
An independent administrative authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR) is responsible for regulating France’s banking and insurance businesses under the direct authority of the Banque de France. Like the AMF, the ACPR focuses on protecting France’s financial stability by monitoring compliance with AML/CFT regulations, maintaining a dialogue with financial sector organisations, and representing France in global financial organisations.
Traitement du renseignement et action contre les circuits financiers clandestins
The Traitement du renseignement et action contre les circuits financiers clandestins (TRACFIN) operates under the authority of the French Ministry of Finance. Its mission is to maintain the health of the French economy by fighting against financial crime, money laundering and the financing of terorism. Under that remit, TRACFIN is responsible for the analysis and investigation of suspicious activity reports submitted by French financial institutions.
Financial Action Task Force
As a member of the Financial Action Task Force (FATF), the French government transposes FATF guidance into domestic legislation, to be enforced by financial authorities such as the AMF. Accordingly, firms in France must take certain fundamental regulatory steps to achieve regulatory compliance, including developing an AML/CFT solution, taking a risk-based approach to AML/CFT, and appointing a money laundering officer responsible for overseeing internal compliance processes and communicating with financial authorities.
What are France’s Key AML/CFT Regulations?
French AML/CFT compliance involves the following key regulations and controls:
French Law: The French Monetary and Financial Code and the French Criminal Code criminalise money laundering and terrorism financing in France.
The AMF General Regulation: The General Regulation sets out the AML/CFT compliance rules that all French institutions must follow. The AMF regularly updates the general regulation to incorporate changes to French and European law.
AMF Recommendations: The AMF periodically releases specific guidance on aspects of AML/CFT laws. Recent AMF recommendations include:
- AMF Doc-2019-15: Guidance on implementing a risk-based approach to AML/CFT.
- AMF Doc-2019-16: Guidance on establishing beneficial ownership.
- AML Doc-2019-17: Guidance on screening for politically exposed persons (PEP).
- AML Doc-2019-18: Guidance on the reporting of suspicious activity to TRACFIN.
The Sixth Anti-Money Laundering Directive: As an EU member-state, France must implement the anti-money laundering directives (AMLD) which are updated regularly to ensure regulatory parity across the continent. The latest directive is the Sixth Anti-Money Laundering Directive (6AMLD) which came into effect on 3 June 2021 and introduced the following key regulatory changes:
- A harmonised list of 22 money laundering predicate offences, including the two new predicate offences of environmental crime and cyber-crime.
- An expansion of the definition of money laundering to include aiding and abetting.
- An extension of criminal liability for money laundering to include legal persons such as companies – effectively ensuring management employees share responsibility for the criminal actions of individual employees.
- Increased punishments for money laundering, including a minimum prison sentence of four years.
- The introduction of information sharing requirements between different EU jurisdictions to better facilitate criminal convictions.
How to Comply with French AML Regulations
AML compliance should be a significant priority for firms in France. Under the risk-based approach, firms must conduct risk assessments of individual customers and implement automated software systems capable of managing the data collection requirements of French AML regulations. In practice, an effective AML/CFT solution in France involves:
- Customer identification: Firms should conduct suitable customer due diligence (CDD) to identify their customers and build accurate risk profiles.
- Beneficial ownership: Firms should conduct beneficial ownership checks to ensure that customers are not using corporate structures or shell companies to disguise money laundering.
- Transaction screening: Firms should screen customer transactions against relevant lists and registers – including politically exposed persons (PEP) lists, beneficial ownership registers, and international sanctions lists, such as the EU’s consolidated list.
- Adverse media screening: Changes in customer risk profiles may be reported in media sources before they are confirmed by official sources. With that in mind, firms in France should implement an adverse media screening solution to capture stories from around the world that involve their customers.
Recent AML/CFT Developments in France
The AMF publishes the latest updates to French AML/CFT regulation on its news page. Key recent developments include:
- MiCA: In July 2022, the AMF publicised the provisional agreement on the EU’s new crypto regulatory framework, known as Markets in Crypto Assets (MiCA). The framework will regulate crypto-assets and stablecoins across the bloc, along with new compliance requirements for cryptocurrency exchanges. The framework will replace France’s existing PACTE law.
- ESG data: In June 2022, the AMF reiterated its call for a Europe-wide regulatory framework for environmental social and governance (ESG) data. The call reflects the increasing significance of ESG data in financial risk management. The AMF suggested that a centralised EU ESG data resource would guarantee “harmonised supervision”.
- Ukraine sanctions: Following Russia’s unprovoked invasion of Ukraine, the AMF publicised guidance for French firms regarding the enforcement of sanctions against Russia and against Russian individuals. In April 2022, the AMF issued guidance on new economic sanctions against Russia which directly affected French asset management companies.
Next Generation Compliance
Our Labyrinth Screening platform enables firms in France and around the world to enhance their AML/CFT compliance performance. Labyrinth Screening incorporates next generation machine learning technology to match customer names across thousands of global data sources, including PEP lists, sanctions lists and adverse media sources, in 21 languages. Use our cutting-edge risk management technology to adapt to new regulations and emerging risks in a challenging global landscape.
Contact us to discuss how Ripjar can support your AML compliance in France
Click here to watch the webinar on-demand.
While Adverse Media (AM) regulations and requirements vary significantly across the world, the need to implement adverse media screening as part of a risk management solution is a consistent compliance challenge. To help you meet that challenge, in August 2022, Ripjar Chief Product Officer Gabriel Hopkins and CEO and co-founder Jeremy Annis hosted an AM screening webinar, focusing on the need for businesses to build a balanced AM screening solution tailored to their unique risk concerns.
Catch up on some of the key points from our webinar here.
Defining Adverse Media Screening
Adverse media screening – sometimes called negative news screening – refers to the process of using different types of media to inform a risk-based compliance process. Speaking in the webinar, Jeremey Annis defined the process as “monitoring the media to manage an organisations’ risk posture and exposure, through customers or related parties, to financial crime and reputational risk”.
Jeremy noted that adverse media usually refers to unstructured content, such as newspaper articles, websites, blogs, social media posts, and other online data posts – rather than typical name screening data sources, such as international sanctions lists or politically exposed persons (PEP) lists. Unstructured adverse media tends to be “fast and messy”, with new stories entering the ecosystem and then evolving and changing as new information emerges. By nature, it is inexact and potentially confusing.
With that in mind, adverse media screening solutions must be agile and flexible and capable of combining a range of structured customer data with unstructured sources derived from the global news landscape. Similarly, adverse media screening represents a way for organisations to move towards a system of ongoing compliance – with processes informed by continuous monitoring technology that adds depth and context to structured customer due diligence (CDD) information or suspicious activity alerts.
Regulator Attitudes to Adverse Media
Financial regulators and authorities have begun to mandate some adverse media screening as part of their risk management frameworks. During the webinar, Gabriel and Jeremy stressed the importance of understanding jurisdictional attitudes to adverse media screening and set out several notable regulatory positions:
The EU: The EU’s Sixth Anti-Money Laundering Directive (6AMLD), adopted across the EU and in the United Kingdom, came into effect on 3 June 2021, with a stronger focus on adverse media screening than its previous iterations. Specifically, 6AMLD stipulates that organisations must implement “systematic” adverse media checks: while that direction may include a broad range of search and screening mechanisms, it represents a tightening of regulatory expectations, ensuring EU organisations are contributing meaningfully to the global fight against money laundering.
The United States: While the US has not gone as far as the EU in introducing a mandatory system of checks, the Financial Crimes Enforcement Network (FinCEN) recently emphasised the importance of adverse media screening as a compliance tool. Many US organisations have interpreted that move as an indication that the financial industry needs to be ready for incoming regulations.
Singapore: The Monetary Authority of Singapore (MAS) has generally been ahead of global adverse media trends. As far back as 2018, MAS was coordinating with banks in Singapore on a requirement for quality adverse media checks as part of the city-state’s anti-money laundering and counter-financing of terrorism framework. Implemented in a variety of Singapore banks, those AM screening processes were then exported to those same organisations’ branches in other jurisdictions out of a need to maintain a level regulatory playing field.
International regulators: The Financial Action Task Force (FATF), an inter-governmental AML/CFT regulator, has long advocated for adverse media checks, with guidance set out in its 40 Recommendations. That sentiment was recently amplified by the influential Wolfsberg Group, which published a Negative News Screening FAQ in May 2022. The FAQ took a ‘common sense’ approach to explaining the significance and importance of adverse media screening as part of the effort to combat financial crime.
Establishing an Effective Adverse Media Solution
The webinar panel’s discussion included a range of fundamental considerations for building an adverse media screening solution that balances efficiency with the need for regulatory robustness. The panel’s key adverse media screening considerations included:
- Search scope: Firms should understand what kind of media coverage their adverse media screening solution needs, taking into account factors such as customer risk profiles and areas of operation. That consideration should ultimately determine what kind of adverse media data they include in their searches and whether local outlets should be included. Customers with business interests in South America, for example, should be screened against local South American news sources.
- Customer screening requirements: It is important to understand how much of a given customer population should be screened against adverse media. This consideration is fundamental to the risk-based approach endorsed by the FATF and requires organisations to conduct customer risk assessments. When a customer is determined to present a high risk of financial crime, adverse media screening is a way to ensure their risk profile remains accurate throughout the relationship. The more high risk customers that an organisation has, the more robust and efficient their adverse media screening solution needs to be (and the more value can be provided).
- Public vs commercial media sources: Adverse media screening solutions may draw on commercial or publicly available news stories – both of which offer different advantages. Publicly available adverse media refers to data derived from scrapes of news websites – while that information is free, it is limited in archival scope and often involves copyright concerns which can limit its usefulness. By contrast, commercial adverse media sources offer a greater depth of archival information that allows for searches over longer periods of time.
Source diversity: An adverse media screening solution should take in a diverse range of media sources, including screen and print sources, established news websites and independent sites, blogs, forums, social media platforms, and any other relevant form of media. That diversity should also take into account the geographic relevance of the data collected, and source credibility: an established news organisation, for example, is likely to produce more credible and higher quality media than a personal blog or social media network, and be of more use in any subsequent money laundering compliance decisions.
How Ripjar Can Help With Adverse Media Screening
Given the challenges and demands of 21st century compliance, your organisation needs an adverse media screening solution that delivers meaningful risk data from a crowded and often chaotic landscape of sources. Key to that requirement is a capability to assess large volumes of data efficiently, searching for customer names in a variety of languages, for example, or using fuzzy logic tools to identify inefficient and potentially costly false positives.
With that in mind, Ripjar’s adverse media screening solution, Labyrinth Screening, has been designed to be a powerful screening tool, capable of conducting name searches in 21 languages and of capturing changes to customer risk profiles in real time. Powered by next generation machine learning technology, Labyrinth Screening goes further than conventional KYC tools by balancing the demands of regulatory compliance with adaptive, ongoing screening support. Our platform can be tailored to the compliance needs of an individual business in order to address risk exposure, while reducing costly false positive alert rates, and adapting to emerging criminal risk and incoming regulations.
One of the wealthiest countries in Europe and the world, Austria is a business destination for hundreds of multinational organisations including banks and fintechs. While Austria’s economic status attracts international investment, it also creates a range of criminal challenges, including money laundering and the financing of terrorism.
To address those threats and protect its financial system, the Austrian government has implemented a range of strict anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations. As a member of the European Union, Austria’s AML/CFT landscape is aligned with the rest of the bloc – which means that it also implements the EU’s Anti-Money Laundering Directives.
In order to comply with Austrian AML/CFT regulations, companies in Austria must understand their regulatory obligations, and their relationship with regulatory authorities.
What is the FMA?
The Financial Market Authority (FMA) is Austria’s financial supervisory authority. Established in 2002, the FMA provides supervision for all financial service providers in Austria, including banks, insurance companies, pension companies and investment firms. The FMA works to ensure that Austrian companies comply with the country’s financial regulations and implement suitable internal measures and controls to detect and prevent money laundring and terrorism financing.
As an ‘integrated’ authority, the FMA handles all regulatory procedures ‘under one roof’ – from issuing licences to obligated entities and conducting ongoing supervision, to working with law enforcement authorities in AML/CFT investigations.
The FMA also works with its international counterparts, particularly those across the EU, to serve the interest of Austria, and to contribute to the global fight against money laundering.
What are Austria’s Key AML Regulations?
Austria’s EU membership requires it to implement the money laundering regulations set out in the Anti-Money Laundering Directives (AMLD) in its domestic AML/CFT legislation. Austria is also a member of the Financial Action Task Force (FATF) which imposes a number of fundamental AML/CFT requirements, including the need to treat money laundering as a crime, to establish a national AML/CFT supervisory authority, and for firms to take a risk-based approach to AML/CFT.
WIth those requirements in mind, Austria has criminalised money laundering under its criminal code and has implemented the following key AML/CFT regulations:
- The Financial Markets AML Act: The AML Act is intended to prevent the misuse of Austria’s financial system for money laundering and terrorism financing – and was introduced in 2017 following the EU’s Fourth AMLD. The Act requires companies in Austria to put suitable risk-based AML/CFT measures and controls in place and to report suspicious activity to the FMA.
- The Beneficial Owners Register Act: In response to the Fifth AMLD requirement that member states create publicly available beneficial ownership registers, Austria passed the Beneficial Owners Register Act.
The FMA has issued a range of supplementary AML/CFT regulations in order to address money laundering and terrorism financing threats, including:
- Regulation on Savings Associations (SpVV)
- School Savings Schemes Due Diligence Regulation (Schulspar-SoV)
- Online Identification Regulation (Online-IDV)
- Regulation on Due Diligence for Fiduciary Accounts (AndKo-SoV)
- Corporate Provision Funds Risk Analysis and Due Diligence Regulation (BVK-RiSoV)
- Life Insurance Due Diligence Regulation (LV-SoV)
How to Ensure Your AML Compliance in Austria
Following FATF Guidance, the FMA requires firms in Austria to put a risk-based AML/CFT solution in place to detect and address criminal threats. The risk-based approach requires firms to conduct risk assessments on individual customers in order to build an accurate risk profile and identify higher risk customers that warrant more intensive AML/CFT scrutiny. With those considerations in mind, AML compliance in Austria should entail the following processes:
- Identity verification: Firms should establish and verify the identities of their customers by collecting suitable customer due diligence information such as names, addresses, dates of birth, and relevant company information. Beneficial ownership should also be established.
- Transaction screening: Firms should screen customer transactions for signs of suspicious activity that may be indicative of money laundering.
- Sanctions screening: Firms must ensure that they are not doing business with the targets of international sanctions. Accordingly, they should screen customers against relevant international sanctions lists, including the EU consolidated list.
- PEP screening: Politically exposed persons (PEP) such as elected officials, government employees, or members of the military pose a higher risk of money laundering. Firms should screen their customers against PEP lists at onboarding and throughout the business relationship.
- Adverse media: Many news outlets report on AML/CFT risks factors, such as sanctions risk or involvement in organised crime, before that information is confirmed by official sources. With that in mind, firms should implement an adverse media screening solution in order to capture news stories from around the world that involve their customers. Adverse media screening software should be able to search across foreign language news sources and take into account the relevance and quality of those sources.
Recent AML/CFT Developments in Austria
While 6AMLD is now in effect, the EU recently announced an overhaul of its AML/CFT framework. The update will introduce ‘an ambitious package of legislative proposals’ and serve as an update to 6AMLD. As an EU member, Austria must implement the regulatory requirements of the updated 6AMLD, which include:
- The introduction of cross-border asset registers.
- A proposal for an Financial Intelligence Unit (FIU) joint analysis framework to aid cross-border AML investigations across the EU.
- New guidance on the type of information that should be held in beneficial ownership registers.
- The establishment of a public body with a duty of oversight over self-regulatory bodies.
- The introduction of National Risk Assessments (NRA) to be conducted every four years.
- New whistleblower protections including strengthened data privacy rules.
Next Generation AML Technology
Ripjar’s Labyrinth Screening solution has been designed to enhance the risk management process and make AML/CFT compliance in Austria faster and simpler. Harness next generation name-matching software to screen customers in real time, drawing data from global sanctions, watch lists and adverse media sources across 21 languages. Use AI-enabled AML technology to inform risk decisions and ensure your business stays ahead of its obligations in a changing regulatory landscape.
Risk management should be more than just a series of ‘box ticking’ data collection exercises. While many anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations focus on capturing static customer information such as names, addresses and business details, it’s vital that you also understand your risk exposure in a constantly-evolving compliance landscape.
Adverse media screening, sometimes referred to as negative news or negative media screening, describes the process of searching for news stories that are relevant to a customer’s AML/CFT risk profile. It takes in traditional screen and print media, as well as online sources such as blogs, forums and social networks. With a global reach, including foreign language news sources, adverse media screening is one of the best ways of building an accurate, up-to-date picture of the counterparty risk that your company faces, and of anticipating future threats. In some jurisdictions, adverse media screening is even codified by law as an AML/CFT compliance requirement.
With these factors in mind, it’s vital you understand how and why your adverse media screening solution can help you meet your regulatory obligations. To optimise your compliance response, read our list of the 5 key reasons you need effective adverse media screening.
1. Spot Emerging Threats Early
When customers are onboarded, the AML/CFT risk that they present may not be immediately apparent. In the same way, existing customers may become involved in activities or be exposed to global events which are likely to increase compliance risk later in the business relationship. Adverse media offers banks and financial institutions a way to spot this kind of emerging threat early since negative news screening may detect certain business activities or financial behaviours that indicate a customer’s risk profile is likely to change.
For example, negative news screening may detect that a client with overseas business interests has connections with Russia, putting them at increased sanctions compliance risk at some point in the future as a result of measures taken in response to the Russian invasion of Ukraine. Similarly, negative news screening may reveal criminal activities (including money laundering predicate offences) that do not result in charges – but which indicate that customers should be scrutinised more closely in the future for ongoing risk indicators.
2. Keep Track of Broader Business Risks
An AML/CFT solution may be set up around the specific risks that an individual customer presents, and screen against a range of relatively static qualities, such as names, addresses, beneficial ownership, business locations, and transaction counterparties. Those data points provide only a very limited perspective on a customer’s risk profile, and do not take into account wider variables that might be affecting the business relationship.
Since the media landscape is constantly changing, with stories evolving on a daily basis, adverse media screening offers a way for organisations to keep track of the broader risk environment. Even better, the information that your compliance team gathers during the remediation of an adverse media alert will help to strengthen your AML/CFT response going forward. In particular, adverse media alerts may help firms stay ahead of geopolitical crises, new criminal methodologies, and new regulatory trends. Adverse media screening may, for example, help your company detect new Environmental, Social and Governance (ESG) risk liabilities – including environmental crimes and unethical labour practices.
3. Identify Beneficial Owners and Shell Companies
Criminals often set up shell companies or use complex corporate structures to conceal their involvement in money laundering transactions and avoid AML/CFT scrutiny. In some cases, shell companies may be set up in low-regulation countries like the Cayman Islands, in order to avoid compliance measures in higher regulation countries and force investigators that are attempting to trace illegal funds to navigate cross-border regulatory disparities. While firms may implement measures that require customers to reveal beneficial ownership, doing so may be challenging and add to the compliance burden.
Since the ownership of shell companies is a frequent subject of investigative media reports around the world, adverse media screening may help firms detect when customers are using corporate structures to commit financial crimes. Global adverse media screening tools are particularly important in this context because of the likelihood that customers are using foreign shell companies to avoid domestic regulations.
4. Discover New Information about PEPs
Politically exposed persons (PEP) are elected officials and government employees that pose an elevated AML/CFT compliance risk. That risk stems from the increased likelihood of PEPs being involved in financial crimes, including bribery and corruption, as a result of their access to government funds and their ability to avoid regulatory scrutiny. Given that threat, companies must screen customers against PEP lists regularly and be aware when a customer’s status as a PEP changes following their election to a political position or employment in a government agency.
The challenge of PEP screening reflects the speed with which the political landscape can change as individuals assume political office. Global adverse media screening is so useful at capturing information about PEPs because foreign news outlets frequently report on elections and on stories involving political corruption which domestic outlets do not.
5. Generate Information for AML Investigations
Regardless of whether an adverse media search generates an alert, the subsequent remediation process provides useful data points to help guide any future financial crime investigation. AML screening by necessity involves the analysis of a vast range of news stories, generating potential connections to a spectrum of financial activities.
The value of adverse media data will depend on the depth and detail of the search conducted. When conducting negative news screening, companies should also consider the quality, relevance, and reliability of the data, taking into account factors like political bias and media sources. Stories from an established mainstream news outlet, for example, with years of industry output, are likely to be more credible and reliable than data sourced from an internet forum or social network.
Adverse Media Screening Technology
In order to meet their adverse media compliance requirements, companies must implement an effective software screening solution capable of capturing relevant news stories from around the world. Ripjar’s Labyrinth Screening solution has been developed with that objective in mind, integrating next generation compliance technology, including real time global adverse media searches in 21 languages, to ensure you stay informed whenever your customers’ risk profiles change.
To find out how Ripjar can help with your adverse media screening, contact us today.
As an influential global power, the UK imposes economic sanctions in order to punish wrongdoing, maintain peace, and achieve foreign policy goals. UK sanctions are developed, implemented, and enforced by a number of governmental organisations, and the names of their relevant designated targets are featured on sanctions lists. UK entities are typically forbidden from doing business with sanctions targets and must check the UK sanctions list to ensure that they are not violating the law. UK economic sanctions typically consist of prohibitions on trade and transactions in general, investment, and business relations, and may target entire countries, organisations, or individuals.
The UK’s sanctions landscape changes constantly, with new designations added and withdrawn regularly. In February 2022, for example, along with other Western countries, the UK moved quickly to impose what Prime Minister Boris Johnson called “the most severe package” of economic sanctions against Russia, with businesses expected to comply with new restrictions as they were introduced. Similarly, the UK recently introduced a new global human rights sanctions regime (GHSR), intended to target individuals around the world (rather than entire countries) that commit serious breaches of human rights.
UK sanctions are implemented under the authority of the Sanctions and Anti-Money Laundering Act 2018. Given the complexity of the regulatory regime, it is important that businesses understand how these sanctions work, and how to remain compliant in a changing regulatory environment.
Who Imposes Sanctions in the UK?
The following government departments and bodies are responsible for the management and implementation of the UK’s sanctions regime:
The Foreign, Commonwealth and Development Office (FCDO): The FCDO, formerly known as the Foreign and Commonwealth Office (FCO), is responsible for developing and implementing the UK’s sanctions policy. That work includes setting out all international sanctions regimes and their designations. The FCDO is also responsible for negotiating the UK’s international sanctions, which means working with legal officials and economists to devise the substance and duration of restrictive measures against foreign targets, while considering their impact on UK interests.
The Office of Financial Sanctions Implementation: OFSI is the department of HM Treasury tasked with ensuring that sanctions are implemented correctly and that they “make the fullest possible contribution to the UK’s foreign policy and national security goals”. In practice, OFSI is responsible for enforcing the country’s sanctions, including assessing breaches of regulations, and imposing monetary penalties for violations. OFSI maintains and publishes sanctions guidance and resources for UK firms in order to promote regulatory compliance.
Department for International Trade: The DIT maintains a special unit known as the Export Control Joint Unit that is responsible for implementing the trade sanctions and embargoes set out in the UK sanctions regime.
Department for Transport: The DfT is responsible for the implementation of transport sanctions. In practice this relates to the movement of ships and aircraft in jurisdictions controlled by the UK.
Home Office: The Home Office is responsible for implementing travel bans against countries and individuals designated by UK sanctions.
HM Revenue and Customs: HMRC is responsible for enforcing breaches of trade sanctions, including imposing monetary penalties against those responsible.
National Crime Agency: The NCA works with other UK authorities and government departments to investigate and enforce breaches of the country’s sanctions.
Types of UK Sanctions
UK sanctions vary by their targets and by the severity of the issue they are intended to address. The most common types of UK sanction measures include:
- Asset freezes: Targeted asset freezes may be deployed against individuals and entities, blocking access to funds and other economic resources such as property.
- Market restrictions: The UK may restrict access to financial markets and financial services for sanctions targets. This type of restriction may be applied as embargoes, investment bans, capital access restrictions, restrictions on the provision of advisory services, and directions to cease business relationships or activities.
- Directions to cease business: UK authorities may direct specific types of business or person to cease all business with sanctions targets.
- Travel bans: The UK may impose travel bans on foreign sanctions targets or restrict travel to and from a target country.
Sanctions Risks in the UK
Most individuals and companies seek to adhere strictly to UK sanctions in order to avoid aiding criminals and exacerbating international conflicts and human right abuses. However, persons that fail to comply risk criminal prosecution, financial penalties, and significant reputational damage.
HM Treasury may impose sanctions penalties following an investigation of a violation in which wrongdoing is found. Criminal punishments for sanctions violations include a maximum of 7 years imprisonment. Exact financial penalty amounts vary by the severity of the offence and are imposed under the following criteria:
- Monetary penalties for sanctions violations may be imposed up to a value of 50% of the breach, or up to £1 million (if that amount is greater than the value of the breach).
- OFSI takes the facts of individual cases into account when deciding on penalty amounts and may apply reductions where cases have been voluntarily disclosed.
How to Comply with UK Sanctions
UK firms must be ready to screen new customers against the relevant sanctions lists both at onboarding and throughout the business relationship. In practice, this means matching new and existing customer names against the UK sanctions list, which is updated regularly with new designations.
It is important that the sanctions screening process is conducted thoroughly, efficiently, and accurately, and captures the level of compliance risk that each customer presents. With this in mind, UK firms must ensure their sanctions screening solution is supported by the following measures and controls:
- Identity verification: UK firms must establish and verify their customers’ identities in order to match them to sanctions designations with a high degree of accuracy. Firms should also establish beneficial ownership of companies where that is unclear.
- Transaction screening: Firms must screen customer transactions for signs of suspicious activity, including transactions with counterparties that feature on the UK sanctions list.
- Adverse media screening: News stories may indicate that a customer has been sanctioned or is likely to be sanctioned before that information is confirmed by official sources. Accordingly, firms should screen foreign media sources for stories that indicate a customer’s sanctions status has changed.
Next Generation Sanctions Screening
The Russian invasion of Ukraine, and the subsequent package of sanctions imposed against Vladimir Putin’s regime demonstrate just how quickly the UK sanctions landscape can change. While the first round of Russia sanctions was announced in February 2022, new measures quickly followed throughout March, April, June, and July. Adding to the challenge, the UK government introduced new sanctions enforcement regulations, further increasing the compliance burden on UK firms.
To achieve UK sanctions compliance, firms should implement a screening solution that meets the unique challenges of their environment. Ripjar’s Labyrinth Screening solution has been designed with that challenge in mind, integrating next-generation name matching software capable of analysing real time data from global sanctions and watch lists, and from adverse media sources across 21 languages. Our solution utilises artificial intelligence to make balanced risk management decisions about client profiles – and to ensure that you are informed whenever new risks emerge.
To learn more about how Labyrinth Screening can support your UK sanctions compliance and global sanctions risk management, get in touch with Ripjar today.