Category: AML Compliance

AML Regulations in the USA

As the largest and most influential economy in the world, the United States addresses financial criminal threats by enforcing strict anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations. Research suggests that up to $300 billion is laundered in the US annually, with AML compliance costing US firms up to $25.3 billion per year. 

Given the criminal threat, the US AML/CFT regulations involve a range of important reporting and record-keeping obligations which are based on standards set out by the Financial Action Task Force (FATF). Violations of AML regulations in the US are serious crimes and may result in financial penalties and even prison sentences for implicated individuals. If you do business in the US, it’s important that you develop a strong understanding of the relevant AML/CFT laws, become familiar with US financial regulators, and ensure that your business is able to meet its regulatory obligations on an ongoing basis.  

Who are the USA Financial Regulators?

The Financial Crimes Enforcement Network

The USA’s principal financial regulator is the Financial Crimes Enforcement Network (FinCEN) which operates under the authority of the Department of the Treasury and serves as the USA’s Financial Intelligence Unit (FIU). FinCEN’s stated mission is to ‘safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities’.

FinCEN provides oversight for all banks and financial institutions in the US as part of the global fight against money laundering and the financing of terrorism. Its responsibilities involve the collection of transaction data from US firms and the distribution of that data for law enforcement purposes. Where necessary, FinCEN partners with law enforcement agencies at the state and federal levels, to aid criminal investigations. FinCEN also cooperates with its international counterparts in order to help fight global financial crime. 

The Office of Financial Assets Control

The Office of Financial Assets Control (OFAC) oversees the US sanctions programmes, ensuring that US firms comply with the trade prohibitions on targets set out in the relevant sanctions lists. The US maintains a number of sanctions lists, but its principal list is the Specially Designated Nationals (SDN) and Blocked Persons List. The SDN list includes the names of persons designated for economic sanctions on one of the US global sanctions programmes. 

What are the Key US AML Regulations?

The Bank Secrecy Act

The primary article of AML legislation in the US is the Bank Secrecy Act (BSA). Introduced in 1970, the BSA imposes reporting and record-keeping obligations on US banks and financial institutions in order to prevent criminals using their products and services to launder money. Under the BSA, institutions must implement internal AML controls including monitoring their customers and transactions for suspicious activity, and reporting suspicious activity to FinCEN. 

The Patriot Act

In 2001, following the September 11 terror attacks, the US passed the USA Patriot Act as an amendment to the BSA. The Patriot Act introduced new powers for US law enforcement agencies when investigating suspected terrorism financing. In particular, the Patriot Act imposes a range of customer due diligence (CDD) and screening responsibilities on US companies, and focuses on international transactions and business relationships. The Patriot Act imposes criminal and financial penalties for persons found to be in violation of CFT compliance rules. 

AMLA 2020

In 2021, the US introduced the Anti-Money Laundering Act (AMLA) 2020. The Act was held up as the most significant reform to US AML/CFT legislation since the implementation of the Patriot Act, and a means to manage the threats posed by new technologies and criminal methodologies. Amongst the regulatory measures introduced by AMLA were new beneficial ownership rules to prevent the misuse of shell companies, increased money laundering penalties, new whistleblower protections, and expanded international information sharing rules. 

US AML Compliance

As an FATF member state, the US requires firms to take a risk-based approach to AML/CFT. This means that they must assess their customers at onboarding to establish the level of compliance risk they present, and then deploy AML/CFT measures in proportion to that risk. In practice this means that firms may subject higher risk customers to more intense monitoring and screening measures. 

With that in mind, an effective US AML compliance programme should feature: 

• Customer identification: Firms in the US must establish and verify the identities of their customers in order to conduct an effective risk assessment. The customer due diligence process should involve the collection of names, addresses, dates of birth, and beneficial ownership information. 
• Transaction screening: US firms must screen their customers’ transactions for signs of suspicious activity, including unusual transaction patterns, transactions with high risk customers and jurisdictions, or transactions involving sanctions targets. 
• Politically exposed persons: Government officials represent an elevated risk of money laundering. With that in mind, US firms should screen customers against politically exposed persons (PEP) lists to determine the level of compliance risk they present. 
• Sanctions screening: US firms must screen their customers against the relevant sanctions lists, including the SDN list, and the UNSC sanctions list. 

Enhanced due diligence

Under the risk-based approach to AML/CFT, the US requires firms to subject higher risk customers to enhanced due diligence (EDD) measures. The EDD process should include a greater degree of AML/CFT scrutiny, stronger identity verification measures, and checks into the source of customer funds and wealth. Enhanced due diligence measures might also include PEP screening and sanctions screening. 

Adverse media checks

Criminal activity and other compliance related risks may be reported in news media before they are confirmed by official sources. Accordingly, the enhanced due diligence process may also include adverse media checks, which require firms to search a range of news sources for customer involvement in negative stories. 

In the US, adverse media screening may involve searching non-English news sources, which means that firms must implement suitable screening technology to match customer names in foriegn languages. Adverse media screening technology is essential to the US AML compliance process: with that in mind, Ripjar’s next generation risk screening solution enables your firm to capture breaking news stories from across the world in real time, reduce false positive hits, and ensure that your compliance team is informed as soon as a customer’s risk profile changes. 

Contact us to discuss how Ripjar can support your AML compliance in the USA 

New EBA Guidelines on the Role of the AML/CFT Compliance Officer

Following its supranational risk assessment (SNRA) in 2019, the EU reported that a number of member states were not implementing Anti-Money Laundering Directive 2015/849 evenly or effectively, and identified specific failures in the appointment of AML/CFT compliance officers. 

After further analysis of the risk assessment’s findings, the EU requested that the European Banking Authority (EBA) develop guidance that ‘clarifies the role of AML/CFT officers in credit and financial institutions’. 

Under the text of the Directive, the EU requires ‘the appointment of a compliance officer ‘at management level’ as part of a firm’s internal AML policies, controls, and procedures. The directive defines the compliance officer as as a ‘senior management’ employee with ‘sufficient knowledge of the institution’s money laundering and terrorist financing risk exposure and sufficient seniority to take decisions affecting its risk exposure’. The directive does not go into any further detail regarding the day-to-day duties of the AML/CFT compliance officer, nor does it define the officer’s wider responsibilities or their relationship with financial authorities. 

To address the potential lack of regulatory clarity, the EBA published its AML/CFT compliance officer guidance in 2022. 

What is an AML/CFT Compliance Officer?

An anti-money laundering/counter-financing of terrorism (AML/CFT) compliance officer is the individual responsible for the implementation of their firm’s AML/CFT compliance programme. In the EU, that means they must ensure their firm is operating in alignment with the rules and regulations set out in the Anti-Money Laundering Directives (AMLD), monitoring and reporting suspicious activities to the appropriate financial intelligence unit (FIU), and ensuring that their organisation is not allowing criminals to misuse their products and services.

The complexity of the EU’s AML/CFT compliance landscape means that the AML Compliance Officer role can be challenging: with the release of the EBA guidance, firms that operate within the EU and the EEA should ensure they understand what the compliance officer does, and how they fit within their firm’s infrastructure.

AML Compliance Officer Role and Responsibilities 

Referencing Directive 2015/849, the EBA stressed that its guidelines on the role and responsibilities of the AML/CFT compliance officer should be interpreted proportionally by individual institutions, taking into account factors such as company size, industry, and complexity. 

The directive frames the ‘management body’ and ‘senior managers’ as important components of their firm’s AML/CFT infrastructure, stating that entities must ‘obtain approval from their senior management’ for the AML policies, controls and procedures that they implement, and that senior management employees must ‘monitor and enhance’ those measures. However, the directive does not set out in detail the management body’s relationship with its AML/CFT compliance officer – who must be appointed as part of those policies, controls, and procedures. 

With that in mind, the EBA organised its guidance into two categories:

• Role and responsibilities of the management body/senior AML/CFT manager
• Role and responsibilities of the AML/CFT compliance officer

The EBA sets out the role and responsibilities of both the management body and the AML/CFT compliance officer in detail in its 2022 guidance. Rather than representing ‘new’ additions to existing guidelines (characterised as sufficient ‘at the time’) the EBA stresses that the 2022 provisions ‘complement requirements in other sectoral laws that relate to credit or financial institutions’ governance and risk management systems, and suitability requirements for senior function holders’.

Key highlights of the EBA’s 2022 guidance are as follows.

The Role of the Management Body/Senior AML/CFT Manager

The EBA’s guidelines set out the role of a firm’s management body and senior AML/CFT manager within its internal AML/CFT framework. The EBA states that ‘the management body should be responsible for approving the credit or financial institution’s overall AML/CFT strategy and for overseeing its implementation’. Key aspects of a management body’s AML/CFT role include: 

• Providing oversight of AML/CFT policies and assessing the effectiveness of those policies through internal and external audits. 
• Ensuring that individuals responsible for AML/CFT functions possess sufficient knowledge, experience and skills to perform their duties effectively. 
• Ensuring that individuals responsible for AML/CFT functions are kept informed of business decisions or any other factors that affect compliance risk. 
• Reviewing any activity reports that the firm’s AML/CFT officer submits.
• Managing human and technical resources in order to facilitate effective AML/CFT operations.

The Role of the AML/CFT Compliance Officer

The EBA notes several important factors that firms must take into account when appointing an AML/CFT compliance officer, including the scale and complexity of their financial operations and their operational exposure to criminal risk. The character and ability of an AML/CFT officer is also important: the EBA’s guidance emphasises the need for officers to have the expertise and authority to carry out their duties effectively, have no conflicts of interest, and have the availability to communicate with the relevant FIU. 

The guidelines also note that the appointment of an AML/CFT compliance officer should be proportional to a firm’s compliance needs. Smaller firms and sole traders, for example, may choose not to appoint an AML/CFT officer as long as they set out their justification for doing so in writing. 

The EBA notes that firms must clearly define and document their AML/CFT officer’s role and responsibilities. Under the requirements of the EU’s AMLD, AML/CFT compliance officers must: 

• Develop a risk assessment framework specific to the risks that their firm faces. 
• Develop AML/CFT policies suitable for their firm’s risk exposure and appetite for risk. 
• Screen customers and transactions, including monitoring high-risk customers, sanctions lists, politically exposed persons (PEP) lists, and adverse media stories. 
• Monitor AML/CFT compliance in line with the latest AMLD regulations on an ongoing basis. 
• Communicate clearly with the firm’s internal management body, including submitting an annual AML/CFT activity report (which will be made available for competent authorities). 
• Report suspicious customer transactions to the relevant FIU. 
• Train compliance employees and promote AML/CFT compliance awareness in line with the latest regulations. 

To learn more about how Ripjar’s solutions can support AML/CFT compliance officers, get in touch today. 

AML Regulations in Germany and How to Comply

Germany is one of the wealthiest members of the EU and a hub for thousands of multinational businesses. While Germany provides an array of commercial opportunities, its financial profile also attracts criminals who seek to exploit the country’s financial system to launder money and commit other financial crimes. Accordingly, AML regulations in Germany are a serious priority for financial authorities: Deutsche Bank, for example, has received significant fines for compliance violations – including a $150 million dollar fine in 2020 for its involvement in the Danske Bank money laundering scandal.

Given the government’s increasing focus on financial compliance, and the potential for significant fines and penalties, companies in Germany should understand the anti-money laundering (AML) and counter-financing of terrorism (CFT) landscape – and how to meet their regulatory obligations.

What is BaFin?

Germany’s financial regulator is known as the Federal Financial Supervisory Authority, or the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). The regulator was established in 2002 to provide oversight for all financial institutions in Germany, including banks, stock exchanges, and insurance companies. 

BaFin’s authority and powers are provided by Germany’s Banking Act (Gesetz über das Kreditwesen). In its supervisory role, BaFin works to ‘prevent irregularities in the banking system’, including those which may endanger the safety of assets or ‘substantially prejudice the economy’. BaFin sets financial regulations, including AML/CFT rules, for all institutions operating in Germany, and monitors their ongoing compliance. It is also responsible for issuing licences to German financial institutions that meet relevant criteria.

AML Regulations in Germany

As a member of the Financial Action Task Force (FATF), Germany transposes FATF AML/CFT recommendations into domestic legislation. Similarly, as a member of the EU, Germany must implement AML/CFT measures introduced in the EU’s Anti-Money Laundering Directives (AMLDs), which are issued periodically in order to maintain regulatory consistency across the union. 

With those factors in mind, AML regulations in Germany are set out in the Money Laundering Act or Geldwäschegesetz (GWG). The GWG defines the crime of money laundering in Germany and includes the following important regulatory points: 

• Following FATF guidance, financial institutions in Germany must develop and implement risk-based AML/CFT programmes. 
• Financial institutions must implement suitable customer due diligence (CDD) processes and screen customer transactions for suspicious activity. 
• Where suspicious activity is detected, financial institutions must submit a report to Germany’s Financial Intelligence Unit (FIU). 

AMLD Compliance in Germany

Germany’s AML/CFT policy is shaped by the EU Anti-Money Laundering Directives, which reflect evolving financial crime methodologies and harmonise the regulatory environments in different EU member states. The most recent AMLD is the Sixth Anti-Money Laundering Directive (6AMLD) which focuses on the ongoing harmonisation of money laundering regulation across the EU. 

Germany implemented 6AMLD via the Draft Act for the Effective Prosecution of Money Laundering (Gesetz zur Verbesserung der strafrechtlichen Bekämpfung der Geldwäsche). The Draft Act introduced the following regulatory measures: 

• A list of 22 money laundering predicate offences, including 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 legal persons, meaning companies and partnerships and their senior management employees.
• Minimum 4 year prison sentences for individuals convicted of money laundering. 
• Information sharing requirements with other EU countries in order to facilitate cross-border prosecutions. 

Updates to the German Banking Act

The German government implemented updates to the Banking Act in 2021, introducing more stringent AML/CFT measures than required by 6AMLD. Under the new rules, the following AML/CFT measures are in effect: 

Predicate offences: The distinction between predicate offences and money laundering offences has been removed. Under the new rules, German authorities may prosecute a broad range of financial crimes as money laundering offences. 

Foreign companies: If foreign companies (or a subsidiary) are active in Germany, those companies may be liable to German prosecution for money laundering. Similarly, foreign companies that commit money laundering predicate offences abroad may face criminal liability for those offences in Germany. 

Reporting obligations: Businesses in Germany must now comply with more comprehensive AML/CFT reporting rules, applicable to a broader range of transactions. Businesses may also be required to justify their business procedures to the FIU.

AML in Germany: Achieving Regulatory Compliance

Under FATF recommendations, German financial institutions must take a risk-based approach to compliance – which means they must assess individual customers and then deploy a proportionate compliance response. With that in mind, firms in Germany should implement suitable Know Your Customer (KYC) procedures in order to understand their customers’ financial behaviour, including: 

Identity verification: Financial institutions should perform customer due diligence (CDD) in order to establish and verify their customers’ identities. The CDD process should involve the collection of customer names, addresses, and birthdates, and the collection of company information including beneficial ownership details. 

Transaction screening: German firms must screen their customers’ transactions for signs of financial crime, including irregular transaction patterns, and transactions involving high risk counterparties or jurisdictions. 

Sanctions screening: In order to avoid doing business with sanctions targets, German firms must screen their customers against relevant sanctions lists, including the EU sanctions list and the UNSC Consolidated List.

ESG and Adverse Media in Germany

Environmental, social and governance (ESG) factors and adverse media monitoring are an important part of AML/CFT compliance in Germany. 

ESG

In December 2019, BaFin published its Guidance Notice on Dealing with Sustainability risks which included descriptions of ‘risk identification, management, and control processes’. In 2021, the German government passed the Supply Chain Act (Gesetz über die unternehmerischen Sorgfaltspflichten in Lieferketten), a law concerning corporate due diligence for supply chains. Under the rules, firms in Germany must extend humanitarian and environmental due diligence obligations to their supply chains, including establishing systems to prevent and minimise ESG risk.  

Adverse Media

Customer involvement in financial crime is often revealed in news media prior to its confirmation by official sources. With that in mind, adverse media, also known as negative news, is a good indicator of AML/CFT risk. 

Under EU AMLD regulations, firms in Germany must implement adverse media screening requirements as part of their risk management solution. The Fourth Anti-Money Laundering Directive (4AMLD), for example, introduced a requirement for firms to screen against open source media, such as ‘reputable newspapers’. 5AMLD subsequently expanded that requirement to a broader range of business sectors and emphasised the need for firms to integrate suitable screening technology. 

2024 Bafin Guidance: Mandatory Adverse Media Screening 

In July 2024, BaFin updated its GWG compliance guidance, known as Auslegungs und Anwendungshinweise (AuA), in anticipation of the new EU Anti-Money Laundering Act (AMLA), and the need for ongoing compliance with EU AMLDs. Amongst the compliance updates set out in AuA ‘2.0’ was the introduction of mandatory adverse media screening. 

While AuA 2.0 acknowledges that adverse media screening is not explicitly required under the GWG, it states that sanctions screening and high risk country list screening is no longer sufficient for compliance, and that firms in Germany must “use all knowledge available” in order to establish AML risk, including knowledge derived “from media analyses”. 

Following the updated guidance, firms in Germany must now implement adverse media screening as part of their GWG compliance solution. 

Next Generation AML Technology

In order to achieve compliance with AML regulations in Germany, it’s vital that you integrate AML software capable of analysing vast amounts of relevant customer data, and of minimising costly false positive alerts. Ripjar’s next generation Labyrinth Screening platform is built for that purpose, integrating cutting edge screening technology to deliver automated data management, multilingual name matching, and the capability to adapt to a changing risk landscape in real time.With the capability to build deetailed AI Risk Profiles for every customer, and generate concise AI Summaries of that risk data, Labyrinth promises to supercharge your screening solution, strengthen decision making, and ensure your business is always prepared for compliance challenges.

Anti-Money Laundering Regulations Around the World

In an evolving regulatory landscape, you need to understand how to meet your anti-money laundering compliance responsibilities wherever you do business. Global anti-money laundering (AML) and counter-financing of terrorism (CFT) compliance is a complex challenge that can vary significantly by jurisdiction, risk environment, and emerging fintech innovations.

To help your business overcome its compliance challenges, and understand its regulatory responsibilities read our guide to money laundering regulations around the world. 

Global Money Laundering Regulations

The Financial Action Task Force

An intergovernmental organisation comprising 39 member states, the Financial Action Task Force (FATF) works to prevent international money laundering and terrorism financing, and to enhance the global compliance standards. To achieve those objectives, the FATF has developed a set of AML/CFT recommendations which its member-states must implement via domestic legislation. As new criminal trends, regulations, and fintech innovations emerge, the FATF adjusts its recommendations to reflect the global risk environment. 

FATF compliance generally requires member-states to implement the following fundamental AML measures and controls: 

• Governments must treat money laundering as a criminal offence and establish a national financial intelligence unit (FIU) to manage money laundering reports. 
• Domestic businesses should implement a risk-based approach to money laundering, performing risk assessments on their customers and deploying proportionate compliance responses. 
• Businesses should implement Know Your Customer (KYC) measures, including customer due diligence (CDD), in order to build out accurate customer risk profiles. 
• Businesses should screen and monitor their customers on an ongoing basis in order to detect suspicious activity and capture changes in risk profiles. Customers should be screened against relevant risk indicators, such as politically exposed person (PEP) lists, sanctions lists, and adverse media stories. 
• Financial authorities should assist international counterparts in cross-border criminal investigations.

European Money Laundering Regulations

The Anti-Money Laundering Directives

The European Union issues Anti-Money Laundering Directives (AMLD) on a periodic basis in order to standardise AML/CFT regulation across the bloc. EU member-states are required to transpose the regulatory measures set out in the AMLD into domestic legislation – and do so by a predetermined implementation deadline. The latest EU AMLDs are the Fifth Anti-Money Laundering Directive (5AMLD) cand the the Sixth Anti-Money Laundering Directive (6AMLD), which introduced the following key AML/CFT measures:

5AMLD – Implemented 10 January 2020

• Introduced public right of access to beneficial ownership registers and role-based PEP lists.
• Expanded AML/CFT reporting and record-keeping obligations to cryptocurrency service providers.
• Introduced transaction limits of €150 for prepaid card transactions, and €50 for online prepaid card transactions. 
• Imposed AML/CFT reporting and record-keeping obligations on high value transactions of €10,000 or more as a way to address financial crime in boutique industries such as the art trade. 
• Introduced mandatory enhanced due diligence checks for transactions involving high risk countries. 

6AMLD – Implemented on 3 June 2021:

• Set out a harmonised list of 22 money laundering predicate offences, including the two new offences of cyber-crime and environmental crime. 
• Added ‘aiding and abetting’ to the definition of the money laundering criminal offence. 
• Extended criminal liability for money laundering to legal persons, essentially enabling corporations to be punished for criminal activity perpetrated by employees. 
• Introduced harsher punishments for money laundering offences, including minimum 4 year prison terms. 
• Introduced requirements for member-states to share information in order to facilitate dual-criminality prosecutions that span international borders.

The UK

The UK’s primary AML/CFT regulations are the Money Laundering, Terrorist Financing and Transfer of Funds Act 2017, the Proceed Of Crime Act 2002, and the Terrorism Act 2000. The regulations define the offence of money laundering and set out compliance requirements, which are based on FATF guidance. Although the UK has left the EU, it has committed to implementing aspects of 6AMLD. 

Accordingly, under UK AML/CFT rules, financial institutions must conduct risk-based checks on their customers, including performing customer due diligence (CDD) checks, establishing ultimate beneficial ownership (UBO), screening against PEP lists and sanctions lists, and running adverse media checks. 

The Financial Conduct Authority (FCA) is the UK’s main financial regulator. Working with the Bank of England and the Prudential Regulatory Authority, the FCA sets out regulatory compliance requirements and provides AML/CFT oversight for UK financial institutions.

Switzerland

Switzerland regulates money laundering and terrorism financing under the Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector 1997, also referred to the as the Anti-Money Laundering Act (AMLA). The act imposes AML/CFT reporting and record-keeping regulations on financial institutions in Switzerland, along with sanctions, PEP, and adverse media screening requirements. 

The Swiss Financial Market Supervisory Authority (FINMA), or Eidgenössische Finanzmarktaufsicht, is Switzerland’s primary financial regulator. FINMA is responsible for issuing operating licences to Swiss banks and financial institutions and for ensuring compliance with AML/CFT regulations.

Nordic States

While AML regulations vary across the region, Nordic states generally mirror their southern and western neighbours in implementing the latest FATF money laundering guidance. As EU member-states, Sweden and Finland are required to transpose the anti-money laundering directives into domestic legislation. Norway is not in the EU and while it is not obliged to implement AMLD, it has, via its Anti-Money Laundering Act (2018), transposed 4AMLD and 5AMLD. In practice, this means that Nordic states impose the same kind of CDD measures, and sanctions, PEP, and adverse media screening processes as other FATF-member states. 

Nordic countries have dedicated financial authorities, known as Financial Supervisory Authorities (FSA), that provide AML/CFT supervision, issue operating licences, enforce regulations, and work with governments to develop new legislation. Sweden’s FSA is called Finansinspektionen, while Denmark’s FSA and Norway’s FSA are both called Finanstilsynet.

The Middle East

Middle Eastern AML/CFT regulations are often significantly divergent between states. With that in mind, many Middle Eastern countries present an elevated risk of money laundering and are designated on the FATF’s Jurisdictions under Increased Monitoring list – also known as the FATF ‘greylist’. The greylist currently includes Jordan, Pakistan, Syria, Yemen, and the United Arab Emirates. 

The United Arab Emirates, comprising  Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain, and Fujairah, was placed on the FATF greylist in 2022. The FATF cited deficiencies in the UAE’s AML/CFT framework, including poor beneficial ownership controls and ongoing failure to address terrorism financing. The UAE’s primary AML/CFT legislation is the Federal Decree-Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations. The law requires financial institutions in the UAE to implement AML reporting, record-keeping, and screening measures. In response to FATF concerns, the UAE has extended AML/CFT rules to designated non-financial businesses and professions (DNFBP). 

There are four regulatory bodies that provide oversight for the UAE’s AML/CFT framework: the Central Bank of the UAE, the Securities and Commodities Authority (SCA), the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA).

The US

The US regulates money laundering and terrorism financing through the Bank Secrecy Act (BSA) and the Partriot Act. The Bank Secrecy Act was introduced in 1970 and requires US banks and other financial institutions to implement an internal AML program with reporting and record-keeping obligations, and with risk-based CDD measures, and PEP, sanctions, and adverse media screening requirements. The Patriot Act was introduced in 2001 in response to the September 11 terror attacks: it modified the BSA by adding new CDD and screening requirements and increasing noncompliance penalties. 

In 2021, the US passed the Anti-Money Laundering Act 2020 (AMLA), the most significant amendment to the BSA since the Patriot Act. AMLA introduced the following AML/CFT measures: 

• New requirements for the disclosure of beneficial ownership.
• Increased financial penalties for money laundering offences and compliance violations.
• New protections for corporate AML/CFT whistleblowers.
• Expanded powers for US authorities to investigate foreign banks suspected of money laundering.
• A pilot program to increase information sharing with the foreign branches of US banks. 

The US’ primary AML/CFT regulator is the Financial Crimes Enforcement Network (FINCEN), which works at a state and federal level to ensure BSA compliance. In addition to FINCEN, the US’ Office of Foreign Assets Control (OFAC) works to enforce the US’ sanctions regulations.

Asia

Hong Kong

Hong Kong follows FATF guidance in implementing AML/CFT regulations. Hong Kong’s main anti-money laundering regulations are the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and the Banking Ordinance (BO), which set out the risk-based measures that firms must put in place to achieve compliance. 

The Hong Kong Monetary Authority (HKMA) is responsible for supervising banks and financial institutions in Hong Kong.

Singapore

Singapore is also an FATF member-state and has implemented a risk-based approach to AML/CFT in its domestic legislation. Singapore’s main money laundering regulation is the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) which defines the offence of money laundering and sets out the relevant CDD measures and screening  controls required for compliance. In 2020, Singapore implemented the Payment Services Act (PSA) which expanded AML/CFT regulations to payment service providers and fintech services in the city.  

The Monetary Authority of Singapore (MAS) provides AML/CFT supervision in Singapore.

Australia

As an FATF member-state, Australia requires banks and financial institutions to implement risk-based AML/CFT solutions. Australia’s primary AML/CFT regulations are the Financial Transaction Reports Act 1988 and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which set out reporting and record-keeping obligations along with other compliance requirements such as CDD measures, and PEP, sanctions, and adverse media screening. 

The Australian Transaction Reports and Analysis Centre (AUSTRAC) provides AML/CFT supervision in Australia with the stated goal of ‘preventing, detecting and responding to criminal abuse of the financial system’. Like other financial regulators, AUSTRACs responsibilities include handling licensing applications, enforcing AML/CFT regulations, and cooperating with international financial authorities. 

Nordic Banking AML Compliance: What You Need to Know

Nordic countries have a reputation as traditionally safe banking destinations, with the financial institutions of Norway, Sweden, Denmark, Finland and Iceland regularly ranking amongst the safest in the world. However, following a series of high profile international money laundering cases involving Nordic banks, that reputation has been shaken, putting a spotlight on Nordic banking AML compliance. 

The cases in question involved banks across the region. In 2018, for example, Denmark’s Danske Bank was implicated in a €200 million money laundering scheme connected to its Eastern European and Russian branches. In 2019, Sweden’s Swedbank was also implicated in the Danske Bank scandal after an investigation revealed it had laundered around €20 billion in its Estonian branches for Russian customers. In 2020, another Swedish institution, SEB Bank, was fined SEK1 billion after an investigation revealed poor money laundering controls in its Baltic branches. 

In response, in 2021 Nordic governments collectively requested that the IMF conduct an independent review of the region’s money laundering and terrorism financing risks, so that regulators could take appropriate steps to strengthen their regulatory compliance controls.

Given the increased focus on anti-money laundering (AML) and counter-financing of terrorism (CFT) in the region, it is more important than ever that companies understand the Nordic regulatory landscape and the compliance obligations that it entails.

Nordic Banking Regulators

All of the Nordic states have established dedicated domestic authorities, known as Financial Supervisory Authorities (FSA) to provide oversight and supervision of AML/CFT regulation. Key regulatory bodies include:

Norway – Finanstilsynet

The Financial Supervisory Authority of Norway supervises Norway’s financial system, and is responsible for managing the licensing of banks and financial institutions, with the goal of ‘promoting financial stability and well-functioning markets’. 

Norway’s primary AML regulation is the Anti-Money Laundering Act. As a member of the EU, Norway implements the Anti-Money Laundering Directives.

Sweden – Finansinspektionen

The Financial Supervisory Authority of Sweden provides oversight of all banking, securities and insurance companies, working to ‘authorise, supervise and monitor all companies operating in Swedish financial markets’. 

Sweden’s primary AML regulations are the The Money Laundering and Terrorist Financing (Prevention) Act and the The Act on Penalties for Money Laundering Offences. Sweden is also in the EU and implements its Anti-Money Laundering Directives.

Denmark – Finanstilsynet

The Danish Financial Supervisory Authority is responsible for the ‘supervision of financial undertakings’ of banks and other financial service providers in Denmark. It also assists the government in developing financial legislation, and collects and communicates financial sector statistics. 

Denmark’s primary AML regulation is the Act on Measures to Prevent Money Laundering and Financing of Terrorism. As an EU member state it implements the Anti-Money Laundering Directives. 

Finland – Finanssivalvonta

The Finnish Financial Supervisory Authority provides oversight for Finland’s financial and insurance sectors, working to ‘enable balanced operations of credit institutions, insurance and pension companies and other supervised entities in stable financial markets’. 

Finland’s primary AML regulation is the Act on Preventing Money Laundering and Terrorist Financing. Finland also implements the Anti-Money Laundering Directives as an EU member state.

Iceland – Seðlabanki Íslands

Iceland’s Financial Supervisory Authority merged with the Central Bank of Iceland in 2020, with the Central Bank taking on its supervisory responsibilities. As a regulator, the Central Bank is responsible for monitoring Iceland’s financial institutions ‘to ensure that their activities are in compliance with the law and with Governmental directives’.

Iceland’s primary AML regulation is the Act on Measures against Money Laundering and Terrorist Financing. Although it is not an EU member state, Iceland is part of the European Economic Area (EEA) and adopts elements of the Anti-Money Laundering Directives as part of its domestic AML/CFT legislation. 

Nordic Banking Risk Environment

Nordic banking money laundering scandals created financial turmoil across the region. The pattern of compliance failures suggested that Nordic banks were collectively struggling to implement effective AML controls, and failing to adequately address risks. Key compliance vulnerabilities that may have contributed to the compliance failures of the Nordic banking system include:

Information Sharing

Nordic banks struggled to share important risk data across borders and institutional frameworks due to barriers such as data secrecy laws. Following the AML scandals, Nordic banks launched a joint scheme to share information on suspicious transaction patterns.

Compliance Technology

Nordic banks used out of date AML/CFT technology, creating regulatory blindspots and generating high volumes of false positive alerts. The remediation of false positives not only created administrative backlogs, but had a negative knock-on effect on the effective management of true positives.

Manual Compliance

Nordic banks relied on manual compliance processes during important customer due diligence (CDD) processes, leading to poor quality risk profiles and slower alert remediation. The challenges of manual compliance were exacerbated as firms were forced to deal with high volumes of alerts.

Employee Compliance Training

Research suggests that employees of Nordic banks were hesitant or unable to address compliance violations, with up to 62% of employees failing to intervene upon discovery of unethical behaviour. The deficiencies in regulatory awareness reflected a failure in company leadership and a need to enhance compliance training to better spot money laundering red flags.

AML Solutions for Nordic Banking

In the wake of its AML challenges, the Nordic banking community is taking collective action to address its compliance failings, including an effort to enhance the data that it collects in order to perform more robust CDD and build more accurate risk profiles. 

The push for better customer data also reflects the need for better financial crime technology solutions. For example, banks that previously relied on manual Google searches of customer names and risk factors, are now implementing automated screening solutions, adding speed and accuracy to their compliance processes, more intuitive name-matching, and the capability to adapt quickly to changes in the risk environment. 

Beyond speed and accuracy, the automated screening solutions add depth and detail to customer data processes, with advantages over manual searches that include:

• Name-matching: Automated solutions can screen against a vast range of customer names in different language systems. Similarly, solutions can be programmed to recognise regional naming conventions, aliases, and spelling variations.
• Politically exposed persons: Automated PEP screening enables firms to capture information from a range of PEP lists. In conjunction with other screening tools, automation allows for the swift detection of changes in PEP status. 
• Adverse media: Automated adverse media screening solutions can cover a variety of news stories from different foreign countries, taking into account source reliability and political bias.
• Sanctions screening: The global sanctions landscape changes constantly. Automated sanctions screening helps firms know as soon as possible when a customer is designated on a sanctions list and use fuzzy logic algorithms to account for naming discrepancies. 

Future Compliance Considerations in Nordic Banking

The Nordic banking community is likely to focus on improvements to its collective KYC framework. The EU’s anti-money laundering directives will also have an effect on Nordic banking AML compliance: the Sixth Anti-Money Laundering Directive (6AMLD) came into effect on 3 June 2021, with an overt focus on the harmonisation of anti-money laundering standards across the EU. The EU also recently announced an update to 6AMLD; particularly relevant to Nordic financial institutions is the introduction of new whistleblowing protections for workers that identify compliance violations within their companies.

Get in touch to discover how Ripjar can support your AML compliance in the Nordics