Established in 1995, the Egmont Group is an international network of 166 financial intelligence units (FIUs) that works to prevent money laundering and terrorist financing by promoting information sharing and inter-organisation cooperation. As part of that goal, the group seeks to improve FIUs’ understanding of money laundering and terrorism financing, and inform government policy through operational experience. The Egmont Group states that financial intelligence should be “the cornerstone” of anti-money laundering (AML) and counter-financing of terrorism (CFT) standards.
In July 2022, the Egmont Group released its Strategic Plan 2022-2027, which seeks to position the Group “at the heart of a more efficient and effective global AML/CFT ecosystem”. The Plan outlines four Thematic Areas of Action (TAAs), which represent “the framework through which the Egmont Group’s activities will be coordinated over the next five years”. Accordingly, each TAA includes Strategic Goals, which are aligned with the Group’s AML/CFT objectives, namely:
- Facilitating information sharing between international FIUs
- Enabling cooperation between FIUs in order to increase their effectiveness
The Egmont Group wants each member FIU “regardless of its size or maturity” to commit to the Strategic Plan in order to maximise their contribution to the network, and collectively enhance global AML/CFT standards. With that in mind, we’ve identified 4 key takeaways from the Strategic Plan:
TAA 1: Enhance the framework for effective information exchange between FIUs
Key takeaway: FIUs must use their unique position within the global AML/CFT framework to strengthen information sharing processes and better manage emerging criminal threats.
The Egmont Group points out that its members’ AML/CFT strengths are derived from their “unique position” in the international AML/CFT framework which allows them to take advantage of financial intelligence such as suspicious activity reports (SAR) and suspicious transaction reports (STR). With that in mind, the Egmont Group will aim to “act as an enabler” for FIUs to share information “bilaterally and multilaterally” so that they can better maintain AML/CFT standards.
In delivering this TAA, the Egmont Group will promote international FIU cooperation, facilitate financial intelligence analysis, increase awareness of its mandate and desired outcomes, and ensure that FIUs are using their financial intelligence products effectively. The Plan’s focus on sharing intelligence and on financial intelligence products reflects the increasing regulatory complexity of the data landscape, and the need for closer cooperation in the face of sophisticated criminal methodologies. Many global jurisdictions have already developed their own information sharing initiatives, such as the FCA’s synthetic data trial in 2022, and the US government’s recent call for the development of “appropriate frameworks for information sharing” between financial institutions.
TAA 2: Strengthen cooperation with international partner organisations
Key takeaway: Enhancing and expanding engagement with international partners is vital to maximising outcomes for FIUs in the fight against financial crime.
The Egmont Group works with a wide range of international partners to bring its insight and intelligence to bear on AML/CFT policy and, ultimately, optimise financial crime outcomes. The Group’s international partners include global regulatory organisations such as the Financial Action Task Force (FATF), world governments, academic institutions, and numerous entities in the private sector.
Accordingly, the Strategic Plan sets out a requirement to both strengthen the Egmont Group’s existing partnerships and create new partnerships with other key stakeholders in the financial community – including “non-traditional’ partners” that can help the Group manage “future vulnerabilities and threats”. The Plan specifically emphasises the need to deepen the existing relationship with the FATF without diminishing the Egmont Group’s own “distinct purpose and identity”.
TAA 3: Develop and promote knowledge of new or emerging AML/CFT methods and trends, good practices, and Egmont Group requirements
Key takeaway: Implementing the latest AML/CFT methods and international good practices will help FIUs respond to threats faster and more effectively.
The third TAA represents a commitment from the Egmont Group to enhance its own unique position in the “AML/CFT ecosystem” in order to identify future financial crime threats and support “fast and flexible cooperation” between FIUs. The Group states that by continuing to deliver high quality insight, its members and stakeholders will be able to respond to money laundering and terrorism financing threats faster, and prevent and detect crime “at scale”.
The Strategic Goals for this TAA include helping FIU members apply AML/CFT good practices, being proactive in identifying emerging money laundering and terrorism financing threats, and promoting compliance with international AML/CFT standards. The Egmont Group also reiterates the importance of cooperation and engagement with the FATF to ensure AML/CFT standards are implemented effectively across the world.
TAA 4: Enhance support to Group members and candidate FIUs
Key takeaway: The Egmont Group will continue to expand its global reach to ensure FIUs maximise their AML/CFT impact regardless of their size or capability.
A trusted, respected international organisation, the Egmont Group will build on its progress to date with a commitment to support both existing members and candidate FIUs. This TAA involves a focus on shared strategic goals, and on ensuring that every FIU “has a voice within the Group” in order to maximise engagement, collaborative potential and operational effectiveness. Key to the TAA is the “active participation” of each member FIU, regardless of its access to AML/CFT resources or its level of maturity.
To deliver on the fourth TAA, the Egmont Group will support FIUs’ national and international initiatives, including fostering regional projects and prioritising technology enhancements. The Group will encourage FIU development by sharing best practices, fostering inter-agency trust, and enhancing access to the Egmont Centre of FIU Excellence and Leadership (ECOFEL). Reflecting the desire to focus on candidate members, the Egmont Group will place a particular emphasis on engaging with FIUs from Africa and Asia, both of which have comparatively low membership levels.
How Technology can help FIUs with AML Compliance
The Strategic Plan calls for a consolidation and strengthening of the Egmont Group, and its role, on the global AML/CFT landscape. However, with 166 member FIUs, and aspirations to expand, the Egmont Group’s information sharing mission requires a high degree of coordination and, crucially, the integration of technologies capable of distributing and searching data sets with speed and accuracy.
With that in mind, Ripjar’s Labyrinth Screening platform offers significant advantages for firms seeking to apply the information sharing best practices that the Egmont Group promotes. Labyrinth Screening gives firms the power to share, collect, and analyse vital AML/CFT data in real time, across thousands of data sources, in over 20 languages. Powered by cutting-edge machine learning technology, Labyrinth delivers actionable intelligence from structured and unstructured data, speeding up and streamlining information sharing processes in an increasingly complex regulatory landscape.
To learn more about Ripjar’s AML compliance technology, contact us today
On September 30, 2022, the United States Treasury’s Office of Foreign Assets Control (OFAC) published Sanctions Compliance Guidance for Instant Payment Systems. The guidance emphasises the importance of the risk-based approach that firms in the US must take to sanctions risk, in particular where those firms use payment technologies to handle transactions, such as instant payment systems.
OFAC published the payment systems guidance following its court settlement with Tango Card Inc, a stored-value card company that distributes products such as electronic gift vouchers and other online rewards. An OFAC investigation found that Tango Card had violated multiple US sanctions by transmitting its products to sanctioned countries.
With OFAC’s renewed focus on payment systems, it is crucial that service providers understand the new guidance, and how to ensure regulatory compliance.
What Does OFAC’s Instant Payment Systems Guidance Involve?
The 2022 guidance emphasises that there is no “one-size-fits-all approach” to sanctions compliance, pointing out that each instant payment system “has its own unique characteristics” and does not entail “the same sanctions risks”. Accordingly, OFAC’s guidance states that each financial institution’s sanctions compliance solution “should be based on that institutions’ assessment of its own risk”, and take in a variety of factors for mitigating that risk.
OFAC’s guidance sets out the following key risk factors relevant to financial institutions offering instant payment systems:
Domestic vs Cross Border Payments: OFAC’s guidance identifies that domestic payment systems which involve the transfer of funds between US bank accounts are typically a lower sanctions risk than those that facilitate cross-border transactions – which are obviously more likely to involve persons designated by US sanctions programs. OFAC points out that US banks already implement robust screening and monitoring processes (as required by US law), along with risk-based customer due diligence, but that non-US banks “may not be subject to the same regulatory requirements and examinations”.
Nature and Value of Payments: Certain types of payment facilitated by instant payment systems pose a greater sanctions risk than others. To this end, OFAC’s guidance suggests that the “nature and value” of payments should be a relevant risk factor when assessing risk. In particular, banks should examine the consistency of payments with customers’ past behaviour: for example significantly higher value payments than normal, to foreign accounts, may indicate a greater sanctions risk.
Emerging Compliance Technology: New compliance technology, such as artificial intelligence tools and information sharing mechanisms can significantly reduce the sanctions risk associated with instant payment systems. In particular, OFAC notes that such emerging technologies can “enhance sanctions screening functions and reduce false positives”, and encourages financial institutions to integrate technology wherever possible in order to manage instant payment risk.
The Tango Card Settlement
The publication of the instant payment systems guidance on 30 September coincided with OFAC’s settlement with Tango Card Inc, following an investigation that ran from 2016 to September 2021. The investigation found that Tango Card had “deficient geolocation identification processes” that had caused multiple US sanctions violations, including the illegal transmission of 27,720 gift cards and debit cards worth $386,828.65. Those cards had been issued to individuals in a number of high risk sanctioned countries, including Iran, Syria, North Korea, Cuba, and Ukraine’s Crimea region.
While OFAC praised Tango Card’s voluntary disclosure of the violations, it pointed out that the card company should have known that it was delivering cards to customers within sanctioned jurisdictions. The investigation found that Tango Card had failed to implement risk-based measures to identify the non-compliant transactions or establish the location of card recipients, and had failed to implement sufficient “geo-blocking” features to restrict the sale of cards to such customers. While Tango Card did implement contractual provisions that required its direct customers to comply with sanctions provisions, it did not ensure that the cards were not passed to customers in sanctioned jurisdictions.
Following the investigation, OFAC emphasised that contractual provisions should not be used as a means to transfer sanctions liability since they do not mitigate sanctions risk, nor do they absolve persons of their own compliance liability.
As part of the settlement, Tango Card agreed to pay $116,048.60, as opposed to a maximum penalty of $9.2 billion. The relatively low fine reflected mitigating factors in the case, including Tango Card’s voluntary disclosure of its compliance failures and its subsequent cooperation with OFAC during the investigation. OFAC also commended the steps Tango Card subsequently took to address its failures, which included implementing geo-blocking measures to prevent card issuance to sanctioned jurisdictions, conducting compliance training, integrating new screening tools, and hiring a security consultant.
The Importance of Technology in Sanctions Compliance
The Tango Card settlement, and the subsequent OFAC guidance underline the importance of the risk based approach as a sanctions compliance priority for organisations that offer instant payment services, but also demonstrate the importance of technology in achieving that goal. Many of Tango Card’s sanctions violations could have been prevented with the better application of screening technology within its compliance infrastructure: high risk transactions, for example, would have been flagged automatically, while geo-blocking measures would have identified top line domains and prevented products being issued to designated countries.
Ripjar’s Labyrinth Screening platform was designed to help firms meet their sanctions compliance requirements including the challenges presented by instant payments. When a payment is initiated, Labyrinth enables real time searches of sanctions lists, watch lists, and other types of data, including thousands of adverse media sources. Labyrinth helps firms conduct accurate, efficient assessments of the sanctions risks they face, integrating machine learning technology to manage structured and unstructured data, and generate actionable intelligence in seconds.
To learn more about sanctions compliance risk for instant payment systems, contact us today.
Following the Russian invasion of Ukraine on 24 February 2022, Western countries, including the UK, the US, the EU, Canada, and Australia, imposed an unprecedented amount of sanctions against President Vladmir Putin’s regime. Those sanctions have included import and export bans, asset freezes, and travel bans, and focused on both degrading Russia’s ability to fund its military action and on punishing the individuals that fund it. Collectively, the global sanctions response against Russia has targeted hundreds of Russia entities, including banking and media organisations, and thousands of individuals, including military figures, politicians, and members of Putin’s elite inner circle.
On 6 October 2022, the EU issued its 8th package of sanctions against Russia. The new sanctions followed Russia’s declared annexation of four Ukrainian regions, and Putin’s repeated threats to use nuclear weapons against Ukrainian forces. The new sanctions package generally broadens the scope of existing EU Russia sanctions, banning the export of a wider range of goods to Russia, targeting more members of Putin’s elite, and depriving Moscow of billions of euros in revenue. The UK joined the EU in imposing new Russia sanctions.
Key measures from the EU’s latest Russia sanctions update include:
Ban on IT consulting, architectural, engineering, and legal services
While the EU had already sanctioned the provision of financial services to Russian entities, the new sanctions package extended that ban to include IT consultancy, architectural, engineering, and legal advisory services.
Crude oil price cap
While the purchase, import, or transfer of crude oil products originating in Russia was banned under the EU’s 6th sanctions package, under the 8th package the EU has banned the maritime transport of those products – subject to a price cap. Ths means that EU countries may now trade Russian oil with third countries as long as the price of that oil remains below a price cap set by the European Council.
New import and export bans
The EU has expanded its import bans to Russian iron, steel, jet fuel, plastics, machinery and appliances, vehicles, ceramics, textiles, footwear, jewellery, and certain chemical products. The new import restrictions are estimated to be worth around €7 billion.
The 8th sanctions package also expands export bans, with a focus on firearms, military goods and technology, and other products that could be used to develop Russia’s defence sector or fuel Putin’s aggression against Ukraine. The export ban specifically targets:
- Goods and technologies with potential military use, including semiconductors, electronic integrated circuits, certain chemical substances and nerve agents.
- Small firearms, and goods with no practical use other than torture, punishment, or degrading treatment.
- Aviation products including certain oils, tyres, and brake pads.
- Products that could enhance Russian industrial capacities, including certain types of coal.
RMRS Ban
The EU has applied a transaction ban to the Russian Maritime Register of Shipping (RMRS), which carries out classification and inspection activities of Russian and certain non-Russian ships. From 8 April 2023, any Russian vessel certified by the RMRS will also be banned from accessing EU ports and locks.
Crypto ban
The EU has tightened its existing restrictions on Russian crypto assets by issuing a complete ban on all crypt-asset accounts, wallets, or custody services to Russian customers. The ban previously only applied to assets worth more than €10,000.
Sanctions expansion to Kherson and Zaporizhzhia oblasts
The EU has expanded its trade and investment ban to the non-government controlled areas of Ukraine’s Kherson and Zaporizhzhia oblasts. The ban previously only applied to the non-government controlled areas of Donetsk and Luhansk oblasts. The expansion follows Putin’s order that Russian armed forces enter those areas.
Russian asset freezes
The EU has expanded the list of individuals subject to asset freezes, with two new designations:
- PJSC Kamaz, a Russian military and vehicle manufacturer
- The National Settlement Depository, Russia’s central securities depository
The EU has also introduced a mechanism to freeze the assets of persons that facilitate Russia sanctions evasion.
Sanctions Impact
The EU’s 8th package of Russia sanctions demonstrates the bloc’s commitment to maintaining pressure on Vladmir Putin’s regime while the conflict in Ukraine is ongoing, and requires firms within the EU to adjust their customer screening and monitoring solutions to account for new designations.
In practice, this involves collecting and analysing a diverse range of customer data, including sanctions list and watchlist data, and information from media sources from around the world. The Russia sanctions landscape evolves rapidly and, as revealed by European Commission Chief Ursula von der Leyen, the EU is already discussing a 9th package of sanctions “to hit Russia where it hurts to blunt even further its capacity to wage war on Ukraine”.
Given the scope of the Russia sanctions challenge, it is important to implement an automated screening solution with the power to manage vast amounts of customer data, and with the flexibility to adapt to evolving compliance requirements. Ripjar’s Labyrinth Screening platform is designed for exactly that purpose: integrating cutting edge machine learning technology, Labyrinth is capable of searching customer names against thousands of data sources, including sanctions lists, watch lists, and adverse media in over 20 languages. Labyrinth delivers real time results, and screens on an ongoing basis, enabling you to generate more accurate customer risk profiles, and know as soon as possible when that risk changes.
To learn more about Russia sanctions
compliance screening, contact us today.
In September 2022, the EU renewed its efforts to combat modern slavery with a proposal for a far-reaching ban on the import of goods made with forced labour.
An estimated 27.6 million people around the world are forced to work by criminal organisations or repressive governments. In addition to the suffering they endure, the sale of the products they make goes towards perpetuating harmful criminal activity and anti-democratic regimes. If passed, the EU’s proposal would introduce sweeping changes for businesses operating across the bloc, especially in supply chain compliance, where firms would have new due diligence obligations and face strict penalties for violations.
Although the proposal’s implementation is still on the horizon, and must pass through the EU’s lengthy approval process, it is important that firms understand what shape the new rules and regulations will take, and what the potential implications will be on their business operations. With that in mind, let’s take a closer look at the details.
What are the new forced labour rules?
The EU’s proposed ban would cover all products in the common market that have been made with forced labour. The ban would prevent both their import for sale in the EU, and their export from the bloc.
Under the new rules, EU member states will be required to designate competent domestic authorities to implement and enforce the ban when it comes into effect. National authorities will be responsible for investigating potential violations, and deciding which products to prohibit within their jurisdiction. Those decisions will be made on a risk-based basis, and domestic customs agencies will follow the guidance of the competent authorities in taking action to prevent forced labour products entering and exiting the EU. The EU will establish a public database of forced labour risks to support member states as they build out their enforcement infrastructure.
The process for determining whether products have been made by forced labour will involve the following investigatory phases.
In the first phase of the process, member state authorities will take a risk-based approach to allowing goods to enter or leave the EU common market, which will involve a risk assessment of each product. If the assessment determines that forced labour has been involved in the goods’ production, an investigation will commence.
The second phase of the process involves the investigation itself. During this phase, the competent authority will analyse a range of information about the product in question, including:
- The risk that the product has been made using forced labour.
- Market surveillance and the compliance of similar products in other member states.
- Third party information about the product, including inputs from civil society.
- The level of due diligence applied by companies involved in the trade of the product.
The subjects of forced labour investigations will be required to provide authorities with any necessary information. Should the authorities determine there has been a violation, the product will immediately be prohibited from sale, while the economic operators responsible for it will be required to remove it from markets and dispose of it appropriately. The EU has stated that penalties for violations of the new forced labour laws will be determined under the national laws of each member state.
Implications for supply chains
While the EU’s proposed rules promise to help governments strike back at criminals that profit from modern slavery, they also mean that businesses will have to review their compliance standards to ensure that they are contributing effectively and are avoiding potential criminal risk. More specifically, the rules will require firms to impose much more robust due diligence, not just for customers and clients, but across all levels of their supply chains.
Supply chain due diligence refers to the need for firms to assess the compliance risks that they face from the third parties that they rely on to facilitate their business operations, including the sale of products and services. Environmental, social, and governance (ESG) factors, such as forced labour, are an increasingly important supply chain compliance priority, attracting both regulatory attention and the attention of the public and the media – which entails reputational damage in addition to any financial penalties.
Since the EU’s proposed ban focuses on imports and exports, firms will be expected to review their supply chain risk exposure. This may involve an examination of:
- The operational risks associated with a firm’s industry. Forced labour risks often correlate with the type of goods being handled.
- The risks associated with the geographical origin of products.
- The risk of products being imported or exported as a result of corrupt trading practices.
- The risk of products being imported or exported from a country designated on a sanctions list.
Global forced labour regulations
The EU is not alone in its efforts to address forced labour. In June 2022, the US introduced its own forced labour law, the Uyghur Forced Labor Prevention Act, which prevented companies from importing goods from China’s Xinjiang province. Under the law, any goods with ties to Xinjiang, the home of the persecuted Uyghur minority group, are presumed to have been made with forced labour. US companies must prove otherwise if they wish to import goods from Xinjiang, which means they must closely scrutinise their supply chains, from China and across Asia, to ensure they remain in compliance with the law.
The EU’s proposals will now be discussed by the European Parliament and the European Union Council. Once a final text is agreed, the EU will likely impose a 24-month implementation period for member state governments, with associated guidelines on how firms must adjust their due diligence compliance standards.
Achieving supply chain compliance
Responding to the announcement, industry observers have emphasised the need for supply chain reform to be driven by leadership. In the Wall Street Journal recently, Kit Conklin of risk data and software company Kharon suggested that “If the law passes as written, there’s going to be significant new due diligence requirements for industry,” adding that discussions about changes to existing compliance solutions must begin at a “C-suite level”.
Since supply chain due diligence means tracking vast amounts of customer data, often across international jurisdictions, it is vital that firms implement a suitable automated screening solution. Ripjar’s Labyrinth Screening platform was developed with this kind of high risk international screening in mind: integrating next generation machine learning technology, Labyrinth enables firms to search customer and third party names against thousands of watchlists, sanctions lists, and adverse media sources, in over 20 languages. Seamlessly blending structured and unstructured data, Labyrinth provides actionable supply chain intelligence that your business can use to ensure that it meets its supply chain due diligence obligations even as the compliance landscape changes.
To learn more about third party screening and supply chain due diligence, contact us today.
The Netherlands has the 17th largest economy in the world by GDP and attracts an array of international businesses, including a growing number of innovative fintech service providers. As a global financial hub, the Netherlands has also become a target for money launderers and other financial criminals, who seek to exploit the country’s financial system. To meet that threat, the Netherlands’ government implements a robust anti-money laundering (AML) and counter-financing of terrorism (CFT) framework, with significant penalties for firms that fail to comply. Dutch authorities emphasise their focus on regulatory compliance: in 2021, for example, Dutch Bank ABN Amro reached a €480m settlement with prosecutors after an investigation uncovered significant AML compliance failings.
AML regulations in the Netherlands represent an ongoing challenge. To ensure your company avoids penalties, it is important to understand the Netherlands’ AML/CFT infrastructure, and what it takes to achieve compliance.
What is the AFM?
The Netherlands’ primary financial regulator is the Authority for the Financial Markets, known as the Autoriteit Financiële Markten (AFM). Established in 2002 as a replacement for the Netherlands’ Securities Board, the AFM is an independent administrative authority that operates under the control of the Dutch Minister of Finance.
The AFM is responsible for supervising Dutch financial entities to ensure their compliance with AML regulations in the Netherlands. In that capacity, the AFM oversees the entire financial sector and its products and services, including “savings, investment, insurance, loans, pensions, capital markets, asset management, accountancy and financial reporting”. In order to achieve its supervisory objectives, the AFM has the authority to conduct inspections of Dutch financial institutions and, where necessary, enforce regulations by issuing warnings, filing reports with law enforcement agencies, and imposing fines and penalty payments.
The AFM shares its responsibilities with the Dutch central bank: De Nederlandsche Bank (DNB). The two entities work closely together, often sharing information. While the AFM focuses on supervising businesses in the Netherlands, and “promoting fair and transparent financial markets”, the DNB focuses on providing prudential supervision.
In conjunction with the DNB, the AFM is also responsible for issuing licences to all financial institutions that operate in the Netherlands. Firms in the Netherlands that wish to obtain a licence must meet a set of qualification criteria and complete the relevant application process.
Key AML Regulations in the Netherlands
The Netherlands’ main article of AML regulation is the Anti-Money Laundering and Anti-Terrorist Financing Act, known as Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft. The Act requires financial institutions in the Netherlands to take a risk-based approach to AML – as mandated by the Financial Action Task Force (FATF) which means they must perform risk assessments of individual customers and implement a range of compliance measures, including:
- Identity verification: Firms in the Netherlands must establish and verify the identities of their customers as part of the customer due diligence process (CDD) in order to conduct an effective risk assessment. The identity verification process requires the collection of information such as names, addresses, dates of birth, and official company documentation.
- Beneficial ownership verification: The CDD process should extend to the beneficial ownership of customer entities. Beneficial ownership checks are required to ensure that customers are not using corporate infrastructure or shell companies to conceal financial crimes.
- Transaction screening: Firms in the Netherlands should screen customer transactions against the relevant risk data sources, including beneficial ownership registries, politically exposed person (PEP) lists, and sanctions lists.
- Adverse media: Firms in the Netherlands should screen customers against global adverse media sources which may reveal changes in risk profile before that information is confirmed by official sources. Depending on risk exposure, it may be necessary to implement adverse media screening on a global scale, with name searches conducted in a range of foreign languages.
Anti-Money Laundering Directives: As a member of the EU, the Netherlands must implement the anti-money laundering directives (AMLD). The AMLD are released periodically by the European Parliament and include a range of updated AML/CFT measures that member states must transpose into domestic legislation. The latest directive, the Sixth Anti-Money Laundering Directive (6AMLD), came into effect in June 2021, introducing the following AML/CFT measures:
- A harmonised list of 22 predicate offences for money laundering, including the 2 new offences of environmental crime and cyber-crime.
- An expansion of the criminal scope of money laundering. Under 6AMLD, aiding and abetting money laundering now also falls under the definition of the offence of money laundering.
- An extension of criminal liability for money laundering to legal persons. In practice, this means that companies (including management and senior executives) may be held liable for money laundering offences committed by individual employees.
- An increase in the criminal penalty for money laundering. Under the new rules, money laundering offences must carry a minimum prison term of 4 years.
- New ‘dual criminality’ rules to facilitate the joint prosecution of money laundering offences in different countries.
Recent AML Developments in the Netherlands
The AFM and the DNB keep firms in the Netherlands up to date with the latest AML/CFT regulatory developments. Key recent updates include:
- Enforcement actions: The AFM publicises enforcement actions and the monetary penalties that it imposes for compliance failures. In June 2022, the AFM imposed compliance penalties on Revo Capital Management amounting to over €150,000 for infringements of the Wwft.
- Ukraine sanctions: Following Russia’s invasion of Ukraine in February 2022, the DNB published guidance for firms in the Netherlands regarding new sanctions against Russia and Russian individuals.
- Fintech: The AFM and the DNB publish guidance and recommendations regarding the regulations of fintech products and services, including cryptocurrencies and cryptocurrency service providers. In 2019, for example, both regulators called for the introduction of an international regulatory framework for cryptocurrencies, and for a national licensing regime for cryptocurrency exchanges. In June 2022, the EU announced it had reached an agreement on a Europe-wide crypto regulation framework, known as Markets in Crypto Assets (MiCA).
Next Generation Risk Management in the Netherlands
Ripjar’s Labyrinth Screening platform can help firms in the Netherlands reduce their compliance burden and streamline their screening processes. Labyrinth Screening enables firms to search thousands of risk data sources, including foreign news sources, in real time, in 21 languages. Incorporating next generation name matching technology, Labyrinth Screening enables you to react to changes in legislation or emerging criminal methodologies quickly and efficiently and be informed as soon as your customers’ risk profiles change.
Contact us to discuss how Ripjar can support your AML compliance in the Netherlands
In March 2022, following the Russian invasion of Ukraine, the UK government passed the Economic Crime Bill, known as the Economic Crime (Transparency and Enforcement) Act, as a means to address the exploitation of the UK’s financial system by Russian oligarchs. While the long-awaited bill was welcomed by the financial community, observers suggested that it did not go far enough to tackle Russian money laundering in the UK. Accordingly, in September 2022, with Russian aggression against Ukraine ongoing, the UK announced the introduction of the second Economic Crime Bill.
The new Economic Crime Bill will bring additional anti-money laundering (AML) measures to bear against inflows of illicit money, including new powers for Companies House and new private sector information sharing obligations. With parliament now discussing the second Economic Crime Bill, it is important that UK firms understand how the imminent legislation differs from its previous version, and how to comply with the new regulations.
What is the UK’s second Economic Crime Bill?
The second version of the Economic Crime and Corporate Transparency Bill was introduced to Parliament on 22 September, 2022. One of the first acts of Prime Minister Liz Truss’ new government, the passage of the bill suggests that financial crime will be a priority for UK authorities going forward, with a strong regulatory focus on money laundering by foreign criminals, and on promoting the UK’s reputation as a legitimate business destination.
The bill introduces the following measures:
Companies House reform: Under the second Economic Crime Bill, the UK’s Companies House will receive enhanced investigation and enforcement powers in order to “become a more active gatekeeper over company creation and custodian of more reliable data”. The powers will include the authority to “check, remove or decline information submitted to, or already on, the Company Register”.
Limited partnership reform: The Economic Crime Bill will modernise limited partnership regulations and address their criminal misuse by foreign persons. The new measures include tighter registration requirements, increased transparency, and a requirement for companies to maintain a connection to the UK.
Cryptoassets: UK law enforcement authorities will receive new powers to quickly seize and recover cryptoassets that are acquired through money laundering or other types of financial crime.
Anti-money laundering regulations: The bill strengthens UK AML powers in the following ways:
- Reform of information sharing rules, including the removal of civil liability for breaches of confidentiality when firms share information for the purpose of addressing economic crime.
- Removal of the requirement for a suspicious activity report (SAR) before the UK’s Financial Intelligence Unit (FIU) can issue an Information Order (IO) in order to obtain information about suspected money laundering or terrorism financing.
- An increased focus on high value criminal activity, including the reduction of the AML reporting burden, in order to prioritise private sector and law enforcement AML resources.
How does the second Economic Crime Bill differ from the first?
The first version of the Economic Crime Bill was first drafted in 2018. A long awaited legislative measure, the bill’s implementation was delayed for years as the country’s financial priorities changed – even as the UK’s legal and financial communities urged the government to move forward. The invasion of Ukraine provided the impetus for the bill’s passage and it was introduced to parliament on 1 March 2022. The first Economic Crime Bill set out the following measures:
- Overseas entities register: A register of overseas entities that own property in the UK. The register includes beneficial ownership information.
- Unexplained wealth orders: An adjustment to the requirements for issuing unexplained wealth orders (UWO). The bill made it easier for authorities to issue UWOs by increasing the evidence review period, lowering legal costs for unsuccessful prosecutions, and broadening the list of possible targets of an order.
- Sanctions liability: The introduction of strict liability for sanctions breaches. In practice, this means that the Office of Financial Sanctions Implementation (OFSI) may impose penalties without establishing that the offender knew they were breaching sanctions rules.
Upon its introduction, many UK politicians and observers predicted that the first Economic Crime Bill would need to be strengthened in the future. Then Home Secretary Priti Patel announced that while the bill focused on the measures that would “have the greatest impact and the greatest enablement”, another bill would be forthcoming because “we simply cannot get all the measures in right now.”
The measures set out in the second Economic Crime Bill specifically address many of the lingering vulnerabilities of the first, with broader requirements for transparency and new responsibilities and powers for financial institutions and authorities. In the past, for example when registering a company in the UK, foreign criminals were able to exploit a lack of checks in order to move illicit funds into the country. Under the new bill, Companies House will now have greater powers to detect foreign money launderers and prevent them from misusing the UK’s financial system, while private sector businesses will be able to share information about suspicious customers more easily.
The second Economic Crime Bill also includes a significant modernising effort, specifically targeting money laundering activities involving cryptocurrencies, and making it easier for UK authorities to seize and recover illegal crypto assets.
How to comply with the new Economic Crime Bill
With Russia’s aggression against Ukraine likely to continue into 2023, UK firms must understand how the second Economic Crime Bill will affect their compliance responsibilities, and adjust their risk management solution accordingly. When it was introduced in March 2022, the first Economic Crime Bill required firms to review their sanctions compliance solution and risk management processes. Building on those measures, the second Economic Crime Bill will require firms to strengthen further in those areas with a global focus on customer data collection, analysis and management.
To manage those new compliance requirements, firms must seek to integrate a powerful software solution capable of drawing from multiple global sources, and dealing with structured and unstructured data. With that goal in mind, Ripjar’s Labyrinth Screening platform has been designed to meet the risk management needs of UK firms in a changing, and challenging, compliance landscape. Labyrinth facilitates real-time search of global data sources, including sanctions lists, watch lists, and adverse media in 21 foreign languages, ensuring that your firm knows as soon as possible when a customer’s risk profile changes, or when new regulations alter the compliance environment.
Integrating next generation machine learning technology, Labyrinth Screening promises to help you manage your UK risk liability accurately and efficiently, while reacting quickly to regulatory changes, such as new sanctions against Russia.
To find out more about how Ripjar can help your firm comply with UK AML regulations, contact us today.
The Financial Action Task Force (FATF) has released its latest Mutual Evaluation Report (MER) on Germany. As a intergovernmental anti-money laundering (AML) and counter-financing of terrorism (CFT) regulator, the FATF conducts mutual evaluation reports on its members in order to gauge their compliance with the regulatory standards that it sets – specifically its 40 Recommendations. The MER process is in-depth and, when published, sets out details of the country’s AML/CFT compliance performance along with recommendations for regulatory improvements to help combat financial criminal threats.
The FATF released its Germany MER in August 2022. As a prominent regional and global economy, Germany’s response to the MER will have consequences both for the businesses that operate within its borders and those beyond. Given that significance, it is important that firms in Germany understand the contents of the latest MER and what consequences it may have for Germany’s regulatory landscape.
German AML/CFT Progress
The FATF found that while Germany continues to face significant financial criminal threats, its regulatory response is generally well-suited to managing risks, and its financial institutions are generally well supervised by the Federal Financial Services Authority (BaFin) and the Financial Intelligence Unit (FIU). Similarly, Germany’s authorities are effective at detecting and prosecuting terrorism financing threats within its financial system.
The FATF also found that Germany made “significant improvements” to its AML/CFT framework in the five years since its last assessment. Notable AML/CFT advances included:
- Use of the National Risk Assessment (NRA) process as a way to enhance the national understanding of money laundering risks.
- Introduction of cooperation and coordination mechanisms between federal and state governments.
- Boosting human resources for state financial regulator BaFin and the FIU.
- Removing asset recovery limitations for money laundering offences.
- Introduction of a Transparency Register to allow improved access to beneficial ownership information.
FATF AML/CFT Recommendations
While the FATF praised positive developments in Germany’s approach to AML/CFT regulation, it also stressed a need to address a range of regulatory deficiencies. The key areas for regulatory attention included:
Sources of Risk
Although Germany had demonstrated a strong response to domestic money laundering and terrorist financing risks, its perspective of the wider risk landscape was limited.
The FATF found that the regulatory focus on money laundering risks from real estate and cash was causing German authorities to “overlook other important risks” such as those created by complex corporate structures including shell companies and foreign companies. This kind of threat was attributed to Germany’s status as a global financial hub, which made it a target for international financial criminals. The FATF noted that German law enforcement authorities “tend to focus on natural persons” rather than foreign criminals and professional enablers, an approach which ends up “limiting the information available for assessing risks”.
Correspondent Banks
The FATF noted that, as an international destination for financial services, Germany faces a significant money laundering threat from the higher risk correspondent banking sector. The MER found that German correspondent banking institutions had problems with the scope and accuracy of the data that they were accessing to address and verify those types of banking threats.
In order to improve the way that correspondent banks access and utilise their AML/CFT data, the FATF noted that Germany should accelerate the integration of advanced analytics technologies within public and private sector compliance frameworks. In particular, larger correspondent banks should seek to integrate bespoke technology solutions to address the increased AML/CFT risk that they face.
Risk Assessment
While the FATF found that Germany’s larger financial institutions tended to address their risk exposure with suitable customer due diligence (CDD) measures, smaller institutions, institutions outside the financial sector, and designated non-financial businesses and professions (DNFBP) were not matching that response. In particular, the FATF found that the weaker level of risk understanding from these institutions was negatively impacting “their ability to develop and implement preventative measures aligned to their ML/TF risks”.
The FATF characterised this deficiency as a “reactive rather than proactive” approach to risk based anti-money laundering with the implication that regulators need to take a unified, strategic approach to the problem, strengthened by coordinated AML initiatives such as data-sharing between financial and non-financial organisations.
Sanctions Implementation
The FATF identified failings in the implementation of global economic sanctions amongst firms in Germany’s financial sector. In particular, the FATF criticised Germany for not proactively designating individuals listed on international sanctions lists (such as the UNSC list) in its domestic legislation in line with its AML/CFT strategy.
Similarly, the FATF noted that German regulatory supervision of sanctions compliance was “not fully effective”, with the problem again particularly notable “in the DNFBP sectors”. It also criticised the impact of German financial sanctions on their targets, suggesting that, for example, the amounts of assets frozen in sanctions actions were low “compared to total amounts raised in Germany”.
German FATF Compliance
Germany has committed to addressing the AML/CFT issues raised by its 2022 MER, which placed a strong focus on risk management and customer data. With that in mind, German regulators are likely to emphasise a need for accurate and agile risk management, with a need for firms to integrate software solutions tailored to their specific compliance needs.
With that challenge in mind, Ripjar’s Labyrinth Screening platform is a powerful compliance tool that enables firms to screen against thousands of global risk data sources in real time, including sanctions lists, PEP lists, and adverse media sources in 21 languages. Integrating cutting edge machine learning technology, Labyrinth seamlessly blends structured and unstructured data enabling firms in Germany to stay in control of their risk environments. As the German government responds to the FATFs findings, Labyrinth will also help firms adjust quickly and efficiently to new legislation with tailored risk management solutions – ensuring you stay compliant even as customer risk profiles change.
To learn more about how Labyrinth Screening can support your risk management in Germany, contact us 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
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.
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.
On 30 June 2022, the European Union reached a provisional agreement on a landmark regulatory framework for the cryptocurrency industry, featuring new EU crypto regulations. The framework, known as Markets in Crypto Assets (MiCA), will regulate unbacked crypto-assets and stablecoins along with the cryptocurrency exchanges and wallets in which those assets are held, and will introduce a range of new compliance requirements for service providers. MiCA follows the introduction of the Transfer of Funds Regulation (TFR) which passed on 29 June and which focuses on anti-money laundering (AML) and counter-financing of terrorism (CFT) protections for cryptocurrency service providers.
Expected to come into effect in 2024, MiCA and the TFR are intended to create a harmonised regulatory regime for cryptocurrency service providers in all EU member states. These new EU crypto regulations are legislatively intertwined, with aspects of the TFR only applicable via MiCA.
Understanding the EU’s Crypto Regulations
What is MiCA?
Markets in Crypto Assets represents the EU’s first attempt at implementing a comprehensive regulatory regime for digital assets, ensuring a high level of consumer protection, market integrity, and financial stability across the industry. The proposed regulation was passed following a series of high profile stablecoin collapses, including the TerraUSD crash that saw over $200 billion wiped off the crypto market in a single day. Under MiCA, the following rules will come into effect:
- Issuers of stablecoins will be required to build up and maintain a sufficient liquid reserve to ensure redemption requests from holders can be honoured, even in the event of a mass withdrawal.
- Crypto-asset service providers will be required to obtain authorisation from a national authority in order to operate.
- The European Banking Authority (EBA) will create and maintain a public register of crypto-asset service providers that are found to be non-compliant with the regulations.
What is the TFR?
The Transfer of Funds Regulation is intended to address the anonymity risks that are associated with cryptocurrency transactions and that criminals frequently exploit to launder money and fund terrorist activities. The regulation reflects Financial Action Task Force (FATF) Recommendation 16, known as the ‘Travel Rule’, which requires financial service providers to trace cross-border transfers of funds as part of their Know Your Customer (KYC) process. Under the Transfer of Funds Regulations, the following rules are in effect:
- Cryptocurrency exchanges are required to obtain the personal data of all parties involved in crypto asset transfers. The requirement applies regardless of the size of the transfer.
- The personal data collection requirement also applies to transactions involving unhosted wallets that are not managed by crypto exchanges when those transactions exceed €1,000.
- Before assets can be released to a beneficiary, service providers must screen to ensure that the beneficiary is not designated on any sanctions lists or subject to other restrictive measures.
- Cryptocurrency exchanges must provide the personal data that they collect to authorities when requested.
TFR rules will not apply to cryptocurrency transactions conducted directly between private wallets – only those that involve an exchange platform. Prior to the introduction of the TFR, cryptocurrency transactions were subject to the FATF Travel Rule but only in cases where funds were equal to or greater than $3,000.
MEP Assita Kanko emphasised the compliance benefits of the TFR in addressing money laundering, terorrism financing and other serious financial crimes: “Today, we have taken a big step to address these problems. It will be much harder to misuse crypto-assets and innocent traders and investors will be better protected. The extended travel rule will make that world safer”.
Crypto Regulations in the UK
Although the UK left the EU in January 2020, it has broadly matched the bloc’s crypto regulatory landscape. As of 2022, the UK had implemented cryptocurrency regulations equivalent to the measures introduced by the EU’s Fifth Anti-Money Laundering Directive (5AMLD) and Sixth Anti-Money Laundering Directive (6AMLD). Those directives included the following regulatory measures:
- 5AMLD set out a legal definition of cryptocurrency and applied existing AML/CFT regulations to crypto assets and exchanges. The directive also required crypto service providers to register with their domestic financial authorities.
- 5AMLD gave national financial intelligence units (FIU) the authority to obtain the personal details of cryptocurrency holders from service providers.
- 6AMLD introduced 22 new predicate offences – requiring crypto service providers to expand the scope of their AML/CFT screening and monitoring.
- 6AMLD also extended criminal liability for money laundering offences to senior management figures – meaning that crypto service providers must ensure their leadership retains oversight of AML/CFT controls.
While the UK is likely to align closely with the new EU crypto regulations, there are indications that it may diverge from its continental counterpart, or even introduce more stringent cryptocurrency compliance measures in the future. In January 2022, for example, the UK Treasury strengthened financial advertising regulations in order to bring cryptocurrencies into line with other types of financial promotion. In April 2022, the UK government announced that it would be bringing stablecoins into the scope of AML/CFT regulations. As part of the government’s ambition to make the UK a global hub for crypto-asset technology, it also announced that it would be introducing a financial market infrastructure sandbox to help crypto firms innovate within the UK’s regulatory environment.
To discover how Ripjar can help you comply with the EU’s crypto AML regulations, contact us today.
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
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.