FATF ROUNDUP: UNDER U.S. PRESIDENCY, GROUP TO FOCUS ON CRYPTO COMPLIANCE, REGTECH, WMDS, AND MORE

The group responsible for creating global financial crime compliance standards has renewed its priorities under the new U.S. presidency starting this month, along with releasing new analyses on the risks of opaque beneficial ownership structures, counter-crime tenets for judges and prosecutors, and more.

Under the United States presidency starting this month, the Paris-based Financial Action Task Force (FATF) will have several broad areas of focus around many perennial and emerging challenges in the financial crime and compliance areas, including the intersection of proliferation financing and sanctions busting, the potential transformative innovations related to the upstart regtech space, and more.

The priorities include:

  • Preventing the financing of the proliferation of weapons of mass destruction.
  • Improving current practices in combating terrorist financing.
  • Fostering improvements in the regulation and supervision of virtual currencies/crypto-assets.
  • Improving compliance and investigative technical assistance provided to countries.
  • Strengthening the FATF global network.
  • Bolstering the legal status of the FATF.
  • Exploring FinTech and regtech innovations.
  • Initiating new work on digital identification.

To read the full report, click here.

FATF also detailed some of their achievements and future plans and focal points in a report to the G20. To read the full report, click here.

The group also released a bevy of important analyses of issues related to the facilitators of financial crime, including:

Professional money launderers: The report notes that professional money launderers use a variety of money laundering tools and techniques, such as trade-based money laundering, account management mechanisms and underground banking and alternative banking platforms and often work through gatekeepers, including attorneys, murky wealth management firms and others. To read the full report, click here.


Concealment of beneficial ownership, new FATF report

Not surprisingly, with the United Kingdom, European Union and even the United States recently upgrading rules, regulations and requirements related to capturing and, in some cases, publishing beneficial ownership information, FATF is tackling the issue yet again.

The group is cognizant of the recent historic leaks, non-governmental organization (NGO) pushes for transparency and growing body of evidence that opaque corporate ownership structures are a magnet for all range of criminals and a stumbling blog for investigators around the world.

FATF noted that “while corporate vehicles, such as companies, foundations, partnerships, and other types of legal persons and arrangements are important for supporting commercial and entrepreneurial activity, they can also be misused to conceal the ownership and control of illicitly gained assets.”

The report uses over 100 case studies provided by 34 different jurisdictions of FATF’s global network, the experiences of law enforcement and other experts, private sector input, as well as open-source research and intelligence reports to identify the methods that criminals use to hide beneficial ownership.

The report notes that, in many cases, criminal groups work through intermediaries and other gatekeepers, including attorneys, company formation agents and various nebulous wealth management firms.

Moreover, FATF states that the “ease with which legal persons, primarily limited liability companies (or similar) can be formed, make them particularly vulnerable, and are seen to be used in building complex legal ownership structures, often involving shell companies.”

In the same vein, trust and company service providers “frequently play a role in such structures,” according to the report.

Criminals are keenly aware that the use of “nominee directors and shareholders, both formal and informal, exacerbates the risks by creating barriers between the owner or individual and laundered proceeds.”

Professional intermediaries have played a major role in these situations, “helping create or operate the structures used to conceal beneficial ownership, either complicitly or unwittingly,” with some groups in recent years selling secrecy to criminals, corrupt oligarchs and even terror groups. To read the full report, click here.


FATF needs your help: Industry assistance needed in public consultation on draft risk-based approach guidance for the securities sector

FATF is asking for industry feedback related to draft guidance to aid the securities sector in better implementing a risk-based approach to anti-money laundering compliance and countering the financing of terrorism.

The guidance attempts to give clarity to one of the most complex areas of financial crime compliance, delineating anti-money laundering (AML) responsibilities to the various players in the trading sector’s supply chain, including intermediated relationships, introducing, clearing and other broker structures and the at-times nebulous world of omnibus accounts.

The sector’s compliance duties can vary depending on who is doing what, what entity is touching the funds or the customer and what information can, and can’t, be shared on customer and company trading patterns, who should be looking for suspicious activity, how should transaction alerts be escalated and how to build expertise at smaller shops with few resources.

Your comments should reach us at FATF.Publicconsultation@fatf-gafi.org with subject-line “Comments of XX on the draft RBA Guidance for the Securities Sector”, no later than Friday, 17 August 2018. To learn more, click here.


New report: AML and counter-terrorist financing for judges and prosecutors

FATF also released a new report reviewing the work of judges and prosecutors in money laundering and terrorist financing cases, noting the challenges of not just creating strong compliance and investigative programs, but ensuring they are effective and backed up with convictions, asset forfeitures and penalties for AML failures.

The work of judges, prosecutors and other investigative authorities is “crucial for stable institutions, transparency and the rule of law, which are all pillars of an effective anti-money laundering (AML) and countering the financing of terrorism (CFT) system.”

Under the Argentine Presidency, covering from July 2017 to July 2018, FATF initiated a global outreach program to the criminal justice systems to review and reinforce effectiveness in the investigation and prosecution of money laundering and terrorist financing, and in the recovery of the proceeds of crime.

The report highlights useful elements and best practices in the conduct of investigations, prosecutions, convictions and confiscation, noting that due to the transnational nature of many criminal networks, more countries need to engage in international cooperation on complex transborder investigations to crush larger organized illicit groups.

In parallel, the report called for more capacity building to upgrade the expertise or countries still strengthening their AML compliance and prosecution frameworks and still training judges on what could be considered systemic and dangerous compliance failures that warrant monetary penalties and even jail terms.

To read the full report for judges and prosecutors, click here.