Welcome to a new monthly feature from ACFCS to help you keep up to date on the latest rules, guidance and enforcement trends: The Regulatory Report! 

In this feature, ACFCS highlight’s key current, upcoming or potential changes in the global financial crime landscape, so compliance professionals, investigators and regulators can better keep abreast of pressing vulnerabilities, issues and legislative fixes. Enjoy!

In this month’s ACFCS Regulatory Report, a Swiss bank gets penalized for corruption even as a Swiss regulator fines a bank for its role in a historic Malaysian graft scandal, a global watchdog updates its priorities under a U.S. presidency, beneficial ownership battles, and more.

United States


Credit Suisse in fincrime compliance spotlight again with nearly $80 million FCPA penalty for ‘princeling program’

Switzerland’s second largest bank and a Hong Kong subsidiary will pay U.S. federal authorities nearly $80 million to settle corruption charges that it improperly awarded choice employment spots to the family and friends of Chinese government officials to influence and, eventually gain, new business.

The U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) this month levied penalties of $47 million and $30 million respectively against Credit Suisse (Hong Kong) Limited and its Zurich-based parent, Credit Suisse Group AG, for “awarding employment” to the relatives and close associates of Chinese politically-exposed persons (PEPs) to capture new revenues, a clear violation of the U.S. Foreign Corrupt Practices Act (FCPA).

The penalty is yet another financial crime compliance foible for Credit Suisse, which has already paid multiple federal agencies and regulators billions of dollars in recent years for failures in nearly every area of counter-crime compliance, including anti-money laundering (AML), sanctions violations for dealing with blacklisted regimes, like Iran, tax evasion, and now, copping to corruption. To read ACFCS coverage of the penalty, click here.

OCC chastises beleaguered Swiss banking behemoth UBS for ‘systemic’ AML deficiencies across the board, from customer risk scoring to SAR filing 

The U.S. Treasury’s Office of the Comptroller of the Currency (OCC) also jumped on the bandwagon this month, levying a formal AML enforcement order against Swiss banking giant UBS in New York, Miami and Connecticut for a host of control failures and reporting issues.

The lengthy and prescriptive 34-page order is requiring the bank to strengthen several key areas that have been a focal point for U.S. regulators targeting the domestic operations of foreign banks, including oversight of correspondent banking portals, private banking, trade finance and third-party payment processing. UBS also had “systemic failures” related to transaction monitoring, customer risk assessments and filing suspicious activity reports. To read the full order, click here.

Due diligence resources spotlight: The secret doors investigators can open on Reddit

A look at how investigators can and should be using Reddit in their online research and due diligence work, with a phrases to pique your interest, including “kittens and the Dark Web,” (via the Hetherington Group).


U.S. sanctions arm warns on hidden ties to North Korea related to goods, technology, human capital  

This month, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the country’s chief sanctions arm, emphasized two primary areas of risk for businesses involving North Korea: unintentionally sourcing services, goods or technology from North Korea, and having North Korean citizens or nationals, whose labor produces revenue for the North Korean government, in a company’s supply chains.

To read the full guidance, click here.

To read a companion piece of guidance from November by the U.S. Treasury’s Financial Crimes Enforcement Network, click here.

U.S. Congress

U.S. lawmakers tried to make sense of virtual currencies, debating whether they are future of funds or ballooning boondoggle

The U.S. Congress this month tackled the vexing question of virtual value in a hearing, highlighting fincrime gaps, and a greater need for regulatory, AML oversight, particularly as there is no “unified approach to regulation” when it comes to crypto-currencies at the national or international levels, (via the U.S. Congress). To view a short wrap up of the hearing, click here.

House bill moves forward to increase oversight of costs related to new regulations

A bill that would expand the administration’s oversight authority to rules issued by most independent regulatory agencies won House passage July 13 by a 230-168 vote. The Unfunded Mandates Information and Transparency Act (H.R. 50), sponsored by House Education and the Workforce Chairwoman Virginia Foxx (R-N.C.), would require the Congressional Budget Office to assess the costs of agency regulations. To read more analysis, click here.

Lawmakers urge GAO to tackle TBML

U.S. Senators Bill Cassidy, M.D. (R-LA), and Sheldon Whitehouse (D-RI) are asking the U.S. Government Accountability Office (GAO) to assess the federal government’s efforts to combat trade-based money laundering (TBML) in light of the ongoing opioid epidemic. To read more, click here.

Law enforcement groups express dismay, frustration at gutting by way of beneficial ownership below-the-belt shot of potentially transformational AML bill

As key Congressional committees wrestle with the Counter Terrorism and Illicit Finance Act (H.R. 6068), which has been stripped of provisions that would require collection of beneficial ownership information at the time of company formation, major law enforcement groups cry out, noting such a provision is a necessary step to address this widely-recognized and well-documented vulnerability in the U.S. AML regime. To read the full statement, click here.

International cooperation

Five countries form a new Joint Chiefs of Global Tax Enforcement (J5) Alliance to better counter cyber criminals, professional financial crime enablers

Her Majesty’s Revenue and Customs announced an alliance on tax enforcement between the United Kingdom, Canada, the Netherlands, the United States and Australia this month with the goal to better combat international tax crimes and money laundering.

Members include the heads of tax crime and senior officials from the Australian Criminal Intelligence Commission (ACAC) and the Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Dutch Fiscal Information and Investigation Service (FIOD), Her Majesty’s Revenue & Customs (HMRC), and Internal Revenue Service’s Criminal Investigation Division (IRS-CI).

The J5 was formed in response to a call to action from the OECD for countries to do more to tackle the enablers of tax crime.  All five countries have similar threats:  organized crime groups and wealthy offshore tax evaders who are well resourced and have access to professional enablers to hide income and assets using the global financial system.

To read the full release, click here. To read more analysis, click here.

State rules 

NYDFS bucks federal tiptoeing, exhorts state financial institutions to bank medical marijuana firms.

New York’s chief financial regulator has taken a firm stand against what it considers antiquated national laws, discordant government agencies and tiptoeing federal regulators by exhorting state-chartered banks and credit unions to establish banking relationships with legal medical marijuana businesses.

The move this week spelled out in guidance by the New York State Department of Financial Services (NYDFS) comes with the explicit support and urging of New York Governor Andrew Cuomo, who noted the issue is a polarizing one on the federal stage as marijuana in any form is still illegal and a schedule one drug.

To pave the way for such relationships, the NYDFS stated clearly it “will not impose regulatory actions” on any New York state-chartered bank or credit union for opening an account or starting a new banking relationship with a medical marijuana-related business that complies with federal and state laws.

To read ACFCS coverage of the guidance, click here. To read the full guidance, click here.

NYDFS cyber rules coming into effect in various tranches with a deadline this month, phasing in until 2019. 

In late August 2017, the first in the nation cybersecurity compliance rules came into effect requiring certain financial institutions to bolster cyber protections and training, rapidly report breaches and attacks and designate a top officer to manage, with a CCO, or board member, certifying effectiveness.

To read more about what is needed to comply with the first deadline, click here.

Here are some passed or upcoming deadlines:

  • March 1, 2018 – One-year transition period ends, first batch of requirements must be implemented
  • September 3, 2018 – Eighteen-month transition ends, second batch must be implemented
  • March 1, 2019 – Two-year transition ends, compliance with all requirements

Crypto corner

U.S. business group urges regulators to regulate ICOs, exhorts them to focus on rules for products, not underlying technology

The world’s largest business group, the US Chamber of Commerce, is demanding clear regulations for cryptocurrencies and any activities related to them, including Initial Coin Offerings (ICOs), moves that would have direct import on related anti-money laundering programs to counter fraud and other financial crimes.

The Chamber urged the Securities and Exchanges Commission (SEC) in its report to continue studying ICOs. The study needs to be done to see how they can be an effective tool for raising capital while protecting investors and meeting all the applicable laws. To read more analysis, click here.

Cryptocurrencies driving a new, more tech-driven era of money laundering, with virtual exchanges prime targets

An increase in the theft of cryptocurrencies is driving the rise of a new, high-tech era of virtual money laundering, with hackers and criminal groups more aggressively targeting virtual currency exchanges, a report released this month has concluded.

In the first half of 2018, more than $760 million in cryptocurrency was stolen from exchanges – a threefold increase from all of 2017, according to CipherTrace, a California-based blockchain security firm.

In the past two years alone, criminals have made off with some $1.21 billion in virtual cash, the firm’s quarterly report on the subject said. These sites have little to no “Know Your Customer” regulation, making it difficult for law enforcement to investigate the trail of money moving in and out of these services, (via the OCCRP). To read the full report, click here.


Under U.S. Presidency, FATF to focus on crypto compliance, with October G20 deadline of binding rules, 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.
  • 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, noting both are working toward an October deadline to create binding AML standards for the crypto currency sector. To read the full report, click here.

The group also released several reports on key vulnerabilities in the global financial crime framework, including:

  • Beneficial ownership: 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.
  • 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 and others. . To read the full report, click here.
  • Judges, prosecutors: 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 read the full report, click here.


In Canada, government officials are also working to strengthen the country’s financial crime and compliance countermeasures with proposed amendments in several key areas considered major vulnerabilities, chiefly around inherently risk technologies and entities, including:

  • Life insurance: Now captured related to the life insurance of loans, so firms would have the same AML requirements as other FIs and a new obligation related to politically-exposed persons (PEPs) if funds involved breach $100,000.
  • CDD reliance: The proposed rules would expand the ways banks can rely on other entities when it comes to performing customer due diligence, including related to third parties and affiliates. The new rules would also repeal a ban on using scanned or photo copied documents, alleviating a major burden.
  • Beneficial ownership: The proposed regulations also update the requirement of verification of beneficial ownership related to corporate entities. If finalized, financial institutions would be required to take reasonable measures to confirm the accuracy of beneficial ownership information and keep it current.
  • Risky PEPs: The proposed changes would require that that entities subject to the rules take reasonable measures to determine the origin of funds related to PEPs. The figures should be reasonable and consistent with their stated income.
  • Virtual currencies: Proposed amendments work update the definition of money services business (MSB) to include virtual currency exchanges, subjecting the sector to AML rules.
  • Prepaid cards: The new rules would also capture prepaid cards, but only related to open loop cards that can be used anywhere, or even with virtual currencies. The rule makes it clear it does not apply to credit and debit cards.
  • Foreign MSBs: The new rules would subject AML rules to foreign MSBs that offer services in Canada, similar to domestic MSBs.
  • SAR shrinkage: The SAR deadline between when a bank suspects a suspicious activity and must file a SAR would shrink from 30 days to three days.
  • Funds transfers: For banks, MSBs and other entities involved in funds transfers, if the amount is more than $100,000, they must make reasonable ovations to determine if a PEP is involved.

European Union

Compliance Enforcement Spotlight: EU Commission refers Greece, Romania, Ireland to Court of Justice, warns Latvia, Malta and Spain on transposing EU AML Directive

This month, the European Union Commission referred Greece, Romania and Ireland to the Court of Justice of the EU for failing to implement the 4th AML Directive into their national law. As a result, the Commission proposed that the court charges a lump sum and daily penalties until the three countries take the necessary actions.

To read the full report, click here.

This month as well, the commission sent reasoned opinions to Latvia and Spain, and an additional reasoned opinion to Malta for failing to implement the 4th Anti-Money Laundering Directive into national law, with a deadline of two months to improve or have the cases referred to the EU Court of Justice.

“Spain has so far only partially transposed the rules, and the Commission has found the transposition in Latvia and Malta incomplete,” according to the EU Commission. “The Panama Papers and other scandals have revealed the need for stricter anti-money laundering rules. Gaps in one Member State have an impact on all others.”

There are currently infringement procedures ongoing against 20 Member States: Three at the stage of court referrals, nine at the stage of reasoned opinions, and eight at the stage of letters of formal notice.

A quick deadline recap:

  • All EU member states had to implement the rules of the Fourth Directive by June 26, 2017.
  • The 5th Anti-Money laundering directive has been agreed and entered into force on July 9, 2018.
  • Member States will have to implement new rules into national legislation by January 10, 2020.

To read the full report, click here.


Germany overhauls chaotic national AML unit to tackle financial crime, terror alert backlog, with more powers, staff, leader

Germany is revamping its new AML agency just a year after its launch, after under-staffing and poor equipment led to a massive backlog of un-tackled cases, leading some to call the situation a national security nightmare and cause of global shame.

Not surprisingly, Europe’s top economy is doubling down by nearly tripling staff, adding more powers to access and share important data and new authority to stop suspect transactions directly.

The financial intelligence unit’s (FIU) staff will be almost tripled to 475 from 165. It’s also being furnished with more powers, meaning that in the future it will get access to all the data it needs from law enforcement, financial and administrative authorities. It will also have the right to immediately stop all suspicious transactions. To read more analysis, click here.

OECD confirms Germany as one of world’s top counter-corruption enforcers, just below U.S. but above U.K.

A new report by a global watchdog group is counting Germany as one of the most aggressive countries in the world against corruption, with a quickening of enforcement and closing complex cases. The Organization for Economic Cooperation and Development’s (OECD)  Phase 4 Report stated that the country has initiated nearly 70 cases resulting in sanctions against 328 individuals, and 18 cases resulting in legal persons being held liable. These figures place Germany behind the United States but well ahead of the UK and other European states.

To read more analysis, click here.

United Kingdom

Banking regulators in the United Kingdom (U.K.) have also been busy, noting some institutions still struggling on basic AML duties, including EDD, risk assessments

The U.K. Financial Conduct Authority (FCA) released several documents with financial crime compliance implications. Here are some snapshots:

Annual AML Report: This month, the FCA released its annual report looking at AML trends. Some takeaways:

  • Examiners identified some weaknesses, such as client risk assessments which considered only a limited number of factors.
  • Firms in some cases failed to record the justification for their risk-based decisions.
  • Overall, in this second round of reviews, examiners also found weaknesses in firms’ anti-bribery and corruption framework. Regulators then “made clear to them that they must ensure they manage and mitigate all their financial crime risks at all times.”
  • Examiners also found deficiencies, “some serious, in some firms, mostly smaller overseas banks.”
  • Among the most common weaknesses was the “ineffective application of enhanced due diligence, which in turn led to poor identification and monitoring of customers who were PEPs or who were high risk.”

To read the full report, click here.

Annual enforcement report: The FCA also released its annual enforcement performance reporting, noting that overall penalty figures have fallen from nearly 885 million pounds three years ago, to just more than 181 million pounds two years ago and in the most recent period shrunk further to just less than 70 million pounds. To read the full report, click here.

Quality reports: The U.K. Law Commission has also highlighted that Investigations of money laundering by organized criminals and terrorists are being hampered by the flood of low-level, and low-value SARs, with the group calling for changes in related AML laws, including:

  • Statutory guidance on areas of fincrime focus, new SAR format for filings.
  • Querying new enforcement, analytical tools, like U.S. geographic targeting orders.
  • New powers to require more details and records for certain transaction types.
  • Guidance on allowing banks to cut down on defensive filing.
  • Legal protections for banks to temporarily freeze some account funds.
  • More clarity around employee and corporate liability to failing to prevent offenses.

To read the full report, click here. To read further analysis, click here.

U.K. seeking to strengthen laws against real estate money launderers, proposing prison terms

Criminals using the U.K. property market to launder money face prison time under proposed legislation, along with heftier fines and bans on selling or leasing property, according to the proposed legislation.

Foreign companies owning U.K. real estate will have to reveal their true, or “beneficial” owners. Failing to do so could lead to up to five years in prison, according to the bill. The owners’ names will appear on a corporate registry, making it easier for law enforcement to seize assets linked to criminals. To read more analysis, click here.


EU banking watchdog criticizes Malta for AML shortcomings, chastising FIU for lax exams, enforcement

The European Union’s top banking watchdog has found “general and systematic shortcomings” in Malta’s application of EU anti-money-laundering (AML) rules, it said this month, chiefly tied to the depth of examines and dearth of penalties for missteps.

The European Banking Authority’s (EBA) criticism came as it concluded an enquiry into the way Malta’s AML watchdog, the Maltese Financial Intelligence Analysis Unit (FIAU), investigated alleged wrongdoings at Pilatus Bank, a lender on the island, noting a lack of examiner expertise as well. In particular, the EBA asked the FIAU to:

  • Take actions to systematically assess the ML/TF risks of the financial sector.
  • Better supervise the effectiveness of the AML/CFT policies in place by obliged entities.
  • Ensure enough procedures, resources are available to supervise obliged entities.

To read the official release and more detailed report, click here. To read more analysis, click here.


Swiss regulator concludes 1MDB investigation with AML action against Rothschild Bank for ‘serious breaches’ of compliance rules

Switzerland’s top banking regulator, the Swiss Financial Market Supervisory Authority (Finma) has dinged Rothschild Bank AG and one of its subsidiaries for broad AML failings, stating the institution was found to be in “serious breach” of money laundering rules related to the sprawling 1MDB corruption scandal, the final of seven enforcement proceedings.

The breaches relate to foundational AML requirements, including due diligence, suspicious activity reporting, decision-making and related documentation. To read the full order, click here.


Singapore’s precious stones and metals industry to face tighter scrutiny on financial crime risks as new regulations subject sector to full spate of AML rules

Dealers of precious stones and metals could soon have to register with the authorities, under a regulatory regime proposed by the Ministry of Law this month, following the United Kingdom, Europe, Canada, and other major countries in subjecting more risky sectors to stronger formal anti-money laundering obligations.

New rules, designed to manage money laundering and terrorism financing risks in the industry, would also require dealers to have measures in place to mitigate any such risks posed by customers and transactions. To read the full release, click here.

New Zealand

AML legislation to hit more Kiwi businesses this month, capturing legal, real estate, and other sectors

The number of Kiwi businesses that need to comply with AML / CFT legislation is quadrupling this month. From July 1, legislative requirements will be imposed on the legal, real estate, sports betting, and high-value goods industries (jewelry, precious metals, precious stones, watches, motor vehicles, boats, art or antiques where they take cash payments of $15,000 or more).

The impact of failing to comply with this global legislation can have severe consequences. This includes hefty fines or a jail term. To read more analysis, click here.


The Securities and Exchange Commission of Pakistan (SECP) and National Counter Terrorism Authority (NACTA) this month signed a memorandum of understanding to better collaborate and coordinate on anti-money laundering (AML)/counterterrorism financing (CTF) oversight and enforcement in the sectors under its authority.

The statement comes on the heels of stronger overall AML regulations adopted in June, which consolidate AML/CFT regime for financial institutions regulated by the SECP, namely, securities brokers, insurance companies, non-banking finance companies and modarabas. The move likely comes in response to gray listing by FATF as Pakistan states these moves will bring the country into alignment with global standards. To read the full report, click here.

Fed dings U.S. operations of Karachi-based bank in familiar refrain targeting foreign banks’ AML programs

The Federal Reserve last week ordered the U.S. operations of Karachi-based United Bank Limited to strengthen its AML policies as the regulator criticized it for not doing enough to track dubious transactions.

This marks the second time that the Fed has sanctioned UBL in the last few years. Five years ago, the regulator directed United Bank to closely monitor remittances from New York City to Karachi and faulted the bank’s AML oversight. To read the full order, click here. To read more analysis, click here.


India bolstering graft laws for both givers, takers in corruption schemes

India is updating laws to counter corruption, strengthening penalties so that bribe givers are just as liable to face harsh punishments as bribe takers. To read more analysis, click here.

India seeking to have expansive crypto regulations in place by September, as country choosing rulemaking rather than outright sector ban. To read more analysis, click here.