Non-compliance with anti-money laundering (AML) regulations can lead to hefty fines. In 2021, regulators issued €4.7 billion in fines for AML deficiencies worldwide. The Financial Action Task Force (FATF) is the global body for combating money laundering and terrorist financing. It also helps with going after the proceeds of crime from these criminals.
The FATF’s mandate includes working with different governments. The aim is to put anti-money laundering and countering the financing of terrorism (AML/CTF) policies in place. Over 200 countries and jurisdictions agree to implement this AML/CFT framework. To avoid fines, keeping up to date with the current FATF Standards is essential.
Update Regarding Russian Federation
The FATF decided to limit the Russian Federation’s role within the FATF. This is due to the ongoing invasion of Ukraine. Read the complete statement here.
Compliance with the FATF Standards
Part of FATF’s role is to review a country’s compliance with AML/CFT policies. Assessments are in-depth reports created by members from other countries. Below are the highlights from the latest evaluations.
The Assessment of Germany
The Plenary found that Germany has improved its AML/CFT framework in the last five years. The assessment found an increased understanding of money laundering and terrorism financing risk. It also noted improved federal and state government cooperation.
However, certain areas are still lacking. For example, the private sector is still not adequately supervised. Also, the availability of beneficial ownership (BO) information should be improved. The Plenary also recommended better use of financial intelligence information by relevant authorities. And lastly, the assessment recommended that authorities should prioritise money laundering cases.
The Assessment of the Netherlands
The Netherlands corrected many deficiencies in its AML/CFT framework in recent years. Their success is based on an integrated system at both policy and operational levels. Another strong point is the development and use of financial intelligence.
The assessment also praised the confiscation of criminal proceeds as a priority. The evaluation further noted the government’s focus on NPOs in preventing terrorist financing.
However, the regulation of Virtual Asset Service Providers (VASPs) still has some deficiencies. There should also be more access to up-to-date beneficial owner information.
Another area identified for improvement is risk-based supervision. The report also suggested increasing the availability of resources for fighting unlicensed activities. Both country assessment reports will be published in September.
Gibraltar Placed Under Increased Monitoring
Gibraltar is now listed as subject to increased monitoring. Jurisdictions on this list cooperate with the FATF to improve their identified deficiencies. Countries should apply corrective action within a specified timeframe.
It also means the country is subject to additional checks. This list is often referred to as the “grey list.”
Malta No Longer Under Increased Monitoring
The Plenary praised Malta for its progress in correcting AML/CTF deficiencies. As a result, it is now removed from the list of jurisdictions subject to increased monitoring. However, it will continue to work with MONEYVAL to strengthen its AML/CTF framework.
The recent FATF Plenary approved several reports. Below are the ones to look out for in the next few months.
Balancing Information Sharing and Data Protection
Information collection is vital for financial institutions to analyse and detect problematic transactions. However, personal information collection and processing must comply with data protection regulations. This upcoming FATF report shows how some member jurisdictions succeeded in both. The goal is to have enough information to share while simultaneously complying with data protection and privacy policies. The report will be published in July.
Guidance on Risk-Based Measures for the Real Estate Sector
Criminals often attempt to launder their illicit funds by purchasing real estate. As a result, the FATF finalised guidance to help this private sector mitigate risks. The focus is on understanding money laundering and terrorist financing risks. The report also focuses on how to mitigate risks by implementing risk-based measures. This report will be published in July.
Implementing the FATF Standards on Virtual Assets/VASPs
VASPs are not as regulated as traditional financial institutions. This makes them attractive to criminals. To mitigate risks, the FATF wants to see all jurisdictions implement its Travel Rule.
This rule requires VASPs to gather identification information for each virtual asset transfer. It is to include the originator and the beneficiary information. The report also mentions market developments and current risks. It will be available by the end of June.
Improving Transparency of Beneficial Ownership
Criminals often use complex shareholding structures to hide ultimate beneficial ownership (UBO) information. These details are vital for identifying problematic transactions and illicit funds. The FATF aims to improve transparency with the below measures.
Guidance on Implementing the FATF Standard for Legal Persons
To mitigate risks, the FATF set new rules around beneficial ownership. This information should be available in an official registry for all entities.
The implementation guidance will help countries apply the new rules. The guidance is to be finalised in October.
Amendments to the FATF Standard for Trusts and Other Legal Arrangements
The FATF is looking to revise Recommendation 25, which affects trusts and other legal arrangements. The aim is to improve the transparency of beneficial ownership.
The white paper includes the proposed definition of beneficial owners and risk assessment. Once the paper is released, the public has until 1 August (18:00 CEST) to submit their comments.
Implementation of the Strategic Vision for the Global Network
The FATF seeks to strengthen the Global Network by implementing the Mar 2022 strategic vision. To this end, 206 jurisdictions agreed to improve their AML/CTF frameworks. The FATF continues to support regional bodies in completing their current mutual evaluations on time. The next round of assessments is set to begin in 2025.
Looking to the Future Under Singapore Presidency
This was the last Plenary under the German Presidency. One key focus was improving access to beneficial ownership information. The guidance also focused on sectors with identified AML gaps, such as real estate and VASPs.
The incoming Singapore President, T. Raja Kumar, introduced his Presidency’s priorities. One of the main focuses is cross-border financial crimes and the recovery of assets. In addition, particular focus will be given to cybercrimes.
The FATF also intends to build stronger public-private partnerships. This is an essential step in fighting money laundering and terrorism financing. NameScan is an essential tool for combating these crimes.
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