Updates from FATF 

The Financial Intelligence Analysis Unit (FIAU) would like to inform subject persons that the Financial Action Task Force (FATF) has recently published the following documents:  

1) Guidance on Beneficial Ownership for Legal Persons 

The purpose of this guidance is to assist countries and subject persons to identify, design and implement appropriate measures to prevent the misuse of legal persons in line with the revised version of Recommendation 24 of the FATF (Transparency and beneficial ownership of legal persons).

This document provides, guidance to countries on the use of a multi-pronged approach for the collection of beneficial ownership information. This implies the combination of different mechanisms to ensure that adequate, accurate and up-to-date information on the beneficial ownership of legal persons is available. The multi-pronged approach assists competent authorities to have access to beneficial ownership information in a timely manner. 

The Guidance emphasises the need for a risk-based approach.  Through this approach countries and the private sector assess the level of money laundering and terrorist financing (ML/TF) risks, and how to mitigate them according to different types of legal persons. Furthermore, it provides guidance to countries on how to assess and mitigate ML/FT risks associated with foreign companies which they are exposed to. 

Detailed guidance is also provided on various aspects of beneficial ownership, including:

• Defining beneficial ownership and understanding the different types of beneficial owners.
• Establishing a legal framework for beneficial ownership. 
• Sharing beneficial ownership information between different authorities and with foreign counterparts.
• Mechanisms for preventing and mitigating risk of the misuse of bearer shares and bearer share warrants.
• Mechanisms for preventing and mitigating risk of the misuse of nominee arrangements.

Case studies and examples of good practices from different countries and the private sector are also included. 

2) Report on Money Laundering and Terrorist Financing in the Art and Antiquities Market

The FATF has recently published a report entitled “Money Laundering and Terrorist Financing through the Art and Antiquities Market”. It focuses on assisting the public and private sector to identify the vulnerabilities and risks that can be exploited by criminals to launder money and finance illegal activities within the art and antiquities market. 

The ML/FT typologies in the cultural objects market may include the use of cultural objects as a vehicle to transfer or mask criminal proceeds. Due to the uniqueness of the objects which leads to subjective and variable prices, the use of cash to acquire cultural objects, the abuse of intermediaries, legal persons or arrangements to hide the transaction’s beneficiary, this market is an ideal channel. There are also a number of crimes which generate illicit proceeds in the context of art and antiquities, such as forgery, theft, looting, illegal trafficking and fraud.

The report identifies how the financing of terrorist groups or activities can take place through the exploitation of trafficking and trading of cultural objects by excavating, looting and smuggling antiquities. It outlines the difficulties law enforcement authorities encounter in the process of detecting and investigating ML/FT linked to cultural artifacts. Investigative strategies, such as the reporting of suspicious transactions, and good practices, such as the provision of training and outreach and public-private information sharing, are provided within this report.     

A non-exhaustive list of risk indicators is included within the FATF report to assist both subject persons and authorities to identify suspicious activities linked to cultural objects which may give rise to ML/FT. 

Moreover, the report highlights the need for proper effectiveness of the AML/CFT obligations, efficient outreach initiatives by the competent authorities, the exchange of updated information on ML/FT risks and typologies and congruous cross-border actions to avoid regulatory arbitrage which may be abused by criminals. 

3) Report on Countering Ransomware Financing

Ransomware is a particular malicious software (malware) developed/used by criminals to deny access to data, systems, or networks, while demanding a ransom payment in exchange. The FATF Standards require ransomware attacks to be criminalised as a predicate offence for ML. 

This report looks at how ransomware payments are made and laundered and identifies good practices to help countries tackle this crime more effectively. It highlights the importance of a risk-based approach and urges countries to ensure that their legal and regulatory frameworks are up to date and effectively implemented. Furthermore, it encourages financial institutions and Virtual Asset Service Providers (VASPs) to enhance their customer due diligence procedures and to report suspicious activities to the relevant authorities.

The report delves deeper into the role of cryptocurrencies in ransomware financing and provides guidance on how VASPs can address the risks associated with virtual assets. It highlights the importance of international cooperation and information sharing in combating ransomware financing. 

This report is complemented by the FATF report “Countering Ransomware Financing: Potential Risk Indicators”, which focuses on the risk indicators that will help public and private sector entities identify suspicious activities related to ransomware.

These Guidance and Reports can be accessed directly through the FATF website, or through the FIAU website by accessing the following link.

FIAU Malta Notice