FATF

Advisory on the Financial Action Task Force-Identified Jurisdictions with Anti-Money Laundering and Combating the Financing of Terrorism Deficiencies and Relevant Actions by the United States Government

The Financial Crimes Enforcement Network (FinCEN) is issuing this advisory to inform financial institutions of updates to the FATF list of jurisdictions with strategic AML/CFT deficiencies. Financial institutions should be aware of these changes, which may affect their obligations and risk-based approaches with respect to these jurisdictions. The advisory also reminds financial institutions of the status and obligations involving these jurisdictions, in particular the Democratic People’s Republic of Korea (DPRK) and Iran.

As part of the FATF’s listing and monitoring process to ensure compliance with its international AML/CFT standards, the FATF identifies certain jurisdictions as having strategic deficiencies in their AML/CFT regimes.1 These jurisdictions are named in two documents: (1) the “FATF Public Statement,” which identifies jurisdictions that are subject to the FATF’s call for countermeasures and/or enhanced due diligence (EDD) because of their strategic AML/CFT deficiencies; and (2) “Improving Global AML/CFT Compliance: On-going Process,” which identifies jurisdictions that the FATF has determined to have strategic AML/CFT deficiencies.2 On June 21, 2019, the FATF updated both documents. Financial institutions should consider these changes when reviewing their obligations and risk-based policies, procedures, and practices with respect to the jurisdictions noted below.3

The advisory then continues with specific sections on Iran and the DPRK, as well as the countries subject to FATF’s ongoing monitoring program. In this second category, Panama was added to the list of jurisdictions and Serbia was no longer subject to ongoing monitoring.

The document also contains reviews of Section 312 guidance, including a specific section for Iran and North Korea, a review of the guidance of the jurisdictions on FATF’s ongoing monitoring list, and a reminder to use the SAR form that was updated in February of this year.

Link:

FinCEN Advisory

Outcomes FATF Plenary, 16-21 June 2019

Orlando, 21 June 2019 – FATF President Marshall Billingslea of the United States, chaired the third and last Plenary meeting under the U.S. Presidency in Orlando on 19-21 June 2019.

During this Plenary, delegates celebrated the 30th Anniversary of the FATF. In recent years, the international community is following the FATF’s work increasingly closely.  Recent G20 statements and the United Nations Security Council resolutions recognise the FATF’s important role in protecting the integrity of the financial system. Last month’s FATF Ministerial meeting resulted in a new, open-ended mandate, and greater Ministerial involvement in the work of the FATF, recognising the substantial achievement of the FATF over three decades.  This Plenary meeting was the first under the FATF’s new mandate.    

U.S. Secretary of the Treasury Steven T. Mnuchin delivered the closing remarks to the Plenary, highlighting the critical role of the FATF, the importance of the new global standards agreed by FATF this week to protect virtual assets from abuse by money launderers, terrorist financiers, and other illicit actors; action on Iran; and agreement to strengthen the standards to counter the financing of the proliferation of WMD.

During three days of meetings, delegates discussed the following issues, including FATF initiatives under the U.S. Presidency of the FATF:

1. Major Strategic Initiatives

  • Mitigating risks from virtual asset activities, including a public statement and a risk-approach guidance on virtual assets and virtual asset service providers.

  • Launching a Strategic Review to analyse the progress made on effective implementation of AML/CFT measures, review the FATF/FSRB assessment processes, and identify drivers of positive change.

  • FATF’s current action to combat terrorist financing, including a statement on FATF Actions to identify ISIL, Al-Qaeda and Affiliates Financing and the adoption of guidance for jurisdictions on assessing terrorist financing risk.

  • FATF’s efforts to strengthen its standards on Countering the Financing of Proliferation

2. Mutual Evaluations and Follow-Up Reviews, and Compliance

  • Discussion of the mutual evaluation reports of Greece and Hong Kong, China

  • Discussion of follow-up reports for the mutual evaluation of Iceland, in which the country achieved technical compliance re-ratings

  • Issuing a statement on Brazil’s progress in addressing the deficiencies identified in its mutual evaluation report

  • Identifying jurisdictions with strategic anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies:

    • Jurisdiction no longer subject to monitoring: Serbia

    • New jurisdiction subject to monitoring: Panama

    • Monitoring Iran’s actions to address deficiencies in its AML/CFT system

3. Other Initiatives

  • Adoption of a report to the G20 Leaders

  • Approval of three Risk-Based Approach Guidance papers:

    • Lawyers

    • Accountants

    • Trust and Company Service Providers (TCSPs)

4. Welcoming the Kingdom of Saudi Arabia as a new member to the FATF

5. Discussion of the FATF priorities under the Chinese Presidency

1. Major Strategic Initiatives

Mitigating the money laundering and terrorist financing risks of virtual assets.

This Plenary, the FATF delivered on its commitment to member governments and the G20, as well as the private sector, to develop and clarify the FATF’s requirement with respect to virtual asset activities and virtual asset service providers. In October 2018, in response to the increasing use of virtual assets for money laundering and terrorist financing, the FATF amended Recommendation 15 and the glossary to clarify to which businesses and activities the FATF requirements apply in the case of virtual assets. Following a public consultation on the measures applicable to virtual asset transfers, the FATF has now finalised the Interpretive Note to Recommendation 15 which sets out in detail the application of the FATF Standards and binding measures for the regulation and supervision of virtual asset activities and service providers. The FATF also finalised guidance to further assist countries and providers in complying with their AML/CFT obligations and guidance for operational authorities to support the effective investigation and confiscation of virtual assets misused for money laundering or terrorist financing.

Risk-based Approach Guidance on Virtual Assets and Virtual Asset Service Providers

The FATF adopted updated guidance that clarifies the application of the risk-based approach to implementing the FATF Recommendations in the context of virtual assets. The guidance benefitted from dialogue with the private sector, including the sector itself. It includes examples of national approaches to regulating and supervising virtual asset activities and service providers to prevent their misuse for money laundering and terrorist financing. 

The FATF is now working on revising its methodology to assess how countries have implemented the FATF’s new requirement for the October 2019 Plenary. During the next 12 months, the FATF will closely monitor the actions that countries are taking and will continue to engage the private sector on its efforts to enhance compliance with the FATF standards.

Strategic Review

With a new, open-ended, mandate, the FATF moves into a new phase.  As the FATF continues to lead global action against money laundering, the financing of terrorism and proliferation, it must ensure that its work is timely, targeted and effective.  With the support from the G20, the FATF Plenary agreed to launch a strategic review of its own processes.  This review will analyse the progress made on effective implementation of AML/CFT measures, review the FATF/FSRB assessment processes, and identify drivers of positive change. 

FATF’s current action to combat terrorist financing

Combatting the financing of terrorism has remained a priority for the FATF under the U.S. Presidency. Acts of terrorism, whether perpetrated by groups such as ISIL and Al Qaeda, or terrorist groups with other extremist views, continue to pose a threat to our society. Since the February 2019 Plenary there have been a number of serious terrorist attacks. The United Nations recognised the FATF as the global standard-setter to combat terrorist financing when it adopted UN Security Council Resolution 2462(2019). This resolution, focused solely on countering terrorist financing, has embedded the need to implement the FATF Standards for combatting terrorist financing into international law. 

During this Plenary meeting, delegates heard an updated assessment of the financing methods employed by ISIL, Al Qaeda and affiliates, and released a public statement on FATF members’ actions to identify and disrupt their financing.  Despite ISIL’s loss of territory, it still has access to significant reserves of funds, while its extremist ideology continues to inspire acts of terror. 

The investigation and prosecution of terrorist financing is central to global efforts to counter terrorism. However, FATF and FSRBs’ assessments reveal that many countries still face challenges in investigating terrorist financing activity. A global workshop, hosted by the Israeli government in Tel Aviv in March 2019, building on the targeted outreach to judges and prosecutors initiated under the Argentinean Presidency of the FATF, sought to explore common challenges and best practices experienced by jurisdictions when prosecuting terrorist financing. The Plenary decided that the FATF should develop guidance to help countries effectively investigate and prosecute terrorist financing. 

Guidance on Terrorist Financing Risk Assessment

The FATF requires each country to identify, assess and understand the terrorist financing risks it faces in order to mitigate them and effectively dismantle and disrupt terrorist networks.  Assessing terrorist financing risks can be challenging due to the cross-border nature of terrorist financing, and the low value and routine nature of funds and transactions often involved.  The FATF finalised a Guidance which will assist countries, in particular low capacity countries with limited terrorist financing expertise, in assessing their risk context. Recognising that there is no one-size-fits-all approach when assessing terrorist financing risk, the Guidance provides relevant information sources and considerations for different country contexts. This report builds on the FATFs 2013 Guidance on National Money Laundering and Terrorist Financing Risk Assessments and draws on national experiences and lessons learnt in assessing terrorist financing risk from across the FATF Global Network.

Countering the Financing of Proliferation

Under the U.S. Presidency, in June 2019, the FATF agreed to pursue further work to strengthen the FATF Standards on countering the financing of proliferation by requiring jurisdictions and private sector entities to understand and mitigate their proliferation financing risks, as well as by enhancing requirements for domestic cooperation and coordination on proliferation financing.  FATF has conducted extensive analysis on a range of proposals, but has agreed to prioritize this work moving forward. Other options considered included new requirements to use criminal justice measures and financial intelligence, expanded targeted financial sanctions tools, and more effective mechanisms to ensure international information sharing on proliferation financing activity. The FATF agreed to potentially consider these other options at a later date.

2. Mutual Evaluations and Follow-Up Reviews, and Compliance

Discussion of the mutual evaluation reports of Greece and Hong Kong, China

The Plenary discussed the mutual evaluation reports of Greece and Hong Kong, China and the level of effectiveness of each jurisdiction’s AML/CFT system and their level of compliance with the FATF Recommendations.

The Plenary concluded that Greece has a sound legal framework to support effective action against money laundering and terrorist financing, but that the country needs to improve its prosecution of these crimes, the supervision of its designated non-financial professions and businesses and NPO sector, and the confiscation of proceeds of crime.   

The Plenary discussed the joint APG-FATF assessment of Hong Kong, China and concluded that the jurisdiction has a strong legal foundation to underpin its AML/CFT regime.  Hong Kong, China understands its risks, has effective measures to combat terrorist financing and to confiscate the proceeds of crime, and actively cooperates with international partners. However, it needs to prioritise efforts to prosecute ML linked to foreign predicates, increase risk understanding and AML/CFT implementation by smaller institutions, and strengthen supervisory measures for some sectors.

The reports were prepared on the basis of the FATF Methodology for assessments which requires countries to take into account the effectiveness with which AML/CFT measures are implemented, as well as technical compliance for each of the FATF Recommendations.

The Plenary discussed the key findings, priority actions and recommendations regarding each jurisdiction’s AML/CFT regime. The mutual evaluation reports are expected to be published by September 2019 after the quality and consistency review, in accordance with procedures.

Discussion of the follow-up report for the mutual evaluation of Iceland in which the country achieved technical compliance re-ratings

The Plenary discussed the progress that Iceland has made since its mutual evaluation report was adopted last year. The FATF Plenary agreed to re-rate Iceland a number of FATF Recommendations to reflect the country’s current level of technical compliance. After a quality and consistency review, the FATF will publish the follow-up report which sets out the actions that Iceland has taken to strengthen the effectiveness of its measures to combat money laundering and the financing of terrorism and proliferation.

Brazil’s progress in addressing the deficiencies identified in its mutual evaluation report

In February 2019, the FATF decided that it would review the Brazil’s recently adopted legislation for compliance with FATF Standards at its June Plenary and determine the next steps at that time.  The Plenary has issued a statement with regard Brazil.

Identifying jurisdictions with strategic anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies

The FATF maintains its February 2019 public documents which identify jurisdictions that may pose a risk to the international financial system, with the amendments set out below:

Jurisdiction no longer subject to monitoring: Serbia 

The FATF congratulated Serbia for the significant progress made in addressing the strategic AML/CFT deficiencies identified earlier by the FATF and included in its action plan.

Serbia will no longer be subject to the FATF’s monitoring under its on-going global AML/CFT compliance process, and will work with its FATF-Style Regional Bodies MONEYVAL as it continues to further strengthen its AML/CFT regime.

New jurisdiction subject to monitoring: Panama

FATF has identified Panama as a jurisdiction with strategic AML/CFT deficiencies. The country has developed an action plan with the FATF to address the most serious deficiencies. The FATF welcomed the high-level political commitment of Panama to this action plan.

Monitoring Iran’s actions to address deficiencies in its AML/CFT system

In June 2016, the FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies, and its decision to seek technical assistance in the implementation of the Action Plan. Given that Iran provided that political commitment and the relevant steps it has taken, the FATF decided in February 2019 to continue the suspension of counter-measures.

In November 2017, Iran established a cash declaration regime. In August 2018, Iran has enacted amendments to its Counter-Terrorist Financing Act and in January 2019, Iran has also enacted amendments to its Anti-Money Laundering Act. The FATF recognises the progress of these legislative efforts. The bills to ratify the Palermo and Terrorist Financing Conventions have passed Parliament, but are not yet in force. As with any country, the FATF can only consider fully enacted legislation. Once the remaining legislation comes fully into force, the FATF will review this alongside the enacted legislation to determine whether the measures contained therein address Iran’s Action Plan, in line with the FATF standards.

Iran’s action plan expired in January 2018. In June 2019, the FATF noted that there are still items not completed and Iran should fully address: (1) adequately criminalising terrorist financing, including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism”; (2) identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions; (3) ensuring an adequate and enforceable customer due diligence regime; (4) clarifying that the submission of STRs for attempted TF-related transactions are covered under Iran’s legal framework; (5) demonstrating how authorities are identifying and sanctioning unlicensed money/value transfer service providers; (6) ratifying and implementing the Palermo and TF Conventions and clarifying the capability to provide mutual legal assistance; and (7) ensuring that financial institutions verify that wire transfers contain complete originator and beneficiary information.

The FATF decided at its meeting this week to continue the suspension of counter-measures, with the exception of the FATF calling upon members and urging all jurisdictions to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran, in line with the February 2019 Public Statement.

While acknowledging the progress that Iran made including with the passage of the Anti-Money Laundering Act, the FATF expresses its disappointment that the Action Plan remains outstanding.  The FATF expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary AML/CFT reforms.

If by October 2019, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will require introducing enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran. The FATF also expects Iran to continue to progress with enabling regulations and other amendments.

Iran will remain on the FATF Public Statement until the full Action Plan has been completed. Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system. The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran, consistent with FATF Recommendation 19, including: (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

3. Other Strategic Initiatives

Adoption of a report to the G20 Finance Ministers and Central Bank Governors

The Plenary discussed the FATF’s report to the G20 Leaders which highlights FATF’s recent work on the regulation of virtual assets. It also sets out other recent developments, including strengthening FATF’s institutional basis, governance and capacity of FATF, countering the financing of terrorism and proliferation of weapons of mass destruction terrorist financing, improving transparency and beneficial ownership, de-risking and work on FinTech/RegTech in relation to digital ID.

Publication of three Risk-Based Approach Guidance papers

The risk-based approach is at the core of the FATF Recommendations. It ensures that countries identify and understand the unique risks they are exposed to, allowing them to prioritise resources on areas where risks are highest. Informed by a public consultation in March 2019, the FATF updated three risk-based approach guidance documents that aim to support the implementation of the risk-based approach, taking into account national ML/TF risk assessments and AML/CFT legal and regulatory frameworks:

  • Lawyers

  • Accountants

  • Trust and Company Service Providers (TCSPs)

4. Welcoming the Kingdom of Saudi Arabia as a member to the FATF

The FATF granted full membership to Saudi Arabia. In 2018, the country underwent a mutual evaluation. Since then, Saudi Arabia has worked according to an action plan to address the key effectiveness issues identified during the evaluation. Based on the country’s commitment to complete the items on its action plan and the continuing progress to improve its AML/CFT, the Plenary agreed to grant membership.

5. Discussion of the FATF priorities under the Chinese Presidency

The FATF Plenary discussed and approved the priorities of the FATF under the Presidency of Xiangmin Liu which will commence on 1 July 2019. The main priority is the Strategic Review, but among other priorities, the FATF agreed to continue its important work to mitigate the money laundering and terrorist financing risks of new technologies and at the same time exploit the opportunities to more effectively fight these risks. Under the Chinese Presidency, the FATF will also prioritise work to promote and enable more effective supervision by national authorities.

Link:

FATF Notice

The legal underpinning:

HM Treasury Advisory Notice: Money Laundering and Terrorist Financing controls in higher risk jurisdictions

 

Requirement to apply Enhanced Due Diligence for higher risk jurisdictions

 

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017) require the UK regulated sector to apply enhanced customer due diligence to high-risk countries.

 

 MLR 2017 Regulation 33 (1) (b) states that regulated businesses (“relevant persons”)must apply enhanced customer due diligence measures and enhanced ongoing monitoring in any business relationship or transaction with a person established in a high-risk third country. For these purposes, Regulation 33 (3) states that a high-risk third country is one identified by the European Commission in delegated acts adopted under Article 9.2 of the Fourth Money Laundering Directive. These delegated acts are set out in Delegated Regulation 2016/1675. 

 

 MLR 2017 Regulation (33) (6) (c) requires that relevant persons must take into account“geographical risk factors” when assessing risk and the extent of measures which should be taken to manage and mitigate that risk. These risk factors are stated as including whether a country is identified by a credible source, including reports published by the Financial Action Task Force (FATF), as not implementing requirements to counter money laundering and terrorist financing that are consistent with FATF recommendations. 

 

As the international anti-money laundering and counter-terrorist financing (AML/CTF) standard-setter, FATF regularly publishes statements that identify high-risk countries based on assessments of their AML/CTF regimes. In line with Regulation (33) (6) (c) HM Treasury would like to draw the regulated sectors attention to the latest publication by FATF on high risk jurisdictions.

The FATF public statement:

FATF public statement

 

On 21 June 2019 FATF published two statements identifying jurisdictions with strategic deficiencies in their AML/CTF regimes. These statements can be found at Annex A and Annex B respectively.

 

In response to the latest FATF statements, HM Treasury advises firms to consider the following:

 

HM Treasury Advice:

Consider as high risk and apply counter measures and enhanced due diligence measures in accordance with the risks

Consider as high riskand apply enhanced due diligence measuresin accordance with the risks, and any other measures as specified by the FATF that have a similar effect in mitigating risks.

Take appropriate actions to minimise the associated risks, which may include enhanced due diligence measures in high risk situations

Jurisdictions:

DPRK*

Iran*

The Bahamas

Botswana

Cambodia

Ethiopia

Ghana

Pakistan

Panama

Sri Lanka

Syria*

Trinidad and Tobago

Tunisia*

Yemen*

The North Korea advisory:

Democratic People’s Republic of Korea (DPRK)

 

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threats they pose to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies. Further, the FATF has serious concerns with the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing.

 

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions, and those acting on their behalf. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures, and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions, to protect their financial sectors from money laundering, financing of terrorism and WMD proliferation financing (ML/FT/PF) risks emanating from the DPRK. Jurisdictions should take necessary measures to close existing branches, subsidiaries and representative offices of DPRK banks within their territories and terminate correspondent relationships with DPRK banks, where required by relevant UNSC resolutions.

 

Jurisdiction subject to a FATF call on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction.

The Iran advisory:

Iran

 

In June 2016, the FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies, and its decision to seek technical assistance in the implementation of the Action Plan. Given that Iran provided that political commitment and the relevant steps it has taken, the FATF decided in February 2019 to continue the suspension of counter-measures.

 

In November 2017, Iran established a cash declaration regime. In August 2018, Iran has enacted amendments to its Counter-Terrorist Financing Act and in January 2019, Iran has also enacted amendments to its Anti-Money Laundering Act. The FATF recognises the progress of these legislative efforts. The bills to ratify the Palermo and Terrorist Financing Conventions have passed Parliament, but are not yet in force. As with any country, the FATF can only consider fully enacted legislation. Once the remaining legislation comes fully into force, the FATF will review this alongside the enacted legislation to determine whether the measures contained therein address Iran’s Action Plan, in line with the FATF standards.

 

Iran’s action plan expired in January 2018. In June 2019, the FATF noted that there are still items not completed and Iran should fully address: (1) adequately criminalizing terrorist financing, including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism”; (2) identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions; (3) ensuring an adequate and enforceable customer due diligence regime; (4) clarifying that the submission of STRs for attempted TF-related transactions are covered under Iran’s legal framework; (5) demonstrating how authorities are identifying and sanctioning unlicensed money/value transfer service providers; (6) ratifying and implementing the Palermo and TF Conventions and clarifying the capability to provide mutual legal assistance; and (7) ensuring that financial institutions verify that wire transfers contain complete originator and beneficiary information.

 

The FATF decided at its meeting this week to continue the suspension of counter-measures, with the exception of the FATF calling upon members and urging all jurisdictions to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran, in line with the February 2019 Public Statement.

 

While acknowledging the progress that Iran made including with the passage of the Anti-Money Laundering Act, the FATF expresses its disappointment that the Action Plan remains outstanding.  The FATF expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary AML/CFT reforms.

 

If by October 2019, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will require introducing enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran. The FATF also expects Iran to continue to progress with enabling regulations and other amendments.

 

Iran will remain on the FATF Public Statement until the full Action Plan has been completed. Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism-financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system. The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran, consistent with FATF Recommendation 19, including: (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

The advisory on the other countries:

The Bahamas

Since October 2018, when The Bahamas made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, The Bahamas has taken steps towards improving its AML/CFT regime, including by beginning its initial implementation of the recent Beneficial Ownership Law, and bringing the Anti-Terrorism Regulations into force. The Bahamas should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) completing the  comprehensive electronic case management system for international cooperation; (2) demonstrating risk-based supervision of non-bank financial institutions; (3) completing the process to ensure the timely access to adequate, accurate and current basic and beneficial ownership information; (4) increasing the quality of the FIU’s products to assist LEAs in the pursuance of ML/TF investigations, specifically complex ML/TF and stand-alone ML investigations; (5) demonstrating that authorities are investigating and prosecuting all types of money laundering, including complex ML cases, stand-alone money laundering, and cases involving proceeds of foreign offences; (6) increasing the identification, tracing and freezing or restraining of assets and to present cases linked with foreign offences and standalone ML cases; and (7) addressing remaining gaps in the TF and PF TFS frameworks and demonstrating implementation.

 

Botswana

Since October 2018, when Botswana made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, Botswana has taken steps towards improving its AML/CFT regime, including by amending its legal framework to criminalise ML and TF and amending record keeping and STR filing obligations. Botswana should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) assessing the risks associated with legal persons, legal arrangements, and NPOs, and developing and implementing a risk-based comprehensive national AML/CFT strategy; (2) developing and implementing risk-based AML/CFT supervisory manuals; (3) improving its analysis and dissemination of financial intelligence by the FIU, and enhancing the use of financial intelligence among the relevant law enforcement agencies; (4) developing and implementing CFT strategy, and ensuring the TF investigation capacity of the law enforcement agencies; (5) ensuring the implementation without delay of targeted financial sanctions measures related to terrorist financing and proliferation financing, and (6) applying a risk-based approach to monitoring  non-profit organisations.

 

Cambodia

Since February 2019, when Cambodia made a high-level political commitment to work with the FATF and APG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, Cambodia has taken steps towards improving its AML/CFT regime, including by increasing the analytical resources of its FIU Cambodia should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) providing a broad legal basis for MLA and  conducting relevant training to LEAs; (2) implementing risk-based supervision for real estate and casinos; (3) implementing the risk-based supervision to banks, including through prompt, proportionate and dissuasive enforcement actions, as appropriate; (4) amending the AML/CFT Law to address the remaining technical compliance deficiencies; (5) conducting sector-specific outreach to casinos, real-estate and MVTS providers; (6) increasing its FIU resources; enhancing its analysis of STRs; and increasing disseminations to LEAs; (7) increasing domestic coordination and cooperation to enhance ML investigations; (8) demonstrating an increase in ML investigations and prosecutions; and providing targeted proceeds of crime confiscation training to all LEAs; (9) demonstrating an increase in the freezing and confiscation of criminal proceeds, instrumentalities, and property of equivalent value; (10) establishing the legal framework to implement UN sanctions related to PF TFS, demonstrating that implementation is occurring and  enhancing the understanding of sanctions evasion.

 

Ethiopia

In February 2017, Ethiopia made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies. The FATF has made the initial determination that Ethiopia has substantially completed its action plan and warrants an on-site visit to verify that the implementation of Ethiopia’s AML/CFT reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future. Specifically, Ethiopia has made the following key reforms: (1) implementing the results of its national risk assessment; (2) integrating designated non-financial businesses and professions into its AML/CFT regime; (3) confiscating the proceeds and instrumentalities of crime; (4) implementing terrorism-related targeted financial sanctions and proportionately regulating  non-profit organizations in line with  a riskbased approach; and (5) establishing and implementing WMD-related targeted financial sanctions. 

 

Ghana

Since October 2018, when Ghana made a high-level political commitment to work with the FATF and GIABA to strengthen the effectiveness of its AML/CFT regime, Ghana has taken steps towards improving its AML/CFT regime, including by developing its national AML/CFT Policy and Action Plan based on the risks identified in the NRA, and conducting a risk assessment on its NPO sector. Ghana should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) developing and implementing a comprehensive national AML/CFT Policy based on the risks identified in the NRA, including measures to mitigate ML/TF risks associated with the legal persons; (2) improving risk-based supervision, by enhancing the capacity of the regulators and the awareness of the private sector; (3) ensuring the timely access to adequate, accurate and current basic and beneficial ownership information; (4) ensuring the focused actions of the FIU in accordance with the risks identified by the NRA, and adequate resource allocation to the FIU; (5) ensuring adequate and effective investigation and prosecution of TF; and (6) applying a risk-based approach for monitoring non-profit organisations.

 

Pakistan

Since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan has taken steps towards improving its AML/CFT regime, including the recent development of its TF risk assessment addendum; however, it does not demonstrate a proper understanding of Pakistan’s transnational TF risk..Pakistan should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) adequately demonstrating its proper understanding of the TF risks posed by the terrorist groups , and conducting supervision on a risk-sensitive basis; (2) demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions; (3) demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS); (4) demonstrating that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for TF; (5) improving inter-agency coordination including between provincial and federal authorities on combating TF risks; (6) demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities; (7) demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions and enhancing the capacity and support for prosecutors and the judiciary; and (8) demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services; (9) demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases; (10) demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources. The FATF expresses concern that not only did Pakistan fail to complete its action plan items with January deadlines, it also failed to complete its action plan items due May 2019. The FATF strongly urges Pakistan to swiftly complete its action plan by October 2019 when the last set of action plan items are set to expire. Otherwise, the FATF will decide the next step at that time for insufficient progress.

 

Panama

In June 2019, Panama made a high-level political commitment to work with the FATF and GAFILAT to strengthen the effectiveness of its AML/CFT regime. Since the completion of its MER in 2017, Panama has made progress on a number of its MER recommended actions to improve technical compliance and effectiveness, including enacting Law No. 70 introducing tax offences and making them predicate offences for money laundering, increasing obligations for resident agents, and addressing the shortcomings in the timeframe to submit suspicious transaction reports. Panama will work to implement its action plan, including by: (1) strengthening its understanding of the national and sectoral ML/TF risk and informing findings to its national policies to mitigate the identified risks; (2) proactively taking action to identify unlicensed money remitters, applying a risk-based approach to supervision of the DNFBP sector and ensuring effective, proportionate, and dissuasive sanctions against AML/CFT violations; (3); ensuring adequate verification and update of beneficial ownership information by obliged entities, establishing an effective mechanisms to monitor the activities of offshore entities, assessing the existing risks of misuse of legal persons and arrangements to define and implement specific measures to prevent the misuse of nominee shareholders and directors, and ensuring timely access to adequate and accurate beneficial ownership information; and (4) ensuring effective use of FIU products for ML investigations, demonstrating its ability to investigate and prosecute ML involving foreign tax crimes and to provide constructive and timely international cooperation with such offences, and continuing to focus on ML investigations in relation to high-risk areas identified in the NRA and MER.

 

 

Sri Lanka

In November 2017, Sri Lanka made a high-level political commitment to work with the FATF and APG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies. In February 2019, the FATF made the initial determination that Sri Lanka has completed its action plan and warrants an on-site assessment. Specifically, Sri Lanka has made the following key reforms: (1) enacting amendments to the MACMA to ensure that mutual legal assistance may be provided on the basis of reciprocity; (2) issuing the CDD Rule for DNFBPs, issuing any necessary guidance, and ensuring implementation of this Rule has begun, by way of supervisory actions; (3) enhancing risk-based supervision and outreach to FIs, and high risk DNFBPs, including through prompt and dissuasive enforcement actions and sanctions, as appropriate; (4) providing case studies and statistics to demonstrate that competent authorities can obtain beneficial ownership information in relation to legal persons in a timely manner; (5) issuing a revised Trust Ordinance and demonstrating that implementation has begun; and (6) establishing a TFS regime to implement the relevant UNSCRs related to Iran, demonstrating that implementation has begun, and demonstrating that implementation has begun on the UN Regulation related to the DPRK. However, due to the terrorist attack that occurred on 21 April 2019, the FATF was unable to conduct an on-site visit to confirm whether the process of implementing the required reforms and actions has begun and is being sustained. The FATF will conduct an on-site visit prior to its October 2019 Plenary.

 

Syria

Since February 2010, when Syria made a high-level political commitment to work with the FATF and MENAFATF to address its strategic AML/CFT deficiencies, Syria has made progress to improve its AML/CFT regime. In June 2014, the FATF determined that Syria had substantially addressed its action plan at a technical level, including by criminalising terrorist financing and establishing procedures for freezing terrorist assets. While the FATF determined that Syria has completed its agreed action plan, due to the security situation, the FATF has been unable to conduct an on-site visit to confirm whether the process of implementing the required reforms and actions has begun and is being sustained. The FATF will continue to monitor the situation, and will conduct an on-site visit at the earliest possible date.

 

Trinidad and Tobago

Since November 2017, when Trinidad and Tobago made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, Trinidad and Tobago has taken steps towards improving its AML/CFT regime, including by proclaiming laws on NPO supervision and civil asset recovery. Trinidad and Tobago should continue to work on implementing its action plan to address its strategic deficiencies, including by implementing: (1) the remaining measures to further enhance international cooperation; (2) the issues related to transparency and beneficial ownership; and (3) the measures to monitor NPOs on the basis of risk.

 

Tunisia

In November 2017, Tunisia made a high-level political commitment to work with the FATF and MENAFATF to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies. The FATF has made the initial determination that Tunisia has substantially completed its action plan and warrants an on-site assessment to verify that the implementation of Tunisia’s AML/CFT reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future. Specifically, Tunisia has made the following key reforms: (1) implementing risk-based AML/CFT supervision of the financial sector and fully integrating designated non-financial businesses and professions into its AML/CFT regime; (2) maintaining comprehensive and updated commercial registries and strengthening the system of sanctions for violations of transparency obligations; (3) increasing the efficiency of suspicious transaction report processing by allocating the necessary resources to the financial intelligence unit; (4) establishing a terrorism-related targeted financial sanctions regime and appropriately monitoring the association sector; and (5) establishing WMD-related targeted financial sanctions.

Yemen

Since February 2010, when Yemen made a high-level political commitment to work with the FATF and MENAFATF to address its strategic AML/CFT deficiencies, Yemen has made progress to improve its AML/CFT regime. In June 2014, the FATF determined that Yemen had substantially addressed its action plan at a technical level, including by: (1) adequately criminalising money laundering and terrorist financing; (2) establishing procedures to identify and freeze terrorist assets; (3) improving its customer due diligence and suspicious transaction reporting requirements; (4) issuing guidance; (5) developing the monitoring and supervisory capacity of the financial sector supervisory authorities and the financial intelligence unit; and (6) establishing a fully operational and effectively functioning financial intelligence unit. While the FATF determined that Yemen has completed its agreed action plan, due to the security situation, the FATF has been unable to conduct an on-site visit to confirm whether the process of implementing the required reforms and actions has begun and is being sustained. The FATF will continue to monitor the situation, and conduct an on-site visit at the earliest possible date.

And Serbia was removed from the monitoring process:

Serbia

The FATF welcomes Serbia’s significant progress in improving its AML/CFT regime and notes that Serbia has strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2018. Serbia is therefore no longer subject to the FATF’s monitoring process under its ongoing global AML/CFT compliance process. Serbia will continue to work with MONEYVAL to improve further its AML/CFT regime.

Link:

HM Treasury Notice

Here’s the headline piece:

Enforcement Action

Central Bank of Ireland and Bank of Montreal Ireland plc.

Bank of Montreal Ireland plc. reprimanded and fined €1,246,189 by the Central Bank of Ireland for breach of banking licence condition

On 26 April 2019, the Central Bank of Ireland (the “Central Bank”) reprimanded and imposed a fine on Bank of Montreal Ireland plc. (the “Firm”) for breaching a condition of its banking licence by failing to submit three operational risk returns to the Central Bank, and failing to establish and maintain effective processes and internal controls to ensure compliance with this regulatory reporting condition. The Firm has admitted the breaches in full. This is the Firm’s second reprimand and fine for deficiencies in regulatory reporting.

The Central Bank’s investigation found that the breaches were caused by:

 the Firm’s failure to establish and maintain effective processes and controls to ensure the

submission of operational risk returns;

 an over-reliance on Bank of Montreal group policies; and

 the use of an informal process to comply with its obligation to submit operational risk returns.

The Central Bank determined that the appropriate fine was €1,780,269 which was reduced by 30% to €1,246,189 in accordance with the settlement discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure (“ASP”).

Seána Cunningham, the Central Bank’s Director of Enforcement and Anti Money Laundering, said:

“All firms operating in Ireland must do so in line with their regulatory licence, and all conditions attaching to it. Compliance with licence conditions is not optional, and breaches are treated seriously by the Central Bank as demonstrated in this enforcement action against the Firm.

The licence breach in this case centres on the Firm’s failure to submit three operational risk returns. As the risks facing the financial sector continue to grow and become more complex, it is essential that the Central Bank has a clear line of sight to any potential risks, including operational risks, within regulated firms to ensure effective supervision and to assess the resilience and integrity of all firms and the financial sector as a whole. All firms must ensure the highest standards in identifying, properly managing and monitoring, and reporting on its operational risks in line with the Central Bank’s requirements.

As a result of this investigation, the Central Bank reminds international firms, whether already established or seeking to establish a presence in Ireland, that they must put in place adequate policies, processes and controls necessary to comply with all licence conditions and regulatory obligations specific to their licence conditions to operate in Ireland.”

Link:

Enforcement Action

April 1, 2019 – FINTRAC Advisory: Financial transactions related to countries identified by the Financial Action Task Force (FATF) 

On February 22, 2019, the Financial Action Task Force (FATF) issued a Public Statement and a statement on Improving Global AML/CFT Compliance. These statements are updated and released following every Plenary.

The Public Statement identifies jurisdictions for which the FATF has called on its members to apply countermeasures or enhanced due diligence. The Improving Global AML/CFT Compliance statement identifies those jurisdictions which have developed an action plan with the FATF to address their strategic AML/CFT deficiencies.

Financial transactions related to countries identified by the FATF

Democratic People’s Republic of Korea (DPRK)

As communicated in the Public Statement dated 22 February 2019, the FATF:

“Remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime and the serious threats they pose to the integrity of the international financial system. Further, the FATF has serious concerns with the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing.

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions, and those acting on their behalf. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures, and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions, to protect their financial sectors from money laundering, financing of terrorism and WMD proliferation financing (ML/FT/PF) risks emanating from the DPRK. Jurisdictions should take necessary measures to close existing branches, subsidiaries and representative offices of DPRK banks within their territories and terminate correspondent relationships with DPRK banks, where required by relevant UNSC resolutions.”

Ministerial directive on the DPRK

Accordingly, in order to safeguard the integrity of Canada’s financial system, and in accordance with section 11.42 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)Footnote 1, the Minister of Finance has issued the following directive as published in the Canada Gazette on December 9, 2017:

“Every person or entity referred to in section 5 of the PCMLTFA shall treat all transactions originating from, or destined to, North Korea (Democratic People’s Republic of Korea) as high risk for the purposes of subsection 9.6(3) of the Act.”

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has issued guidance related to the Ministerial Directive which can be found on its website. FINTRAC will assess compliance with the Ministerial Directive.

In addition, on December 12, 2017, FINTRAC published an Operational Alert on the DPRK’s use of the international financial system for money laundering and terrorist activity financing. The purpose of this Operational Alert is to inform Canadian reporting entities of the patterns and risk areas related to the DPRK’s suspected money laundering and terrorist activity financing.

Iran

As communicated in the Public Statement dated 22 February 2019, the FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies in June 2016. However:

“Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism-financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system. The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran, consistent with FATF Recommendation 19, including: (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.”

Accordingly, FINTRAC is reiterating to all reporting entities subject to the requirements of the PCMLTFA, the risks of doing business with individuals and entities based in, or connected to, Iran.

FINTRAC is advising that reporting entities should consider the above in determining whether they are required to file a suspicious transaction reportFootnote 2 in respect of one or more financial transaction(s) or attempted financial transaction(s) emanating from, or destined to, Iran. FINTRAC guidance related to suspicious transaction reports can be found on our website.

In addition, reporting entities are required to consider the geographic location of a person’s or entity’s activities as part of their risk assessment under their Compliance ProgramFootnote 3 and to undertake mitigating measures, as applicable. Reporting entities are encouraged to undertake enhanced customer due diligence, including obtaining information on the reasons for intended transactions, with respect to clients and beneficiaries involved in such financial transactions or attempted financial transactions.

Other jurisdictions

In its compliance document dated 22 February 2019, the FATF brought to the attention of its members several jurisdictions that have strategic AML/CFT deficiencies. The following jurisdictions have developed an action plan with the FATF to address identified deficiencies and have demonstrated some progress with the execution of their plans: the Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen.

FATF action on the terrorist group Islamic StateFootnote 4

On September 22, 2014, the Government of Canada updated the Criminal Code list of terrorist entities to include the Islamic State (IS), which was previously listed as Al Qaeda in Iraq.

FINTRAC would like to reiterate previous statements issued by the FATF, expressing its deep concern with the financing generated by, and provided to, the terrorist group known as the Islamic State.

Accordingly, FINTRAC is reminding all reporting entities subject to the requirements of the PCMLTFA of their obligationFootnote 5 to submit a terrorist property report (TPR) to FINTRAC without delay, once they have met the threshold to disclose under the Criminal Code or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (RIUNRST). Guidance related to TPRs can be found on FINTRAC’s website.Footnote 6

In this context, property includes any type of real or personal property. This also includes any deed or instrument giving title or right to property, or giving a right to recover or receive money or goods. A terrorist property report includes information about the property as well as any transaction or attempted transaction relating to that property.

FINTRAC is advising that reporting entities should consider the above in determining whether to file a suspicious transaction report in respect of one or more financial transactions emanating from, or destined to, a jurisdiction under IS control or a surrounding jurisdiction where there are reasonable grounds to suspect that the transactions or attempted transactions are related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence.

Reporting entities are also encouraged to undertake enhanced customer due diligence with respect to clients and beneficiaries involved in such financial transactions or attempted financial transactions.Footnote 7

Link:

FINTRAC Advisory

Circular to Licensed Corporations and Associated Entities 

Anti-Money Laundering / Counter-Financing of Terrorism 

(1)  FATF Statement on Democratic People’s Republic of Korea and Iran

(2)  FATF Statement on Improving Global AML/CFT Compliance: On-Going Process

(3)  Outcomes from the Meeting of the FATF Plenary, 20-22 February 2019

(1)  FATF Statement on Democratic People’s Republic of Korea and Iran

Further to our circular issued on 29 October 2018, this is to inform you that the Financial Action Task Force (“FATF”) issued an updated statement on 22 February 2019 identifying jurisdictions that have strategic deficiencies in their anti-money laundering and combating the financing of terrorism (“AML/CFT”) regimes.

The statement Note 1 has been separated into two sections.

(i)   Jurisdiction subject to a call on its members and other jurisdictions to apply counter-measures

Democratic People’s Republic of Korea (“DPRK”)

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its AML/CFT regime and the serious threat this poses to the integrity of the international financial system.  Further, the FATF has serious concerns with the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (“WMDs”) and its financing.  The FATF calls on its members and other jurisdictions to continue to apply counter-measures and targeted financial sanctions in accordance with applicable United Nations Security Council (“UNSC”) Resolutions to protect the international financial system from the on-going and substantial money laundering, terrorist financing and WMD proliferation financing risks emanating from the jurisdiction.

Licensed corporations (“LCs”) and associated entities (“AEs”) should give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions and those acting on their behalf, and subject them to increased scrutiny and enhanced due diligence measures.

In addition, LCs and AEs are reminded that it is an offence under section 4 of the Weapons of Mass Destruction (Control of Provision of Services) Ordinance (Cap. 526) for a person to provide any services where he believes or suspects, on reasonable grounds, that those services may be connected to WMD proliferation.

(ii)    Jurisdiction subject to a call on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction 

Iran

In June 2016, the FATF welcomed Iran’s adoption of an action plan to address its strategic AML/CFT deficiencies and suspended counter-measures accordingly. In November 2017, Iran established a cash declaration regime. In August 2018, Iran has enacted amendments to its Counter-Terrorist Financing Act and in January 2019, Iran has also enacted amendments to its Anti-Money Laundering Act. The bills (which are not yet in force) to ratify the Palermo and Terrorist Financing Conventions have passed the Parliament. However, Iran’s action plan has expired with a number of items remains outstanding.

The FATF decided in the recent Plenary Meeting to continue the suspension of counter-measures noting the progress of the legislative efforts of Iran. While welcoming the passage of the Anti-Money Laundering Act, the FATF expresses its disappointment that the action plan to address Iran’s strategic AML/CFT deficiencies remains outstanding and expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary AML/CFT reforms. If by June 2019, Iran does not enact the remaining legislation in line with FATF standards, then the FATF will require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran.

Until Iran fully implements the measures required to address the deficiencies identified with respect to countering financing of terrorism in the action plan, the FATF remains concerned with the risk of terrorist financing emanating from Iran and the threat this poses to the international financial system.  The FATF calls on its members and other jurisdictions to continue to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction.

LCs and AEs should apply enhanced due diligence measures, including obtaining information on the reasons for intended transactions, and conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination, to business relationships and transactions with natural and legal persons from Iran. LCs and AEs are further advised that the type of enhanced due diligence measures applied should be effective and proportionate to the risks, and in line with the standards as specified in the FATF statement Note 1.

(2)  FATF Statement on Improving Global AML/CFT Compliance: On-Going Process

In addition, please be informed that as part of the on-going process to improve global AML/CFT compliance, the FATF has set out in a separate statement an updated list of jurisdictions that have strategic AML/CFT deficiencies for which they have developed an action plan with the FATF.  The FATF will closely monitor the implementation of those action plans and encourage its members to consider the information presented in the statement which can be found on the website of the FATF (http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/fatf-compliance-february-2019.html).

As the FATF will continue to assess the progress made by these jurisdictions in addressing the deficiencies in their AML/CFT systems and issue updated statements from time to time, LCs and AEs are reminded to browse the website of the FATF for the latest information.

(3)  Outcomes from the Meeting of the FATF Plenary, 20-22 February 2019 

In addition to the statements in (1) and (2) above, the FATF has also published various other outcomes of its recent Plenary Meeting which may be of interest to LCs and AEs. They include, for example, (i) FATF’s current action to combat terrorist financing, and (ii) Interpretive Note to FATF Recommendation 15 for mitigating risks from virtual assets. Further information can be found on the website of FATF (http://www.fatf-gafi.org/publications/fatfgeneral/documents/outcomes-plenary-february-2019.html).

Should you have any queries regarding the contents of this circular, please contact Ms Kiki Wong at 2231 1569 who will assist to refer your queries to the relevant officer.

Intermediaries Supervision Department
Intermediaries Division
Securities and Futures Commission

End

SFO/IS/007/2019

Links:

HK SFC Notice

HK SFC Circular

On Friday, FinCEN issued an advisory based on the latest FATF pronouncements. It says, in part:

On February 22, 2019, the Financial Action Task Force (FATF) updated its list of jurisdictions with strategic anti-money laundering and combatting the financing of terrorism (AML/CFT) deficiencies. The changes may affect U.S. financial institutions’ obligations and risk-based approaches with respect to relevant jurisdictions.

The Financial Crimes Enforcement Network (FinCEN) is issuing this advisory to inform financial institutions of updates to the FATF list of jurisdictions with strategic AML/CFT deficiencies. Financial institutions should be aware of these changes, which may affect their obligations and risk-based approaches with respect to these jurisdictions. The advisory also reminds financial institutions of the status and obligations involving these jurisdictions, in particular the Democratic People’s Republic of Korea (DPRK) and Iran.

As part of the FATF’s listing and monitoring process to ensure compliance with its international AML/CFT standards, the FATF identifies certain jurisdictions as having strategic deficiencies in their AML/CFT regimes. These jurisdictions are named in two documents: (1) the “FATF Public Statement,” which identifies jurisdictions that are subject to the FATF’s call for countermeasures and/or enhanced due diligence (EDD) because of their strategic AML/CFT deficiencies; and (2) “Improving Global AML/CFT Compliance: On-going Process,” which identifies jurisdictions that the FATF has determined to have strategic AML/CFT deficiencies. On February 22, 2019, the FATF updated both documents with the concurrence of the United States. Financial institutions should consider these changes when reviewing their obligations and risk-based policies, procedures, and practices with respect to the jurisdictions noted below.

Link:

FinCEN Advisory