The numbers still aren’t enormous – 70,000 GBP total has been frozen under the ISIL/Al-Qaida regime, 18,000 under EU Reg 2580/2001 and 9,000 under TAFA. There were 45 total accounts frozen as of the end of the quarter, and only 2 new designations (both ISIL/AL-Qaida) and 4 delistings (also all ISIL/Al-Qaida) this quarter. There was one TAFA renewal.


April-June 2019 TAFA Report

Eighth Biennial Report for Licensing Activities Undertaken Pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA)

OFAC has released a Biennial Report of Licensing Activities pursuant to Section 906(c) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), covering activities undertaken by the Treasury Department’s Office of Foreign Assets Control (OFAC) under Section 906(a)(1) of the TSRA from October 2014 through September 2016.  Under the procedures established in its TSRA-related regulations, OFAC processes license applications requesting authorization to export agricultural commodities, medicine, and medical devices to Iran and Sudan under the specific licensing regime set forth in Section 906 of the TSRA.


OFAC Notice

TSRA Biennial Report

From the introductory section:

This is the Treasury’s seventh annual report on AML/CTF supervision. This report includes self-reported data about activity undertaken in 2017-18 across the UK’s AML/CTF regime, which AML/CTF supervisors provided to the Treasury in their annual returns. This report provides transparency about the performance of AML/CTF supervisors and fulfils the Treasury’s obligation under the MLRs, to ask all designated AML/CTF supervisors to provide information on their supervisory activity and publish a consolidated review of this information.

1.1 Under the MLRs, the Treasury is responsible for appointing AML/CTF supervisors (see Annex 1 for the full list of current supervisors). Working closely with both statutory supervisors (FCA, HMRC and the Gambling Commission) and the 22 PBSs, the Treasury seeks to ensure they deliver upon the government’s objective of a robust and risk-based approach to supervision, applying dissuasive sanctioning powers when necessary, while minimising unnecessary burdens on regulated firms.

1.2 The UK’s AML/CTF regime is based on the international standards set by the FATF. These standards form the basis of the European Union’s Fourth Money Laundering Directive (4MLD) which was transposed into UK law by the MLRs. The European Union published the Fifth Money Laundering Directive (5MLD) in June 2018 to further enhance money laundering legislation.1 5MLD amends 4MLD and is due to be transposed into UK legislation by January 2020; the public consultation on the UK’s approach to transposition took place between April and June 2019.

1.3 In December 2018, the FATF MER of the UK’s AML/CTF regime concluded with the publication of the final evaluation report.2 The UK achieved the best ratings of any of the 60 countries assessed to date. The FATF, however, did have significant concerns about the UK’s supervision regime, assessing it as only moderately effective.

1.4 The MER found significant weaknesses in the risk-based approach to supervision among all the UK’s supervisors except the Gambling Commission. The statutory supervisors – the Financial Conduct Authority (FCA), HMRC, and the Gambling Commission – and the largest legal sector supervisor (the Solicitors Regulation Authority) were assessed to have a stronger understanding of the risks present in their sectors than the other Supervisors. The report concluded that:

• PBSs have significant weaknesses in the application of a risk-based approach to supervision, which is particularly concerning, as an effective risk-based approach is central to combatting illicit finance

• there is lack of dissuasive sanctioning for non-compliance with the MLRs, particularly within the accountancy and legal sectors

The UK accepts these findings, noting their consistency with the Government’s National Risk Assessments of Money Laundering and Terrorist Financing.

1.5 The government established OPBAS as part of a wider package of government reforms to strengthen the UK’s AML/CTF regime. OPBAS is housed within the FCA and became operational on 1 February 2018. OPBAS was created to oversee the 22 PBSs to ensure a consistent standard of AML/CTF supervision. OPBAS also seeks to facilitate information and intelligence sharing between PBSs, statutory supervisors and law enforcement agencies.

1.6 In 2018, OPBAS conducted supervisory assessments of each of the 22 PBSs listed in Schedule 1 of the MLRs to assess how they supervise their members in line with the requirements set out in the MLRs and guidance set out in the OPBAS sourcebook. OPBAS subsequently published an overview of their findings in March 2019.3 OPBAS’ AML supervisory assessments found significant weaknesses in PBSs’ approach to supervision including that:

• 80% of PBSs lacked appropriate governance arrangements and 86% preferred offering support and guidance to their members rather than issue penalties

• 91% of relevant PBSs were not fully applying a risk-based approach to AML/CTF supervision, 23% of relevant PBSs undertook no form of AML supervision and 18% had no fully identified their supervised population

• PBSs had an inconsistent approach to intelligence and information sharing, some lacked sufficient record-keeping practices and 80% lacked appropriate staff competence training

Following its supervisory assessments, OPBAS asked PBSs to develop individualised AML strategy plans detailing how they intend to rectify identified deficiencies.

1.7 As in previous years, the Treasury has fulfilled its legislative requirement to ask all designated supervisors to provide information on their supervisory activity to inform the content of this report. This report sets out AML/CTF supervisory activity in 2017-18 (the first year following the introduction on the MLRs 2017) based on the self-reported information provided by AML/CTF supervisors in their annual returns to the Treasury. This report does not attempt to replicate the in-depth assessments undertaken by OPBAS but provides a factual review of the information AML/CTF supervisors provided in their annual returns. In view of the new requirements introduced by 5MLD on PBSs to publish annual reports about their AML/CTF supervision, the Treasury will review how best to comply with its legal obligations under Article 44 of 4MLD as amended by 5MLD.

Each chapter considers a specific area:

• chapter 2 outlines the methodology the Treasury used to develop this report

• chapter 3 considers supervisor’s supervisory activities

• chapter 4 considers supervisors’ promotion and enforcement of compliance with the AML/CTF standards among their supervised population

And the methodology:


2.1 The MLRs require all AML/CTF supervisors to provide the Treasury with information to inform this report. The core content of the questionnaire is set out in Schedule 4 of the MLRs. It includes questions on the number of regulated firms and persons supervised, the number of breaches of the MLRs, and the sanctions employed using powers provided under the MLRs.

2.2 This report details AML/CTF supervisory activity in 2017-18 (the financial year which saw the implementation of the MLRs 2017) based on the annual returns from AML/CTF supervisors. While the updated MLRs were only adopted in June 2017, full year data is presented in this report as most reporting requirements were unaffected by the change. This report covers activity by statutory supervisors – the FCA, HMRC and the Gambling Commission – and by PBSs – the legal and accountancy sector professional body supervisors.

2.3 The Treasury sought quantitative as well as qualitative evidence to help inform and present this report. Due to the specificities of each sector – including differences in size of supervised population and distribution of ML/TF risk within this population – it is not always appropriate to compare supervisors based on quantitative data alone. The Treasury has sought to capture the data reported by supervisors as accurately as possible. However, it was not possible to include the full range of data provided due to inconsistencies in the ways the returns were filled.

2.4 Prior to this report, there was no standard reporting period for AML/CTF activities. To streamline data collection and aid year-on-year comparisons, the Treasury commissioned supervisors to submit their AML/CTF returns to the Treasury on a financial year basis (6 April 2017–5 April 2018).

2.5 In 2017-18, the Treasury enhanced the scope of the data collected to inform this report to aid understanding of supervisory authorities. The Treasury requested more information from AML/CTF supervisors on several areas including supervision of Trust or Company Service Providers (TCSPs), the number of supervised persons refused the right to practice for AML/CTF reasons, and on breaches of the MLRs by the regulated businesses they supervise. This information has been incorporated into this report.


Supervision report

Notice of Amendments to Legislation

27 Jun 2019

Following the ending of the consultation period on a number of proposed legislative changes that were set out in Consultation Paper No. 124 the DFSA Board, after due consideration of consultees’ comments, made amendments to the DFSA Rulebook as described below. Please bear in mind that changes may have been made to the legislation originally proposed in the relevant consultation paper.

The DFSA Board also amended the AML module of the Rulebook to make various minor and consequential amendments to update or correct references that are no longer correct due to the entry into force of new Federal AML legislation.


The DFSA Board made the following Rulemaking Instruments to come into force on 1 July 2019

• GENERAL MODULE (GEN) RULE-MAKING INSTRUMENT (No. 253) 2019, which repeals and replaces the General Module (GEN) of the DFSA Rulebook with an updated version (see appendix 1 for the detailed amendments);
• CONDUCT OF BUSINESS MODULE (COB) RULE-MAKING INSTRUMENT (No. 254) 2019, which repeals and replaces the Conduct of Business (COB) module of the DFSA Rulebook with an updated version (see appendix 2 for the detailed amendments);
• COLLECTIVE INVESTMENT RULES (CIR) INSTRUMENT (No. 255) 2019, which repeals and replaces the Collective Investment Rules (CIR) of the DFSA Rulebook with an updated version (see appendix 3 for the detailed amendments);
• MARKETS RULES (MKT) RULE-MAKING INSTRUMENT (No. 256) 2019, which repeals and replaces the Markets Rules (MKT) of the DFSA Rulebook with an updated version (see appendix 4 for the detailed amendments);
• GLOSSARY MODULE (GLO) RULE-MAKING INSTRUMENT (No. 257) 2019, which repeals and replaces the Glossary Module (GLO) of the DFSA Rulebook with an updated version (see appendix 5 for the detailed amendments); and
• ANTI-MONEY LAUNDERING, COUNTER-TERRORIST FINANCING AND SANCTIONS MODULE (AML) INSTRUMENT (No. 258) 2019, which repeals and replaces the Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module (AML) of the DFSA Rulebook with an updated version (see appendix 6 for the detailed amendments).

The rule-making instruments mentioned above and the appendices to this notice can be viewed under the “Amendments to Legislation” section of the DFSA website and the relevant modules will be replaced on the DFSA website on the date of their coming into force as described above. Earlier versions of the relevant modules are to be found in the archive.


DFSA Notice

AML/CTF and Sanctions InstrumentChanges (appendix 6)

Under the Federal Civil Penalty Inflation Adjustment Act of 1990 (amended under the Debt Collection Improvement Act of 1996 and the Federal Civil Penalties Inflation Adjusement Act Improvements Act of 2015), federal agencies get to adjust their penalty schedules for inflation. For OFAC, that means the statutory maximums imposed for non self-disclosed, egregious violations.

  • The Trading with the Enemy Act (TWEA) penalties, which, until a few years back, were capped at $65,000 per violation (originally I believe they started out at some ridiculously low figure, like $11,000), will now land at $89.170.
  • Under the International Emergency Economic Powers Act (IEEPA), which started out with $250,000 penalties for low-value transactions, the maximum penalty will now be $302,584 or twice the transaction amount.
  • The Foreign Narcotics Kingpin Designation Act (FNKDA or Kingpin Act) maximum CMP, which started out at $1,000,000 back in the day, now tops out at $1,503,470
  • The maximum penalty under the Antiterrorism and Effective Death Penalty Act (AEDPA) goes from $77,909 to $79,874, while that under the Clean Diamond Trade Act (CDTA) goes from $13,333 to $13,669

Note: Mr Watchlist has never seen, since he started following this stuff, fines under AEDPA or CDTA. AEDPA is not really a surprise because many Sanctions programs are authorized under AEDPA and IEEPA, and IEEPA has a more punitive CMP scale.


OFAC Notice

Treasury Notice

This is OFAC’s 27th “Annual Report to the Congress on Assets in the United States Relating to Terrorist Countries and Organizations Engaged in International Terrorism” – a mouthful, I know.

Some highlights:

  • $46.181 million in blocked terrorist organization assets, up from $43.606 million in 2017
  • Biggest increases in this group – Hizballah blocked assets increased from $9.814 million to $11.601 million, Hamas went from $1.143 million to $1.364 million, the IRGC-Quds Force increased from $14.491 million to $14.989 million, ISIL went from $251,613 to $657,689, Lashkar-e Tayyiba increased from $218,639 to $397,774, and the Taliban increased from $10,728 to $206,805.
  • State Sponsors of Terrorism have $216.83 million in blocked funds, up from $201.53 million in 2017
  • Of that increase, the overwhelming bulk is due to North Korea (almost $11 million), with Iran ($2.9 million) and Syria ($1.4 million) making up the rest
  • State Sponsors of terrorism own a bit of real estate: Syria owns 4 properties, Iran 11, and Bank Melli indirectly has an ownership interest in a NY building


Calendar Year 2018 Terrorist Assets Report