Today we are looking back at the last three months of industry news worth knowing, from FATF updates making waves on an international level, to the EU’s AMLA which has recently signed a cooperation agreement with the European Supervisory Authorities to secure effective information exchange.
Furthermore, the European Banking Authority (EBA) uncovers that 70% of competent authorities report high or increasing ML/TF risks in the financial sector, warning that FinTech firms may be prioritizing customer acquisition over compliance.
What trends are we noticing? Now, authorities are adamant about the power of data exchange for AML compliance and crypto asset firms are increasingly put under the magnifying glass, while AI and social media expose markets to new risks.
💡Industry news worth knowing
The FATF has published a report on evolving terrorist financing risks, which warns that 69% of jurisdictions assessed showed major or structural deficiencies in effectively investigating, prosecuting and convicting TF offenses.
“This continued abuse of the financial system poses a serious threat to global security and undermines international peace. Countries around the world must use the intelligence in this report to build a stronger picture of the threats they face and harness the tools available through the FATF Global Network to strengthen international cooperation and intelligence sharing.”
– FATF President, Elisa de Anda Madrazo
Furthermore, in August, the FATF President delivered a speech at the UN Security Council and while you can read the entire speech here, worth highlighting was the President’s appeal to social media and messaging platforms as stakeholders that should now be included to combat emerging risks.
On the European level, over the summer period, the AMLA signed a multilateral MoU with the European Supervisory Authorities – EBA, EIOPA and ESMA. This framework aims to strengthen cooperation and information exchange between prudential and anti-money laundering supervision and avoid duplication of effort.
Additionally, the AMLA has singled out a “selected obliged entities” that are particularly vulnerable to cross-border money laundering risks, to directly supervise. These include:
- Payment firms
- Crypto-asset service providers (CASPs)
- Banks that also fall under the ECB’s prudential supervision
Due to CASPs technological features, cross-border operations, and anonymity-enhancing capabilities, the AMLA is setting high expectations for AML/CFT controls, requiring robust systems in place from day one of their authorization – a prerequisite for receiving a MiCA license to provide their services in the EU.
Elsewhere, the United Kingdom has recently published a progress report on the Economic Crime Plan 2 (ECP2) aiming to reduce money laundering and fraud, which finds a 36% increase in money laundering prosecutions, and a 7% increase in convictions in year one.
Aligned with this goal, the UK has also released a variety of guidelines to compliment the greater KYC/AML regulatory landscape, aiming to inform entities’ understanding of due diligence and reducing risk:
- Starter Guide to UK Sanctions for businesses that need to understand more about what sanctions are and how they work. The Guide makes note of the need for strong due diligence for new and existing counterparties, also requiring periodic review to assess ongoing risk.
- FCA’s Finalized Guidance on PEPs underlines that firms should adopt a risk-based approach to identifying PEPs and conduct a case-by-case review for proper compliance, clarifying which positions are and are not to be considered PEPs.
Regulated entities in the UK should review their compliance procedures to ensure they remain aligned with the new guidelines released, avoiding undue risk and non-compliance.
Additionally, the FCA has issued a Consultation Paper proposing the application of existing FCA Handbook rules to firms conducting regulated crypto asset activities. Firms are urged to contribute your comments and feedback.
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