Category Archives: Anti-Money Laundering

01.11.16
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FinCEN Enforcement Action: Oaks Card Club of Emeryville, CA

A card club is a gaming establishment where all the games are card-based. Oaks Card Club (aka Oaks Club) settled with FinCEN for $650,000 for violations of the program and reporting requirements of the Bank Secrecy Act.

Want a taste of why there was an enforcement action against Oaks Club? From FinCEN's news release:

Among its failures, Oaks relied on an inaccurate and misleading anti-money laundering (AML)
policy to train its staff. The AML policy failed to provide instructions, or provided wrong
instructions, concerning the card club’s BSA obligations and filing of BSA reports. For
example, it encouraged employees to provide notice to patrons if they were about to conduct a
cash transaction that would put them over the $10,000 threshold for the filing of a Currency
Transaction Report, thereby possibly encouraging structured transactions. The policy also
lacked instructions on when an employee should file a Suspicious Activity Report (SAR). The
Oaks filed no SARs in 2009 and 2010.

The press release also notes that Oaks Club filed no SARs in relation to illegal activity by its employees, including racketeering, that eventually led to a March 2011 raid by federal and state law enforcement.

FinCEN Director Calvery thanked the FBI and the US Attorney's Office for the Northern District of California for their help in the investigation.

Links:

FinCEN Press Release

Civil Monetary Penalty Assessment

 

01.05.16
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Egmont Group focuses on Terrorist Financing

The Egmont Group is an international group of Financial Intelligence Units (FIU). Today, they issued a communique announcing steps they are planning to take to combat terrorism financing:

    • working closely with the FATF to overcome information sharing obstacles and consider
      updating the international standards on effective information sharing;
    • contributing to the research of TF threats and vulnerabilities associated with ISIL and FTF;
    • expanding capacity to produce timely tactical and strategic analysis, including through leveraging technology to better capitalise on data;
    • seeking access to even more sources of information necessary to produce actionable financial intelligence, including working in partnership with academics and broader industry sectors that have visibility of suspect purchases of terrorism related goods;
    • uniting the expertise and knowledge of government, the private sector and academia to develop educational tools on terrorism financing risks and to raise awareness and professional competencies;
    • assisting FIUs in expanding bilateral and multilateral cooperation to more effectively share intelligence, technology and expertise internationally and domestically, and liaise with industry and academics to counter terrorist financing to enhance effectiveness;
    • supporting the improvement of the information sharing aspect of cooperation between FIUs
      and domestic agencies mandated to combat terrorist financing;
    • improving cooperation among FIUs internationally by removing existing obstacles to
      information sharing and developing tools and practices to facilitate multilateral exchanges
      and joint analysis;
    • continuing to focus on dialogue with the private sector, to include providing indicators to
      facilitate the identification and disclosure of useful financial intelligence; and,
    • exploring an intelligence-based approach which, complementing the suspicious-based
      approach, allows obliged entities and FIUs to better identify and disrupt terrorist activities.

Link:

Egmont Group Communique

 

12.29.15
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FinCEN issues impact and flexibility statements for proposed CDD changes

An interesting peek behind the curtain at the Financial Crimes Enforcement Network, or FinCEN. They're proposing beefing up the CDD rules to require beneficial owner identification for all new legal entities of every owner of 25% or more. Because the cost impact is significant (estimated to be $100 million per year to institutions), they not only had to issue a regulatory impact assessment, they also had to assess the need for some regulatory flexibility. On that second note, while many smaller institutions will be affected, the impact on each is not significant enough to warrant flexibility (i.e. Big number spread out over a lot of institutions ends up not being much cost per institution).

Now, the regulatory impact assessment is a lot meatier (33 pages). Mr. Watchlist will spend some of his vacation time looking at it a bit more but what he's seen so far is fascinating – there are estimates of how much reduction in “illicit activity” (most notably drug trafficking money laundering, it appears) is necessary to justify the rule change, and what the actual estimates are for the reduction.

It's nice to see that a cost-benefit analysis is part of the deal – sometimes, you wonder if, in the pursuit of greater compliance, the bottom line impact is even considered. It's nice to see that, at least in the AML world, that it is.

Links:

FinCEN Notice of Availability

FinCEN Regulatory Impact Assessment

FinCEN Initial Regulatory Flexibility Analysis

12.29.15
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AUSTRAC PEP guidance updated

Some tidbits from AUSTRAC's web pages (courtesy of the e-news newsletter), which were recently updated. Here's how they define “prominent public functions” (a cornerstone of many PEP definitions):

This term relates to functions which may exist at the Commonwealth, state and territory levels or their foreign equivalents. The meaning of 'prominent' may be determined through the size of the function in relation to the number of affected persons, the budget and its relevant powers and responsibilities.

The 2012 FATF Recommendations provide examples of positions which are covered, such as Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important party officials, or, in relation to international organisations, directors, deputy directors and members of the board or equivalent. The FATF provides further detail in its guidance, Politically Exposed Persons (Recommendations 12 and 22).

Such positions commonly hold specific powers in relation to approving government procurement processes, budgetary spending, development approvals and government subsidies and grants.

And here is their guidance on how local or municipal officials should be treated:

It is noted that although FATF considers that a prominent public function may extend to the municipal or local government level, it is generally considered that this will only apply to persons who have the substantive powers (as noted above) relevant to this level of government.

The definition of 'domestic politically exposed person' in the AML/CTF Rules limits such persons to those who hold a position in an 'Australian government body', which is defined in the AML/CTF Act as extending to the Commonwealth, state or territory levels. This definition does not capture the local government or municipal level.

This is not the case with the definition in the AML/CTF Rules of 'foreign politically exposed persons' who hold positions in a 'government body', which is defined more broadly in the AML/CTF Act to include the 'government of part of a country'.

Although foreign PEPs are characterised as being of high ML/TF risk under Part 4.13 of the AML/CTF Rules, reporting entities may consider foreign officials at the local or municipal level as being PEPs only if they hold the substantive powers as noted above.

Accordingly, domestic customers of reporting entities at the local government or municipal level and who would otherwise be considered PEPs if they were foreign customers, are not required to be treated as PEPs under Part 4.13 of the AML/CTF Rules. However, the normal obligations relating to customer identification in Chapter 4 and ongoing customer due diligence in Chapter 15 will apply to such persons.

The Department of Foreign Affairs and Trade's Heads of Government List provides details on the names and titles of heads of state, heads of government, foreign ministers, trade ministers and in some case, ministers responsible for development assistance.

And on how soon after leaving office someone can stop being considered a PEP:

As described above, a PEP is someone who occupies a prominent public position. Once a person no longer holds that position, they are no longer considered a PEP. However, a reporting entity should continue to apply a risk-based approach to determine whether an existing customer who is no longer a PEP should continue to be treated as a high-risk customer.

Higher risk PEPs are also more likely to continue to pose a ML/TF risk after they cease holding a public position. As such, reporting entities may choose to undertake enhanced customer due diligence (ECDD) for a longer period for a former PEP under the ECDD provisions in Chapter 15 of the AML/CTF Rules.

Links:

AUSTRAC e-news December 2015 issue

 

12.23.15
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December 11, 2015: Financial Sanctions Alert from Central Bank of Ireland

This is the section about the latest updates:

  • IRAN

    • There have been changes made to the EU Restrictive Measures concerning Iran. Please see links below setting out the changes to the existing anti-proliferation sanctions on Iran:


    Council Regulation (EU) 2015/1861 of 18 October 2015 amending Regulation (EU) No 267/2012 concerning restrictive measures against Iran


    Council Implementing Regulation (EU) 2015/1862 of 18 October 2015 implementing Regulation (EU) No 267/2012 concerning restrictive measures against Iran


  • NEW REGIME Burundi

    • Please note Council Regulation (EU) 2015/1755 of 1 October 2015 concerning concerning restrictive measures in view of the situation in Burundi . This is a new sanctions regime and comes into immediate effect.


  • Other recent Financial Sanctions news is available here.



  • The Central Bank has prepared Frequently Asked Questions (FAQs) to assist credit and financial institutions compliance with financial sanctions requirements.



  • FATF: Financing: FATF Report to G20 Leaders- actions being taken by the FATF



  • FATF: Combating the abuse of non-profit organisations



  • If implemented effectively, targeted financial sanctions are an important means to deprive terrorist and proliferation financiers of their funds, thereby protecting citizens from the threats of crime, terrorism and weapons of mass destruction. International Best Practices: Targeted Financial Sanctions Related to Terrorism and Terrorist Financing (Recommendation 6)



  • Financing of the Terrorist Organisation Islamic State in Iraq and the Levant This study identifies how funds are raised, moved and ultimately used by ISIL. This report seeks to understand how ISIL obtains and moves funds in order to (i) disrupt financial flows, (ii) deprive ISIL of its resources, and (iii) prevent ISIL from abusing relevant financial and economic sectors. Given the diversified nature of ISIL funding and operations, the report considered the broader issue of resourcing to accurately capture the complexities of this terrorist organisation.
    • 12.22.15
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    December 9, 2015: Hong Kong Securities and Futures Commission AML/CTF Circular

    Something a little different this time – it's not about list changes:

    (1) Suspicious Transaction Report

    Suspicious transaction reporting is a vital and integral part of the regime to combat money laundering and terrorist financing.

    Licensed corporations (“LCs”) and associated entities (“AEs”) when fulfilling their statutory obligations to file a suspicious transaction report are encouraged to make reference to the reporting methods and advice available on the website of the Joint Financial Intelligence Unit (“JFIU”) at http://www.jfiu.gov.hk/index.html, as well as the advice and observations from the JFIU set out in the Appendix.

    LCs and AEs are also reminded to take appropriate steps to ensure that any suspicious transaction report submitted by them contains accurate, sufficient information of the transaction and the person or entity involved, and a reasonably detailed analysis of the suspicion triggering the obligation to file the report. By providing as much relevant information as possible in the suspicious transaction report, LCs and AEs will minimize the need for the JFIU to request further information from them that is required for analysis and follow-up.

    (2) Seminar Materials

    The PowerPoint slides of the presentations (in both English and Chinese versions) that SFC staff and speakers of the JFIU respectively made at the recent Anti-Money Laundering and Counter-Terrorist Financing Seminars Note 1 have been posted on SFC’s website Note 2 under the heading “Training materials – Presented by SFC staff” and under the heading “Training materials – Presented by external parties”, respectively.

    LCs and AEs are encouraged to download the aforesaid presentation materials for reference and internal training as appropriate.

    Should you have any queries regarding the contents of this circular, please contact Ms Kiki Wong on 2231 1569.

    Intermediaries Supervision Department

    Intermediaries Division

    Securities and Futures Commission

    Links:

    HK SFC Notice

    HK SFC Circular

     

    12.21.15
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    One way or another, you will hear about the latest FATF advisories in Canada

    Both FINTRAC and OSFI posted copies of the latest FATF pronouncements about deficient jurisdictions (OSFI links to FINTRAC's advisory). Here's the meat of the advisory – kind of lengthy, but that's because there are a significant number of short sections:

    Financial transactions related to countries identified by the Financial Action Task Force (FATF)

    In order to protect the international financial system from money laundering and terrorist financing risks, the Financial Action Task Force (FATF) issued two statements on October 23, 2015.

    Islamic Republic of Iran and the Democratic People’s Republic of Korea

    In its October 23, 2015 public statement, FATF reaffirmed its particular and exceptional concerns about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system. FATF also reaffirmed its concerns about the Democratic People’s Republic of Korea’s (DPRK) failure to address the significant deficiencies in its anti-money laundering and combatting the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. FATF reaffirmed the call on its members to apply effective preventive measures to protect their financial sectors from such risks.

    Accordingly, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is reiterating to all reporting entities subject to the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) the risks of doing business with individuals and entities based in, or connected to, Iran and the DPRK.

    FINTRAC is advising that reporting entities should consider the above when deciding whether to file a suspicious transaction report in respect of financial transactions or attempted financial transactions emanating from, or destined to, Iran or the DPRK. 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.

    Jurisdictions representing a risk arising from deficiencies

    In its October 23, 2015 public statement, FATF calls on its members to consider the risks arising from the strategic AML/CFT deficiencies associated with the following jurisdiction that has not made sufficient progress in addressing the deficiencies: Burma (Myanmar).

    FINTRAC is advising that reporting entities should consider giving special attention to financial transactions or attempted financial transactions related to Burma (Myanmar).

    Other jurisdictions

    In its October 23, 2015 compliance document, 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 FATF to address identified deficiencies and demonstrated some progress with the execution of their plans: Afghanistan, Algeria, Angola, Bosnia and Herzegovina, Guyana, Iraq, Panama, Papua New Guinea, Syria, Uganda and Yemen.

    FATF is not yet satisfied that Lao PDR has made sufficient progress on its action plan agreed upon with FATF. If this jurisdiction does not take sufficient action to implement significant components of its action plan by February 2016, then FATF will identify Lao PDR as being out of compliance with its agreed action plan and will take the additional step of calling upon its members to consider the risks arising from the deficiencies associated with Lao PDR.

    Ecuador and Sudan no longer subject to FATF monitoring process

    FATF welcomed the significant progress of Ecuador and Sudan in improving their AML/CFT regimes. The jurisdictions have met their commitments in their action plans regarding the strategic deficiencies that FATF had identified. Ecuador and Sudan are therefore no longer subject to FATF’s monitoring process.

    The FATF October 23, 2015 statements can be found at the following website: http://www.fatf-gafi.org/

    Caribbean Financial Action Task Force (CFATF) public statement

    Reporting entities should take note that, on November 26, 2015, the Caribbean Financial Action Task Force (CFATF), under a process that is separate and distinct from the FATF monitoring process, issued for the first time a public statement regarding the strategic AML/CFT deficiencies of Suriname.

    Suriname has not made sufficient progress in addressing their significant AML/CFT deficiencies, including making certain legislative reforms. If specific steps have not been made by May 2016, then CFATF will identify Suriname as not taking sufficient steps to address its AML/CFT deficiencies. CFATF members will then be called upon to consider implementing counter measures to protect their financial systems from the ongoing money laundering and terrorist financing risks emanating from Suriname. Further, CFATF will consider referring Suriname to the FATF International Cooperation Review Group (ICRG).

    FATF action on the terrorist group Islamic State Footnote 1

    FINTRAC would like to reiterate the preceding statements issued by FATF, expressing its deep concern with the financing generated by, and provided to, the terrorist group the Islamic State (IS).

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

    Accordingly, FINTRAC is reminding all reporting entities subject to the requirements of the PCMLTFA, of their obligations

    Footnote

    2 to submit a terrorist property report if:

      • they know of the existence of property in their possession or control that is owned or controlled by or on behalf of a terrorist or terrorist group; and
      • they have information about a transaction or proposed transaction in respect of property referred to above.

    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 right to money or goods. A terrorist property report includes information about the property as well as any transaction or proposed transaction relating to that property.

    FINTRAC is advising that reporting entities should consider the above when deciding whether to file a suspicious transaction report in respect of financial transactions or attempted financial transactions emanating from, or destined to, the jurisdictions under IS control and the surrounding jurisdictions. 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.

    On October 23, 2015, FATF also noted that terrorists financing remains a top priority given the terrorist threats posed most notably by IS and foreign terrorist fighters.

    Links:

    OSFI Notice

    FINTRAC Notice