Anti Money Laundering Blog

On February 29, 2008, the Financial Action Task Force (FATF) issued Terrorist Financing Report.

This document is the study that examines the means terrorists use to raise funds and the wide range of methods they use to move money within a criminal organisation or between organisations. According to the FATF, “the adaptability and opportunism shown by terrorist organisations suggests that all the methods that exist to move money around the globe are to some extent at risk”.

The study covers and describes such problems as the terrorist requirement for funds, raising terrorist funds, moving terrorist funds, international response to terrorist financing, and policy implications.

The study identifies 4 areas to focus efforts on in order to strengthen counter-terrorist financing activities. These are addressing jurisdictional issues, outreaching to the private sector, building a better understanding across bith public and private sectors, as well as enhancing financial intelligence to use financial investigations for fighting terrorist financing.

The document was published on the FATF website on March 14, 2008.

Jersey’s new anti-money laundering rules are planned to be tightened up. Some occupations, for example, experienced financial advisors, which did not fall within current regulations, will be included into the new measures to fight money laundering.

An International Monetary Fund (IMF) inspection will assess Jersey against its standards to combat money laundering and fight terrorist financing.

The changes mean that the new categories would be checked by the Jersey Financial Services Commission (JFSC), the offshore jurisdiction’s regulator.

It has already been discussed previously that the new anti-money laundering regulation was to come into force in Japan from March 1, 2008.

So, the law aimed at preventing diversion of criminal proceeds has already come into full force. It should be indicated that last year the law anti-money laundering law covered mainly financial institutions, however, now regards also real estate agents, precious metal dealers, jewelers, licensed tax accountants, administrative notaries, judicial notaries and certified public accountants.

The above-mentioned was prompted by 2003 recommendations made by the Financial Action Task Force (FATF), and it will definitely affect economic activities of people and companies. Administrative authorities should act cautiously when implementing the law.

In accordance with the new regulations, financial institutions, real estate agents, precious metal dealers and jewelers are now obliged to confirm customers’ identities, keep transaction records and file reports on suspicious cases.

As with most directives, the Third Money Laundering Directive started with the draft. The Committee on the Prevention of Money Laundering and Terrorist Financing endorsed the European Commission’s draft of technical measures to supplement the Third Money Laundering Directive on May 10, 2006.

The Third Money Laundering Directive incorporated into EU law the revisions made in June 2003 by the Financial Action Task Force (FATF) to its Forty Recommendations on combating money laundering. It also extended the provisions to any financial transaction that possibly could be linked to terrorist activities.

It should be mentioned that the Third Money Laundering Directive allowed the European Commission to adopt implementing measures or “technical measures” in order to clarify certain aspects of the regulation such as technical aspects of the definitions, to establish criteria for assessing “low risk” or “high risk” of money laundering or terrorist financing, as well as to establish standards for assessing persons carrying out a financial activity on a very limited basis.

As it has already been discussed previously, the Third EU Money Laundering Directive became operative on December 15, 2007. So, it was incorporated into the national laws of the 25 EU members.

Currently, the recently implemented Directive brought some significant changes that has been discussed previously.

On February 27, 2008, Iran’s President Mahmoud Ahmadinejad has announced that the first anti-money laundering law will be implemented in Iran.

In the beginning of February, this anti-money laundering law was approved by the legislative watchdog the Guardians Council. Previously,t an international anti-money laundering watchdog called for closing loopholes in its financial system and limiting terrorist financing.

Iran’s economy minister will be the head of a new committee – the High Council for Combatting Money Laundering – along with the ministers of commerce, interior, intelligence, and the head of the Central Bank.

All legal bodies (the central bank, credit and financial institutions, commercial banks, insurance companies, charities, foundations and municipalities) are required to implement anti-money laundering regulations approved by the High Council for Combatting Money Laundering. The requirements obligatory under the new law from these organizations include the identification of clients, keeping records and reporting suspicious operations and transactions.

The Law was implemented after in January Iran met with the United States at a meeting of the Financial Action Task Force (FATF) in Paris.

On February 14, 2008, the Canada’s federal government announced the final regulations in its ongoing efforts to make Canada an unwelcome place for money laundering and terrorism financing were published.

Canada’s Finance Minister Jim Flaherty said that the country is ready to go to great lengths in order to strengthen its regime in line with international standards, and that it will continue fighting for being a world leader in this regard.

It is worth noting that new regulations cover real estate developers. In accordance with the regulations, real estate developers will have to observe the requirements of client identification, record-keeping and transaction-reporting under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Also, casinos be required to report to the Financial Transactions and Reports Analysis Centre of Canada any large disbursements as well as to keep records on of these transactions.

The regulations were published in the Canada Gazette today, on February 20.Â

On January 1, 2008, US Securities and Exchange Commission published Anti-Money Laundering (AML) Source Tool, which represents a research guide. The guide compiles key AML laws, rules, and guidance that are applicable to broker-dealers.

As far as there is a great variety of related anti-money laundering guidance materials that assist broker-dealers, AML Source Tool summarizes and points out key anti-money laundering compliance materials and provides related source information.

The guide prepared by staff in the Office of Compliance Inspections and Examinations (OCIE), Securities and Exchange Commission includes the following topics:
- the Bank Secrecy Act;
- the USA PATRIOT Act;
- AML compliance programs;
- customer identification programs;
- Correspondent Accounts: prohibition on Foreign Shell Banks and Due Diligence Programs;
- Due Diligence programs for Private Banking Accounts;
- suspicious activity monitoring and reporting;
- other BSA reports;
- records of funds transfers;
- information sharing with law enforcement and financial institutions;
- special measures imposed by the Secretary of the Treasury;
- Office of Foreign Asset Control (OFAC) Sanctions Programs and other lists;
- selected additional AML resources;
- useful contact information.

It goes without saying that anti-money laundering regulations, rules and orders are subject to change and often they can change rapidly. Therefore, it is to be taken into account that the information summarized in the compilation is current as of January 1, 2008.

It has already been discussed that the Third EU Money Laundering Directive  effective from December 15, 2007 brought some essential changes. Now, firms need to have a risk assessment in place, to conduct their client due diligence on the basis of this risk assessment, and to monitor their clients – both new and existing.

In accordance with the Third EU Money Laundering Directive, monitoring existing clients is a continuous requirement for firms. However, it should be noted that the new regulation does not require immediate request of identification information from firms’ well-established clients. Well-known clients are to submit only limited extra evidence of their identity, which is permitted in copies of some bank correspondence or copies of a tax return.

It is worth noting that anonymous accounts and anonymous passbooks will no loger be allowed to be kept. The owners or beneficiaries of existing anonymous accounts may become the subject od customer due diligence.

As regards record keeping, copies or references of evidence are to be kept for 5 years after the end of the relationship. Also, there must be systems for full and rapid response to enquiries for authorities like the Financial Intelligence Unit (FIU).

It has already been mentioned previously that recently the Third EU Money Laundering Directive was implemented and due to implementation deadline for the Third EU Money Laundering Directive in December, European companies had to to speed on anti-money laundering issues and best practices quickly.

The Directive became operative on December 15, 2007. There were firms that already acted according to the current anti-money laundering regulations, so, the new guidelines did not entail any change for them. However, many firms had to adopt some changes.

From December 15, firms need to have a risk assessment in place, to conduct their client due diligence on the basis of this risk assessment, and to monitor their clients, both new and existing ones.

As regads due diligence, in accordance with the new regulations, simplified customer due diligence measures are permitted only for certain clients. But customer due diligence is a must when establishing a business relationship, carrying out transaction of EUR 15 000 or more, and, of course, in case of suspecting money laundering or terrorist financing.

For all higher risk clients, enhanced due diligence must be applied. Hogher risk client category includes public officials from outside the EU, clients not met physically and politically exposed persons (PEPs).

On October 10, 2007, the Financial Crimes Enforcement Network (FinCEN), is a US network bringing people and information together in order to fight money laundering, published a document called Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting.

The document was aimed to discuss some common errors in the filing of Suspicious Activity Reports (”SARs”) noticed by FinCEN. It enlists and provides an explanation of 10 of the most common errors. The documen also discusses ways the errors can be mitigated.

The target audience for whom the document was published is financial institutions in different industries wishing  to implement simple strategies for providing accurate and complete information in their SAR filings. Also it should be useful for SAR filers trained on the requirements that could achieve significant improvements to the SAR filing without many additional efforts. 

The published Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting are important as, accurate complete SARs are an effective tool in fighting money laundering.