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Written by Jackie Whiting
on July 30, 2021

For many organisations and industries, summertime can often mark a slow down in operations. But in the world of RegTech and regulatory compliance, things rarely slow down. This certainly rings true for kompany, as this past July has been one of the busiest times yet for our team - especially where new partnerships are concerned. 

kompany partners with AsiaVerify to facilitate safer international business

nChain launches initial phase of its enterprise platform, enabling enhanced data integrity, with first partner kompany

kompany partners with smartKYC to bring its business verification services to more clients around the world

And if you missed the client onboarding webinar, hosted by FIN, that we participated in earlier this month, you can register now to get free access to the recording. Learn what “good” looks like when it comes to onboarding at financial institutions and listen as the panel of experts shares different ways technology can enhance the customer experience, while ensuring compliance of course. 

Now, onto the first story of our July 2021 RegTech Roundup. This month we’re focusing on the strengthening of anti-money laundering requirements and enforcement in Europe and abroad. We begin with this story from Reuters, who is reporting on the EU’s proposal to create a new watchdog to stop the flow of dirty money. 

EU proposes watchdog to halt flow of dirty money (Reuters)

Last week, EU policymakers proposed the creation of a new agency to help stop financial firms from aiding criminals and terrorists after a scandal at Danske Bank highlighted various vulnerabilities within the bloc’s defenses. More than 200 billion euros worth of suspicious transactions are believed to have passed through the Danish bank’s small Estonian branch between 2007 and 2015, resulting in mounting pressure for Europe to more effectively enforce its anti-money laundering rules.

According to Reuters, without a central EU authority to stop money laundering and terrorist financing running into the billions of euros, the bloc has relied on national regulators for enforcement, but often they disagree over who should be in charge which leads to rules that are inconsistently enforced.

Therefore, the EU Commission has proposed creating an EU Anti-Money Laundering/Countering Financing of Terrorism Authority (AMLA) to “directly supervise a yet-to-be-compiled list of cross-border financial firms considered the most risky, and to coordinate enforcement among national regulators.”

Included in the proposal is the power for the AMLA to intervene in companies not on the aforementioned list if the national regulator has not “taken sufficient action.” 

The plan is for AMLA to be fully operational by 2026 with an estimated 250 staff, 100 of whom would be dedicated to supervising the riskiest organisations alongside national regulators. Its operational costs are estimated at 45.6 million euros and the organisation would have the ability to “impose sanctions up to 10 million euros or 10% of a firm's annual turnover” and “would strip the EU's European Banking Authority (EBA) of the role it has had since 2019 of coordinating enforcement of anti-money laundering rules.”

The removal of the EBA’s involvement stems from the decision of their board to close an inquiry into Danish and Estonian regulators regarding Danske Bank “without explanation, even though the two national regulators were found in breach of EU law.”

Next steps include the European Parliament and Council discussing the proposed legislative package at an upcoming meeting. Improving internal procedures by finding the right technology partners should be treated as a top priority for obliged entities in the lead up to the creation of this new agency. 

Corruption, Cybercrime Top List of U.S. Anti-Money-Laundering Concerns (Wall Street Journal)

At the end of last month, the U.S. Treasury Department issued a set of highly anticipated national anti-money laundering priorities, “naming corruption and cybercrime among the areas where financial institutions should focus their compliance resources.” The list is the first of its kind created by the Treasury's Financial Crimes Enforcement Network (FinCEN), which is required by Congress to develop a national strategy of priorities every four years.  

The department’s list of primary concerns include the following: corruption, cybercrime and the criminal exploitation of virtual currency, foreign and domestic terrorist financing, fraud, transnational organised crime, narcotics trafficking, human trafficking and smuggling, and the funding of weapons of mass destruction. 

The publication of this list of priorities comes after the enactment of the US Anti-Money Laundering Act (AMLA) in January 2021, a law that is largely considered to be the most substantial AML legislation since the 2001 Patriot Act. According to the AMLA, FinCEN is “required to draft a national strategy for countering money laundering and terrorist financing and to publish a list of the related predicate crimes it prioritises under the plan.” 

Some compliance experts have expressed concerns that the priorities listed are too general and therefore may only serve to increase the sector’s overall regulatory burden. In response, FinCEN and a number of other regulatory agencies involved in creating the list of priorities have said in a joint statement that their publication wouldn’t create immediate changes to the sector’s regulatory obligations.

“The Treasury unit said it would issue regulations later clarifying how financial institutions should incorporate the priorities it had identified into their compliance programs. The anti-money-laundering act gives FinCEN 180 days after publishing the priorities to issue the regulations.”

Money laundering in Canada is pervasive, but little is done about it: according to experts (Ottawa Citizen)

According to a recently published story from the Ottawa Citizen, the challenges of combating money laundering in Canada are becoming increasingly difficult to manage. In fact, the problem is considered so pervasive that money laundering in Canada has its own nickname: snow-washing.

“Over the past 10 years, Ottawa-area banks flagged more than 10,000 suspicious transactions to Canada’s financial intelligence agency, but during that same period only 20 people faced money laundering-related charges in the city.” Experts say that the discrepancy between the number of suspicious transactions reported and the number of related charges proves there is something amiss in the country.

“‘You have nearly no prosecutions in the country,’ said Matt McGuire, the co-founder and practice director of The AML Shop. ‘The odds are infinitely small that you are going to be charged. If you are charged, the odds are infinitely small that you are going to be prosecuted. If you are prosecuted, it’s almost entirely unlikely that they’re going to find the money and almost entirely unlikely that it’s going to be forfeited.’” 

The effects of money laundering are also plaguing the Canadian real estate market. In British Columbia, money laundering was suspected to be so prevalent that it led to the creation of a special inquiry into the issue, known as the Cullen Commission. The Commission’s findings led to an estimation that money laundering has caused house prices to rise an average of five per cent province-wide, contributing to an ever-growing housing crisis. It’s also assumed this is happening in other populous provinces, such as Ontario, as well. 

Although “the federal government committed in 2019 to creating a new team to better coordinate efforts to stop and prevent money laundering, it remains pervasive,” according to McGuire. 

As anti-money laundering related efforts are increased in the United States, it remains to be seen how Canada will find effective new ways to combat the issue within its own borders. 

That's it for this month! But before you go...

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