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Written by Jackie Whiting
on June 29, 2022

The first day of summer in the Northern Hemisphere has come and gone and with it, plenty of updates in the world of anti-money laundering, financial crime and RegTech. At kompany, we’ve been busy traveling to a variety of summits and conferences throughout the past months and we remain grateful for opportunity we've had to engage in so many interesting conversations with leaders in KYC from around the world.

If you didn’t manage to spot us at Money2020 in Amsterdam or the EBRA Conference in Madrid, you have another chance to join a conversation with the kompany team tomorrow! Hosted by Asia Risk and Fenergo, we’ll be joining this discussion to explain how financial institutions can adopt a Perpetual KYC model that leverages data, analytics and automation to reduce the cost and time involved in conducting periodic reviews. You can register for free here!

Now, let’s get on to the news! Our first story this month comes from Pymnts and summarizes a recent report published by the European Supervisory Authorities. Time to dig into it.

EU Supervisors Seek More Power to Strip Licenses for AML Violations - PYMNTS

At the beginning of June, the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EOIPA) and the European Securities and Markets Authority (ESMA), published a joint report advocating for the introduction of a “specific legal ground to evoke licenses for breaches of anti-money laundering/combating the financing of terrorism (AML/CFT) rules.” 

The report also mentioned that they’d want to see relevant authorities include an assessment of a firm’s current AML/CFT compliance arrangements and processes as a condition for granting them authorization for registration. Authorities would then be able to withdraw authorization from firms found to be “committing serious breaches of AML/CFT rules, based on EU or national law.”

Other proposals included in the report involve regulators providing authorities with additional powers in order to perform a money laundering/terrorist financing risk assessment at the moment of authorization. Although many authorities already do this, there’s no legal requirement to perform these ML/TF risk assessments in many of the sectoral laws.

The cryptocurrency sector was also included in the report, with the European Supervisory Authorities highlighting a need for “the Markets in Crypto-Assets Regulation” to fully integrate AML/CFT issues. 

Finally, the ESAs clarified that they are only proposing to revoke a firm’s license for serious breaches of AML rules, “subject to a discretionary and proportionality assessment” that would be managed on a case-by-case basis.  

Money laundering: more Australian prosecutions needed, financial intelligence agency warns - The Guardian

At a recent ACAMS conference, the head of Australia’s financial intelligence agency (Austrac) reiterated that Australian law enforcement groups need to carry out more money laundering prosecutions in order to avoid punishment from international regulators. In preparation for its next evaluation by the Financial Action Task Force, Australia needs to reconsider its compliance with the standards set by the international intergovernmental organization. 

There is pressure to demonstrate an improvement by 2025 partly due to the fact that Australia performed poorly at its last evaluation in 2016. The country is also expected to face more hurdles during its next evaluation due to the Morrison government’s failure  “to bring in a register of beneficial ownership or implement ‘tranche 2’ reforms, which bring real estate agents and lawyers into the anti-money-laundering system.”

The record-breaking AUS $1.3bn fine against a major Australian bank is considered to be a step in the right direction by Austrac’s leader Nicole Rose but it remains a difficult task to convince the country’s chief executives and board members to take the issue seriously.

However, the stakes of getting these actions wrong are high. Fellow conference speaker, David Shannon of the Asia/Pacific Group on Money Laundering, has said that it’s entirely possible the country could be “gray-listed” by FATF. This holds serious implications for the country’s economic future as one only needs to look at the organization’s decision to gray list the UAE back in March. This decision is “reportedly set to carve 3% from the country’s GDP, or about US $10bn.”

Gibraltar joins UAE on FATF gray list as government responds to AML scrutiny - International Investment

The FATF Plenary came together last week in Berlin and the inter-governmental body made several noteworthy decisions, with the gray-listing of Gibraltar coming as a particular surprise to people around the world.

The British Territories is now on the gray list of jurisdictions subject to increased monitoring, alongside nations like the UAE, Cayman Islands, Barbados, and Panama. This decision comes after FATF found that “the overseas territory’s regulators are not fining offenders in line with prescribed penalties or focusing hard enough on intermediaries” like lawyers. 

Gibraltar will need to complete a number of actions before they can get themselves off the gray list. FATF chair Marcus Pleyer has said that they will need to focus on gambling operators, lawyers, and other gatekeepers to the financial system who are particularly vulnerable to money laundering failings. The gambling sector in Gibraltar is especially important due to its size and the fact that it’s aimed at foreign jurisdictions. 

Gibraltar will have until May 2023 to address these concerns. Government officials have said that they are committed “at the highest political level” to demonstrate full compliance within this timeframe. 

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

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