September 2020

International

The Financial Action Task Force (FATF)

• Published virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing, which will help national authorities detect whether virtual assets are being used for criminal activity. Based on more than 100 case studies collected by members of the FATF Global Network, it highlights the most important red flag indicators that could suggest criminal behaviour. Key indicators in this report focus on:
• Technological features that increase anonymity - such as the use of peer-to-peer exchanges websites, mixing or tumbling services or anonymity-enhanced cryptocurrencies
• Geographical risks - criminals can exploit countries with weak, or absent, national measures for virtual assets
• Transaction patterns - that are irregular, unusual or uncommon which can suggest criminal activity
• Transaction size – if the amount and frequency has no logical business explanation
• Sender or recipient profiles - unusual behaviour can suggest criminal activity
• Source of funds or wealth - which can relate to criminal activity
• Published follow-up report to Ukraine, Czech Republic, Lithuania, Mongolia and Myanmar's progress in strengthening measures to tackle money laundering and terrorist financing.
• Published Philippine and Pakistan's progress in strengthening measures to tackle money laundering and terrorist financing.

Australia

The Australian Transaction Reports and Analysis Centre (AUSTRAC)

• Westpac and AUSTRAC have agreed to a 1.3 billion dollar proposed penalty over Westpac’s breaches of the AML/CTF Act. Westpac and AUSTRAC have agreed that the proposed penalty reflects the seriousness and magnitude of compliance failings by Westpac. In summary, Westpac admitted that it failed to:
• Properly report over 19.5 million International Funds Transfer Instructions (IFTIs) amounting to over $11 billion dollars to AUSTRAC.
• Pass on information relating to the origin of some of these international funds transfers, and to pass on information about the source of funds to other banks in the transfer chain, which these banks needed to manage their own ML/TF risks.
• Keep records relating to the origin of some of these international funds transfers.
• Appropriately assess and monitor the risks associated with the movement of money into and out of Australia through its correspondent banking relationships, including with known higher risk jurisdictions.
• Carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.
• Issued an infringement notice to State Street Bank and Trust Company (State Street) for over $1.24 million for failing to report international funds transfers. Under the AML/CTF Act, financial institutions including banks and credit unions must report IFTIs to AUSTRAC within 10 business days of sending or receiving the instruction. AUSTRAC is working with State Street to address compliance issues with their IFTI reporting systems and controls.

New Zealand

The Financial Markets Authority (FMA)

• Updated the AML/CFT enhanced customer due diligence guideline, which clarifies when source of wealth or source of funds identification and verification must be carried out, as well as some other small wording changes. All the changes are listed in the version history at the end of the guideline.

It is important to remember that there are several different types of enhanced CDD under the AML/CFT Act. One common misunderstanding is that obtaining and verifying source of wealth or source of funds is the only type of enhanced CDD. This is not the case. The Act’s requirements relating to wire transfers, identification of politically exposed persons and involvement in new or developing technologies that might favour anonymity are also known as enhanced CDD.

• Published report on FMA’s supervision activities over the past 18 months. The report shows that large parts of the financial services sector are working hard to meet the FMA’s expectations, but called for further and more widespread improvements to governance and compliance. The FMA has found weaknesses across its regulated sectors in four main areas:
• governance and oversight
• conduct and culture
• compliance assurance programmes
• compliance and controls

Canada

No major updates this month.

United Kingdom

No major updates this month.

European Union

The European Commission

• Adopted a report assessing whether Member States have duly identified and made subject to the obligations of Directive (EU) 2015/849 all trusts and similar legal arrangements governed under their laws. Directive (EU) 2015/849 (the 5th anti-money laundering Directive) indeed extended to trusts and similar legal arrangements the transparency rules and obligations applicable to legal entities, requiring Member States to identify and notify trusts or trust-like arrangements governed under their legal framework.

United States

The Financial Crimes Enforcement Network (FinCEN)

• Published statement regarding unlawfully disclosed suspicious activity reports.
• Issued final rule to require customer identification program, anti-money laundering program, and beneficial ownership requirements for banks lacking a federal functional regulator. Banks without a Federal functional regulator are currently required to comply with certain BSA obligations, including filing suspicious activity and currency transaction reports.  FinCEN anticipates that banks lacking a Federal functional regulator will be able to leverage existing policies, procedures, and internal controls required by other statutory and regulatory requirements to fulfill the obligations set out in the final rule. 
• Issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit public comment on a wide range of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (BSA). The proposals under consideration are intended to provide financial institutions greater flexibility in the allocation of resources and greater alignment of priorities across industry and government, resulting in the enhanced effectiveness and efficiency of AML programs.

Hong Kong

The Hong Kong Monetary Authority (HKMA)

• Updated the frequently asked questions in relation to AML/CFT. These FAQs aim to assist authorized institutions regulated by the HKMA in understanding relevant AML/CFT requirements. 
• Articulated key principles in relation to remote on-boarding of corporate customers based on use cases and proposals gathered through HKMA’s ongoing engagement with the industry.

The Customs and Excise Department

• Mounted an operation codenamed "Shadow Hunter" in September and successfully smashed a large-scale money laundering syndicate involving a family of five and a money changer. The amount involved in the case was over $3 billion, which is the largest ever among similar cases handled by Customs. A total of six local persons were arrested during the operation.

Singapore

The Monetary Authority of Singapore (MAS)

• Published effective AML/CFT controls in private banking. The paper sets out MAS’ supervisory expectations of effective AML/CFT controls in the private banking industry.

Other Jurisdictions

No major updates this month.