How AML officers are affected by ESG goals | Wolfsberg Group response on NPOs | FINMA guidance | Other news
Anna Stylianou
Anti-Financial Crime & AML Advisor | Board Governance | Building Compliance-by-design programs | Educating and Inspiring Compliance Teams | AML Trainer | Helping Businesses Stay Ahead of Regulatory Risks
Welcome to our AML News and Updates Newsletter for September 2023. ??
Stay up to date with main AML news and updates in less than 10 minutes per month!
In this month's newsletter, we will discuss the following:
Ever wondered whether AML and ESG are related? Should AML professionals care? Read our short and to-the-point article to find the answer!
2. Regulatory developments:
3. Other news
Let's get started...
How AML officers are affected by ESG goals
Imagine a news headline:
“Bank ABC Bank (your organization) Fined $100 Million for Allowing Money Laundering for Criminal Proceeds from Illegal Wildlife Trade” ??
or this one:
“Bank ABC (your organization) Prevents $1 Billion Money Laundering from Illegal Wildlife Trade” ??
Which one would you prefer for your company?
The answer is clear. No company wants to be fined for failing to prevent money laundering.
But in today's world, it's not enough to just have a strong Anti-Money Laundering (AML) program. Regulated entities must also consider ESG risks in your AML program to protect your company against reputational damages.
...and a strong AML program can help in combatting environmental and social crime.
What is ESG ??
ESG is a framework for evaluating how companies manage their Environmental, Social, and Governance responsibilities.
ESG factors are becoming increasingly important to investors, customers, and other stakeholders, driving more companies to consider it as a way to mitigate risks, attract responsible investors and customers, improve brand reputation, and comply with ESG regulatory obligations.
These factors include:
? Environmental Factors: A company's impact on the planet such as climate change considerations, pollution, waste management, and how the company utilizes natural resources.
? Social Factors: A company's impact on the society. Labor practices, human rights, community engagement, and the safety of products or services fall under this category.
? Governance Factors: A company's internal structure and ethics. Transparency, accountability, and ethical behavior are key elements that stakeholders consider.
ESG Risks and AML Compliance
ESG risks can pose a threat to AML compliance. For example, environmental crime, such as illegal logging and wildlife trafficking, can generate large sums of cash that can be used to launder money. ??
If you wonder how serious things are, read the below statistic:
According to the FATF, “environmental crime is estimated to be among the most profitable proceeds-generating crimes in the world, generating around USD 110 to 281 billion in criminal gains each year.”
Corruption can also be used to facilitate money laundering by corrupt officials who help criminals to move money generated from environmental crime through the financial system.
Here are some specific examples of how ESG risks can be linked to financial crime:
?? Illegal logging: The illegal logging industry is estimated to be worth $152 billion per year. This industry generates a lot of cash that can be used to launder money. (Source: Money Laundering from Environmental Crime Report – July 2021)
?? Wildlife trafficking: The illegal wildlife trade is estimated to be worth $23 billion per year. This industry also generates a lot of cash that can be used to launder money. (Source: FATF report on Money Laundering and the Illegal Wildlife Trade – June 2020)
?? Corruption: Corruption is a major problem in many countries. Corrupt officials can be used to facilitate money laundering by helping criminals to move their money through the financial system.
Are AML Officers affected by ESG goals?
AML officers are affected by ESG risks in a number of ways.
For example, they may need to:
By understanding and addressing ESG risks, AML officers can help to prevent money laundering and protect their organizations from financial crime. ??
Some additional steps that AML officers can take are:
? Build relationships with other departments, such as compliance and risk management, to share information and coordinate efforts.
? Stay up-to-date on the latest ESG regulations and trends.
? Use technology to automate and streamline AML processes.
? Invest in training and education for staff on ESG risks.
By taking these steps, AML officers can help their organizations to mitigate ESG risks and comply with AML regulations.
The Future Landscape of ESG and Compliance
We expect to see a number of trends in ESG and compliance in the coming years. These include:
??? Stricter ESG regulations: Governments and regulators will likely introduce more stringent ESG rules. For example, in the European Union, the Corporate Sustainability Reporting Directive (CSRD) requires large companies to report on their ESG performance.
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?? Greater demand for ESG information: Investors will demand more ESG-related data and information, leading to new data standards and a growing ESG data market.
?? Board of Directors to place emphasis: ESG will gain prominence in boardrooms, influencing decision-making and reporting.
?? ESG investing growth: ESG-focused investing will continue to gain popularity.
Best practices for AML Professionals ??
In light of the growing importance of ESG in AML compliance, AML professionals should take the following steps:
?? Understand the ESG risks that are relevant to their industry and region.
?? Integrate ESG risks into their AML programs.
?? Work with other departments, such as compliance and risk management, to address ESG risks.
? Stay up-to-date on the latest ESG regulations and trends.
By taking these steps, AML professionals can help their organizations to mitigate ESG risks and comply with AML regulations.
Conclusion
ESG risks are a growing threat to AML compliance. AML professionals need to understand these risks and integrate them into their AML programs. By doing so, they can help their organizations to mitigate ESG risks and comply with AML regulations.
?
Wolfsberg Group Response to FATF Consultation relating to Non-Profit Organisations
In June this year, the FATF issued public consultations on revisions to R.8/INR.8 and a Best Practices Paper dealing with protecting non-profit organisation (NPOs) from potential terrorist financing abuse. The Wolfsberg Group has provided its comments and inputs to the FATF on 18th August 2023.
Read their official announcement here: https://wolfsberg-group.org/news/47
IMF assessment Report for AML/CFT of Cote D'Ivoire
The International Monetary Fund (IMF) has issued a detailed assessment Report for AML and CFT of Cote D'Ivoire. The report summarizes AML/CFT measures in the Republique of C?te d’Ivoire at the time of the on-site visit (6-24 June 2022).
It analyzes the level of compliance with the FATF 40 Recommendations and the effectiveness of C?te d’Ivoire’s AML/CFT system and provides recommendations on how the system could be strengthened.
Source: C?te d'Ivoire: Detailed Assessment Report for Anti-Money Laundering and Combating the Financing of Terrorism (imf.org)
FINMA publishes guidance on money laundering risk analysis
The Swiss Financial Market Supervisory Authority on 24th August 2023 published guidance on the money laundering risk analysis. The money laundering risk analysis is an important tool for the strategic management of banks and other financial intermediaries. It analyses the money laundering risk of more than thirty banks in spring 2023 and reveals that many of the risk examined did not meet the requirements.
Read the official announcement here: https://www.finma.ch/en/news/2023/08/20230824-meldung-am-5-24-geldwaeschereirisiko/
FATF Mutual Evaluation and Follow-up Reports published in August 2023
The FATF, during August 2023 has published the Mutual Evaluation Reports of the following countries:
The FATF has also issued the following follow-up reports on previous mutual evaluations:
Banks hit with $549 million in fines for use of Signal, WhatsApp to evade regulators’ reach
U.S. regulators on Tuesday announced a combined $549 million in penalties against Wells Fargo and a raft of smaller or non-U.S. firms that failed to maintain electronic records of employee communications.
The Securities and Exchange Commission disclosed charges and $289 million in fines against 11 firms for “widespread and longstanding failures” in record-keeping, while the Commodity Futures Trading Commission also said it fined four banks a total of $260 million for failing to maintain records required by the agency.
Source: CNBC
UAE fines 225 firms Dh77 million in 2023 for violating AML laws
The Ministry of Economy of UAE imposed administrative penalties of Dh77 million ($76.9 million) on 225 entities in the Designated Non-Financial Businesses and Professions (DNFBPs) sector. It also suspended 50 establishments for failing to comply with anti-money laundering and terrorist financing regulations.
Read the official announcement here: UAE Ministry of Economy
The HK Monetary Authority takes disciplinary action against EFG Bank AG Hong Kong Branch
The Hong Kong Monetary Authority fined EFG Bank AG, Hong Kong Branch HK$16 million for AML and CTF contraventions.
More specifically, EFG HK did not properly conduct CDD on some customers who came from another financial institution. There were also deficiencies in onboarding CDD and ongoing CDD measures on some other customers.
During this same period, EFGHK failed to establish and maintain procedures to ensure appropriate CDD and ongoing monitoring as the national AML Law requires.
See the official announcement here: Hong Kong Monetary Authority
CEO | Founder at Gidea Advisory| Helping clients apply for MiCA license in Estonia | 10+ years providing legal advice and expertise in VASP & CASP, AML, and compliance matters.
1 年AML/ESG - this is a topic that I am interested in and I see demand in my work, very good summary, thank you! Can you recommend some sources where I can read more about AML/ESG or Compliance/ESG synergy and practical implementations? I would be very grateful! ?? ??
Congratulations on reaching 18,000 subscribers! ?? Your dedication to keeping AML professionals well-informed is truly admirable. As Leonardo da Vinci once said, “Learning never exhausts the mind,” and your newsletter is a testament to that. For those inspired by making a global impact, consider the opportunity to be part of the Guinness World Record for Tree Planting. Let's grow together! ?? Learn more here: https://bit.ly/TreeGuinnessWorldRecord ?? Keep shining and sharing knowledge! #Sustainability #Growth
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