Lessons learned from AML penalties issued in 2023 | FinCEN's requirement for BO information | EU Council agree on procedure for AMLA and more

Welcome to the our AML News and Updates Newsletter January 2024 edition. ??

Stay up to date with main AML news and updates in less than 10 minutes per month!

This newsletter is brought to you by Toronto Compliance and AML Enterprise (TCAE) a global organization that offers industry-leading interactive Education, Consultancy, and Recruitment services to professionals and organizations in the Regulatory and Financial Crime and Crypto Compliance space.

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Let's see an outline of the topics to be covered in this edition:

1. Discussion of the month: Lessons learned from AML penalties issued in 2023
2. Regulatory Developments:? FinCEN's requirement for beneficial ownership information starts on January 1st 2024 ? Update of the UAE's FSRA Rulebook for AML? Amendments to the UK AML Law on treatment of domestic PEPs? European Council and Parliament agree on procedure to select seat for new Anti-Money Laundering Authority (AMLA)
3. Other News:? Former Latvian central bank governor Rim?ēvi?s sentenced to 6 years in prison? EU's 12th package of sanctions on Russia's war of aggression against Ukraine ? OFAC issued a guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia's Military-Industrial Base.

Lessons learned from AML penalties issued in 2023

2023 was a year marked by a series of hefty financial penalties imposed on regulated entities across various industries.

These penalties, ranging from millions to billions of dollars, served as reminders of the consequences of failing to comply with regulatory requirements and prioritizing compliance.

Noteworthy penalties issued in 2023

Lets examine the top five financial penalties of 2023, exploring the reasons behind these enforcement actions and the key lessons that we can learn to prevent similar mistakes in the future.

Binance

Penalty: more than $4 billion as per U.S. Department of Justice’s announcement for:

??? Money laundering

??? Violation of sanctions

??? Unlicensed money transmitting

??? Failure to maintain an AML program

?? Non-reporting of thousands of suspicious transaction reports.

Here’s the official announcement: https://www.justice.gov/opa/pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution

Lessons learned:

Crypto entities should ensure that they understand and comply with all applicable regulations, including anti-money laundering (AML) regulations.

More specifically they should among others:

? Implement a comprehensive AML program

? Perform adequate risk assessments to understand their risk exposure

? Establish effective transaction monitoring procedures

? Identify red flags and report suspicious activity.

Crown Resorts

Penalty: $450 million by AUSTRAC for:

??? Failure to perform risk management for money laundering and terrorist financing

?? Failure of oversight of AML/CFT program.

??? Failure to establish a risk-based transaction monitoring program.

??? Failure of implementing enhanced due diligence on high risk customers (EDD).

Here’s the official announcement: https://www.austrac.gov.au/news-and-media/media-release/austrac-and-crown-agree-proposed-450-million-penalty

Lessons learned:

Casinos and gambling entities are facing increased scrutiny from regulators. As a first step, they need to understand AML requirements and establish effective AML and counter-terrorism financing (CFT) programs in place.

More specifically they should among others:

? Establish robust AML and CFT programs tailored to their specific risk profiles.

? Implement effective oversight of their AML/CFT programs.

? Employ a transaction monitoring system.

? Implement enhanced scrutiny on high risk customers

Deutsche Bank

Penalty: $186 million by the U.S. Federal Reserve Board for:

???Deficient anti-money laundering internal controls and governance processes

?? Insufficient remedial progress under the 2015 and 2017 OFAC and AML consent orders related to the Estonian branch of Danske Bank.

?Here’s the official announcement: https://www.federalreserve.gov/newsevents/pressreleases/enforcement20230719a.htm

Lessons learned:

Financial institutions should implement risk-based diligence when offering correspondent services and ensure that the correspondent accounts are not misused by the respondent bank’s customers. Additionally, take immediate measures, especially when weaknesses are identified by regulators.

More specifically, when offering correspondent services they should among others:

? Assess the AML program of the respondent institution.

? Conduct transaction monitoring on the correspondent accounts to identify suspicious transactions.

? Implement random checks on the respondent institutions due diligence measures.

? React immediately to regulators’ orders.

William Hill: ￡19.2 million By the UK Gambling Commission

Three gambling businesses owned by William Hill Group will pay a total of ￡19.2 million for social responsibility and anti-money laundering failures as follows:

??? Customers were able to deposit and lose large sums of money without adequate scrutiny.

?? Customers were able to place large bets without being scrutinized or monitored.

??? Policies and procedures did not provide clear instructions on how to act on the ?results of customer profiling.

??? Procedures and controls did not prevent customers from spending more money before risk profiling was completed.

?? Training for AML staff did not provide enough information on risks and how to manage them.

Here’s the official announcement: https://www.gamblingcommission.gov.uk/news/article/william-hill-group-businesses-to-pay-record-gbp19-2m-for-failures

Lessons learned:

Gambling companies must take social responsibility and AML compliance seriously.

More specifically they should among others:

? Implement scrutiny on customers who deposit and lose large sums of money.

? Establish clear policies and procedures to take action based on the results of customer profiling.

? Implement mechanisms to prevent customers from transacting before risk profiling is completed.

? Ensure AML staff receive comprehensive training on risk identification and management.

Guaranty Trust Bank (UK) Limited

Penalty: ￡7,671,800 by the Financial Conduct Authority (FCA)

The FCA imposed the penalty for weaknesses in the bank’s AML systems and controls between October 2014 and 2019. The weaknesses include:

??? Failure to undertake adequate customer risk assessment.

?? Not assessing or documenting the money laundering risks posed by its customers.

??? Failure to monitor customer transactions and business relationships.

Here’s the official announcement: https://www.fca.org.uk/news/press-releases/fca-fines-guaranty-trust-bank-uk-limited-ps76-million-further-failures-its-anti-money-laundering

Lessons learned:

Regulated financial institutions must implement robust and comprehensive AML systems and controls.

More specifically they should among others:

? Undertake thorough customer risk assessments

? Identify and prioritize high-risk customers.

? Document the money laundering risks posed by each customer to ensure consistent and effective risk management.

? Continuously monitor customer transactions and business relationships to detect any suspicious activities or patterns.

Conclusion

A close look at these fines reveals common themes that emphasize the importance of understanding risk, prioritizing compliance, and continuously improving within regulated organizations.

Let’s learn from these enforcement actions to enhance the risk management practices of entities, strengthen their compliance programs, and foster a culture of responsible conduct.

Hope all regulated entities take the lessons and act today!

FinCEN's requirement for beneficial ownership information starts on January 1st 2024

In the US, the Financial Crimes Enforcement Network (FinCEN) has implemented additional regulations related to the beneficial ownership registry created by the Corporate Transparency Act (CTA). Starting January 1, 2024, all new reporting companies will have to report beneficial ownership information to FinCEN, and existing companies must do so by January 1, 2025.

Read more here: Beneficial Ownership Information Reporting | FinCEN.gov

Update of the UAE's FSRA Rulebook for AML

The UAE's Financial Services Regulatory Authority (FSRA), in December 2023 has updated its AML Rulebook to enhance compliance with anti-money laundering and counter-terrorism financing regulations. The revisions include changes relating to wire transfers in order to provide greater clarity that the FATF's "Travel Rule" applies to Virtual Assets also.

Read more here: ADGM FSRA announces revisions to its Anti-Money Laundering and Sanctions Rules and Guidance

Amendments to the UK AML Law on treatment of domestic PEPs

The UK government has amended anti-money laundering regulations to make it clear that domestic politically exposed persons (PEPs) should be subjected to lower risk-based due diligence measures than non-domestic PEPs. This change is intended to address concerns that domestic PEPs have faced undue burdens in accessing financial services due to their heightened scrutiny. The government also commits to a review of how financial institutions are following FCA guidance on PEPs and expects the FCA to prioritize this review promptly.

European Council and Parliament agree on procedure to select seat for new Anti-Money Laundering Authority (AMLA)

The European Parliament and the Council have agreed on a procedure for selecting the seat of the new European authority for countering money laundering and terrorist financing (AMLA). The decision will be based on a transparent and equitable process involving joint public hearings and political negotiations.

?Nine member states submitted applications to host AMLA: Belgium (Brussels), Germany (Frankfurt), Ireland (Dublin), Spain (Madrid), France (Paris), Italy (Rome), Latvia (Riga), Lithuania (Vilnius) and Austria (Vienna).

?The location of AMLA's seat will be decided by both the Parliament and the Council and will be included in the AMLA regulation.

Former Latvian central bank governor Rim?ēvi?s sentenced to 6 years in prison

The Riga District Court in Jūrmala sentenced the former president of the Bank of Latvia and European Central Bank governing council member?Rim?ēvi?s, to six?years of imprisonment, with a ban on holding state and local government positions for 5 years and a probationary period of one year and one month, as well as confiscation of property.?

The court found Rim?ēvi?s guilty of accepting a bribe and material inducements.?

Read more here .

EU's 12th package of sanctions on Russia's war of aggression against Ukraine

The European Council decided to impose restrictive measures on an additional?61 individuals and 86 entities?responsible for actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

The?new listings?target primarily the?military and defence sectors.?The Council is listing more than 40 companies taking part in the Russian military industrial complex, 7 Russian?private military companies and one of their founders, 12?Belarusian individuals involved in the military support to Russia's war against Ukraine, and further Russian officials and Russian?businesspersons?in the defence sector.

Read more here.

OFAC issued a guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia's Military-Industrial Base

The purpose of the document is to provide practical guidance to Foreign Financial Institutions on how to identify sanctions risks and implement corresponding controls. The document highlights that foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base run the risk of being sanctioned by OFAC.

You can read more here .

That's all for this month!

Hope you have a productive month and year!

Stay tuned for next month's AML News and Updates! ??

Best

Anna

Founder

AML Cube Consulting and Education