Kenneth Rijock’s Post

🛡️ 𝗛𝗠 𝗧𝗿𝗲𝗮𝘀𝘂𝗿𝘆 𝗵𝗮𝘀 𝗽𝘂𝗯𝗹𝗶𝘀𝗵𝗲𝗱 𝗶𝘁𝘀 𝗔𝗠𝗟/𝗖𝗧𝗙 𝗦𝘂𝗽𝗲𝗿𝘃𝗶𝘀𝗶𝗼𝗻 𝗥𝗲𝗽𝗼𝗿𝘁: 𝟮𝟬𝟮𝟮-𝟮𝟯, dated May 2024. The report provides an overview of the performance of AML/CTF supervisors in the financial year 2022-23, highlighting their supervisory activities, risk-based approaches and enforcement actions. It also outlines the UK's AML/CTF regulatory and supervisory regime. 📄 Some key takeaways from the report include: 1. 𝘾𝙧𝙞𝙩𝙞𝙘𝙖𝙡 𝙧𝙤𝙡𝙚 𝙤𝙛 𝘼𝙈𝙇/𝘾𝙏𝙁 𝙨𝙪𝙥𝙚𝙧𝙫𝙞𝙨𝙤𝙧𝙨: AML/CTF supervisors play a critical role in protecting the UK financial system from money laundering and terrorist financing. 2. 𝙎𝙩𝙧𝙪𝙘𝙩𝙪𝙧𝙚 𝙤𝙛 𝙩𝙝𝙚 𝙧𝙚𝙥𝙤𝙧𝙩: The report is divided into three chapters: Chapter 2 focuses on supervisory activities, Chapter 3 discusses promoting and ensuring compliance, and Annexes A and B provide additional information on supervisors and definitions of sanctions and penalties. 3. 𝙍𝙞𝙨𝙠-𝙗𝙖𝙨𝙚𝙙 𝙖𝙥𝙥𝙧𝙤𝙖𝙘𝙝: AML/CTF supervisors use a risk-based approach to supervise their population, outlining their supervisory activities and considering information sharing. 4. 𝙎𝙪𝙥𝙚𝙧𝙫𝙞𝙨𝙤𝙧𝙮 𝙖𝙘𝙩𝙞𝙫𝙞𝙩𝙞𝙚𝙨: Chapter 2 of the report details each supervisor's risk-based approach, supervisory activities and information sharing. 5. 𝙋𝙧𝙤𝙢𝙤𝙩𝙞𝙣𝙜 𝙘𝙤𝙢𝙥𝙡𝙞𝙖𝙣𝙘𝙚: Chapter 3 of the report examines the use of deterrent enforcement by supervisors to promote compliance with AML/CTF standards among their supervised population. 6. 𝙈𝙚𝙩𝙝𝙤𝙙𝙤𝙡𝙤𝙜𝙮: The report is based on an annual data return collected from all AML/CTF supervisors, which includes information on regulated entities, supervisory activities, MLR breaches, sanctions applied and case studies. 7. 𝘿𝙖𝙩𝙖 𝙘𝙤𝙡𝙡𝙚𝙘𝙩𝙞𝙤𝙣: HM Treasury collects data from supervisors, which may change in the future under the new effective framework, in preparation for the UK's next FATF evaluation. 8. 𝙏𝙝𝙚 𝙩𝙝𝙧𝙚𝙖𝙩 𝙤𝙛 𝙞𝙡𝙡𝙞𝙘𝙞𝙩 𝙛𝙞𝙣𝙖𝙣𝙘𝙚: illicit finance in the UK poses a significant threat to national security, economic prosperity and the integrity of the financial system. 9. 𝙄𝙢𝙥𝙤𝙧𝙩𝙖𝙣𝙘𝙚 𝙤𝙛 𝘼𝙈𝙇/𝘾𝙏𝙁 𝙚𝙛𝙛𝙤𝙧𝙩𝙨: The fight against money laundering and terrorist financing is vital to protecting the security and prosperity of UK citizens and communities, and the integrity of the financial system. However, it is important to note that the report does not draw explicit conclusions. 💸 These key points summarize main aspects of the 'Supervision Report: 2022-23' by HM Treasury, highlighting the importance of AML/CTF supervisors, the structure of the report and the key areas of focus in the fight against money laundering and terrorist financing.

The elements of Enhanced Due Diligence (EDD) in Know Your Customer (KYC) are: 1. Increased Frequency of Monitoring_: More frequent review and updating of high-risk customer information. 2. Source of Funds and Wealth: Verifying the customer's source of funds and wealth to ensure legitimacy. 3. Additional Risk Assessment: Conducting a more in-depth risk assessment to identify potential risks. 4. Senior Management Approval: Requiring senior management approval for high-risk customers. 5. Ongoing Surveillance: Continuously monitoring high-risk customers for suspicious activity. 6. Adverse Media Screening: Screening customers against adverse media reports and sanctions lists. 7. PEP (Politically Exposed Person) Screening: Identifying customers with political exposure and applying additional scrutiny. 8. Sanctions Screening: Checking customers against sanctions lists to ensure they are not prohibited from doing business. 9. Reputation Risk Assessment: Assessing the customer's reputation and potential risk to the organization. 10. Documentation and Record Keeping: Maintaining detailed records of EDD processes and findings. Importance of EDD : These elements help financial institutions and other organizations to further mitigate the risk of doing business with high-risk customers, including those potentially involved in money laundering, terrorist financing, or other financial crimes.

The elements of Enhanced Due Diligence (EDD) in Know Your Customer (KYC) are: 1. Increased Frequency of Monitoring_: More frequent review and updating of high-risk customer information. 2. Source of Funds and Wealth: Verifying the customer's source of funds and wealth to ensure legitimacy. 3. Additional Risk Assessment: Conducting a more in-depth risk assessment to identify potential risks. 4. Senior Management Approval: Requiring senior management approval for high-risk customers. 5. Ongoing Surveillance: Continuously monitoring high-risk customers for suspicious activity. 6. Adverse Media Screening: Screening customers against adverse media reports and sanctions lists. 7. PEP (Politically Exposed Person) Screening: Identifying customers with political exposure and applying additional scrutiny. 8. Sanctions Screening: Checking customers against sanctions lists to ensure they are not prohibited from doing business. 9. Reputation Risk Assessment: Assessing the customer's reputation and potential risk to the organization. 10. Documentation and Record Keeping: Maintaining detailed records of EDD processes and findings. Importance of EDD: These elements help financial institutions and other organizations to further mitigate the risk of doing business with high-risk customers, including those potentially involved in money laundering, terrorist financing, or other financial crimes.

Dear FinCEN Director Gacki, Canada's financial intelligence unit, FINTRAC, has published a cracking good report on lawyers. Anything you can do to gin up the FinCEN troops to do something similar would be appreciated. FINTRAC analyzed Suspicious Transaction Reports and thousands of other AML-related reports and came up with a "Special Bulletin on the use of the legal profession in money laundering and sanctions evasion". Given that US lawyers are like their Canadian counterparts in that they enjoy a trust-us-we're-lawyers approach to anti-money laundering, and have otherwise dodged AML laws and regulations that impose CDD, program, and SAR/STR reporting obligations, perhaps FinCEN could do a similar analysis, and publish a similar report, on US lawyers? FINTRAC's report finds that "an analysis of FINTRAC data holdings demonstrates that the role of legal professionals in financial transactions is significant and high volumes of funds are potentially exposed", and "2,400 suspicious transaction reports submitted to FINTRAC by reporting entities within Canada’s anti-money laundering and anti-terrorist financing regime referenced transactions involving legal professionals and/or law firms". FINTRAC notes that "complicit legal professionals, as enablers and third-party money launderers separate from the proceeds-generating criminal activity, can offer a veneer of legitimacy and respectability to a financial transaction that may dissuade questioning or suspicion from financial institutions." Looking forward to reading your report on US lawyers! Cheers Jim PS - thanks to my Canadian friend Norman Baldwin for the heads up on the FINTRAC report! https://lnkd.in/gQ9Hyuyh

5 Steps to Identify High-Risk Money Laundering (ML) and Terrorist Financing (TF) Risks in Your Business Financial regulations require all regulated entities to be alert against money laundering (ML) and terrorist financing (TF) activities. Here are 5 key steps to identify high-risk areas within your business: 1️⃣ Scrutinize Clients: Sanctions & Adverse Media Checks Before onboarding any client, perform thorough screening against government sanctions lists and adverse media coverage. This helps identify individuals or businesses associated with illegal activities. 2️⃣ Identify Politically Exposed Persons (PEPs) Public officials, family members and their close associates (PEPs) pose a higher risk due to their potential influence.  Identify all PEPs among your existing and potential clients to implement enhanced due diligence measures. 3️⃣ Pay Attention to Links with High-Risk Countries Certain countries are known to have weaker anti-money laundering controls.  Be extra cautious when dealing with clients or transactions originating from high-risk jurisdictions. 4️⃣ Identify Complex or Unusual Transactions Transactions that are overly complex, involve unusually large sums, or lack a clear business purpose should trigger further investigation.  Look for inconsistencies with the client's typical financial activity or economic profile. 5️⃣ Don’t Ignore Unexplained Activity Any transaction that doesn't make sense or is not in line with a client's established financial profile.  Investigate thoroughly and, if there are still suspicions, report the activity to the appropriate authorities. What other steps do you take to identify high-risk areas for ML/TF?

Key Insights from the FCA's Fine on Starling Bank Over Financial Crime Failings On September 27, 2024 ,the Financial Conduct Authority (FCA) imposed a fine of £28,959,426 on Starling Bank for serious deficiencies in its financial crime controls, particularly regarding its financial sanctions screening practices. This penalty underscores the critical importance of robust compliance frameworks in the rapidly growing fintech sector. Background of Starling Bank Founded in 2014, Starling Bank has expanded its customer base from 43,000 in 2016 to over 3.6 million by 2023.However, this growth was not matched by effective financial crime prevention measures, leading to FCA scrutiny. Key Issues Identified 1. Inadequate Sanction Screening: The FCA found Starling's automated screening processes severely lacking, screening customers against a limited part of the UK sanctions list and failing to monitor individuals outside the UK. 2. Failure to Comply with Regulatory Requirements : Starling had agreed to a Voluntary Requirement (VREQ) prohibiting the onboarding of high-risk customers until its compliance improved. Yet, from September 2021 to November 2023, it opened over 54,000 accounts for high-risk customers , violating this agreement. 3. Internal Audit Oversights: An internal review revealed that the bank had been aware of significant gaps in its AML (anti-money laundering) processes since 2018 but did not effectively communicate these risks to its board or the FCA. Regulatory Findings The FCA's investigation, which began in early 2021 , pointed out several areas of concern, including: - An outdated financial sanctions policy not reflecting current practices. - Insufficient management information regarding alerts and trends in potential financial crimes. - A high acceptance rate of risky customers not aligned with due diligence. Therese Chambers, the FCA's Joint Executive Director, noted that Starling’s lax controls left the financial system vulnerable to exploitation. Implications of the Fine The £28.9 million fine was reduced from an initial £41 million due to Starling's decision not to contest the allegations. This incident highlights the necessity for fintech companies to develop stringent compliance and risk management systems as they grow. Starling has since initiated programs to remediate these breaches and enhance its financial crime control framework, underscoring the responsibility of financial institutions to maintain rigorous compliance. Conclusion The case of Starling Bank reflects the increasing pressure on financial institutions to uphold stringent AML and sanctions screening practices. As regulatory scrutiny intensifies, banks must prioritize robust compliance mechanisms to safeguard against financial crime.

🚀🔒Bank of Lithuania Urges CASP’s to Strengthen AML and Fraud Prevention Measures🚀🔒 🧱💰The Bank of Lithuania (BoL) recently released findings on money laundering and terrorist financing (ML/TF) risks faced by CASPS’s based on data from January to December 2023. The BoL reinforced its guidance on Anti-Money Laundering (AML), fraud prevention, sanctions compliance, and robust internal controls across CASP’s as financial institutions. 🌐💳Security and regulation remain key concerns in P2P and crypto spaces. ⚖️ Responsible for building KYC, EDD, ODD, TM, SAR processes, Sanctions framework. · Regulatory reporting duties & liaison with regulator, authorities. · Monitoring and researching legal environment for relevant regulatory changes in fintech and VASP/CASP requirements, consulting and assisting in new product and market launches. 💊Key Recommendations: Sanctions Compliance and Monitoring: Financial institutions should regularly review and test transaction monitoring rules to ensure compliance with international sanctions and restrictive measures. Enhanced Internal Controls for ML/TF: Institutions are advised to strengthen their internal control systems to manage ML/TF risks effectively. Fraud Prevention Efforts: Investment scams, the most frequent type of fraud, remain a significant threat. Financial institutions are encouraged to screen customers for potential links to fictitious or unlicensed investment platforms. Conflict of Interest Management: The BoL highlighted the need for clear role separation within institutions to mitigate risks related to conflicts of interest, particularly by reducing overlapping employee duties. Ongoing Training Programs: Regular training programs should integrate the latest ML/TF typologies to inform staff about emerging threats. Improved Information-Sharing Mechanisms: Institutions should enhance internal communication to ensure management remains fully aware of current ML/TF risks. 🥊Scope of work 1.     CAML to support CASP on analysis of how CASP’s products align with specific MiCA services. 2.     CAML to work with CASP to review and finalize business plan and programs of operations. 3.     Provide a draft for strategic plan for MiCA adoption which guides through the MiCA licensing process (incl. assessment of timelines, timetable, costs and reasonable sequence of works). 4.     CAML to form an appropriate Board of Directors for CASP as per MiCA and Lithuanian requirements. 5.     CAML creates and implements CASP’s accounting policy by the IFRS standards support here would entail validating CASP’s views regarding the specific MiCA services it will be offering). This guidance reflects the Bank of Lithuania's commitment to safeguarding the CASP’s against financial crime by encouraging proactive risk management. #BlockchainTech #CryptoPayments #FinancialInclusion #DigitalWallets #P2PPayments #FutureOfFinance #TechForGood #CryptoAdoption #MiCA

Day 24 of Corporate KYC: Thrilled to tackle today's topic! 《《《 FATF 》》 The Financial Action Task Force (FATF) is an intergovernmental organization established in 1989 to develop policies to combat money laundering. Its mandate expanded in 2001 to include counter-terrorist financing. FATF sets international standards aimed at preventing these illegal activities and the harm they cause to society. **What FATF Does:** 1. **Sets Standards:** FATF develops recommendations, known as the FATF Recommendations, which provide a comprehensive framework for combating money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction. 2. **Monitors Compliance:** FATF monitors countries' progress in implementing its recommendations through peer reviews called Mutual Evaluations. These reviews assess the effectiveness of a country's anti-money laundering (AML) and counter-terrorist financing (CTF) measures. 3. **Identifies High-Risk Jurisdictions:** FATF identifies jurisdictions with strategic deficiencies in their AML/CTF regimes and places them on public lists. The "grey list" includes countries that have committed to addressing the deficiencies, while the "black list" includes those that have not made sufficient progress. 4. **Provides Guidance:** FATF issues guidance on emerging threats and best practices to help countries and the private sector understand and address these risks effectively. 5. **Promotes Global Cooperation:** FATF works with various international organizations, including the International Monetary Fund (IMF), the World Bank, and the United Nations, to enhance the global AML/CTF framework. **Example of FATF's Work:** **Pakistan's Grey Listing:** Pakistan has been placed on the FATF grey list multiple times due to deficiencies in its AML/CTF measures. The grey listing has significant implications for Pakistan: - **Increased Scrutiny:** Pakistan is subject to increased monitoring and has to report its progress in implementing FATF recommendations more frequently. - **Economic Impact:** The grey listing can deter foreign investment and financial transactions due to perceived higher risks, impacting the country's economy. - **Reform Incentive:** The grey listing pressures Pakistan to implement necessary reforms to strengthen its AML/CTF framework. For instance, in response to FATF's concerns, Pakistan has passed various laws to improve its financial regulations and enforcement mechanisms. By identifying weaknesses and pushing for improvements, FATF helps ensure that countries take serious steps to combat financial crimes, thereby contributing to global financial security. #Day24 #FATF #financialcrime #cdd #standard #law #compliance #Learning

Grey Lists, Blacklists and AML Compliance The FATF grey and blacklists can serve as valuable resources for compliance professionals. Firms should screen existing and new clients against these lists and have risk-based processes in place when dealing with individuals or organizations that operate in these jurisdictions. It is also important to note that these lists can change. The FATF releases two public documents (one for each list) three times a year, where it is possible that jurisdictions are added or removed from each list based on FATF assessments. Screening To ensure AML compliance, it is important that businesses screen customers against both black and grey lists. This is true for both the onboarding of new customers, but also for existing customers as lists can change and new jurisdictions can be added. Part of complying with FATF recommendations and ensuring a robust compliance program includes the use of a sanctions and watchlist screening tool for the individuals and corporations your business deals with...