FCA’s report on PEPs released, Europol to double in size, FinCEN on all-cash property deals

From Paul O'Donoghue at AMLi

FCA’s report on PEPs released, Europol to double in size, FinCEN on all-cash property deals

The Financial Conduct Authority (FCA) on Thursday issued its report on how British banks deal with PEPs. Given the storm the issue caused in H1 leading to the resignation of Alison Rose as CEO of NatWest, the #FCA report effectively says “Move along now, nothing to see here.” The report finds that there is no bank which would turn away #PEP customers and “most” banks handle the process well. But there is a need for improvement.

Elsewhere, one of Europe’s foremost anti-financial crime experts Ilze Znotina has penned a column for AML Intelligence prompted by remarks from former FATF executive secretary David Lewis FRGS . David posted around the publication of the recent FATF gatekeeper report asking “What is the value of compliance?”

Ilze has responded, writing that compliance is the superpower that underwrites the global anti-financial crime system. Don’t miss her column here: In fight against financial crime, compliance is our superpower – the foundation for resilience and sustainability

NEWS DIGEST

UK BANKS: One of the AML stories over the last year which received international attention was that of Nigel Farage and Coutts Bank.

A scandal erupted after it emerged that Alison Rose, the chief executive of #Coutts’s owner, #NatWest, had discussed the matter of Nigel Farage’s bank account with a #BBC journalist.

Following Rose’s departure from the lender, the Financial Conduct Authority pledged a review examining how UK lenders deal with politically exposed persons (PEPs).

The study found that “most” banks do not subject PEPs to excessive checks and found no evidence of them being denied bank accounts.

However, a range of improvements were recommended, details of which can be found on AML Intelligence.

FATF IN THE HEADLINES

AML STANDARDS: FATF (Financial Action Task Force) has been centre stage again this week. That’s unusual given we are in high summer and the agency wouldn’t normally expect to be in the headlines weeks after publishing its most recent report on gatekeepers.

First, the #Economist highlighted claims that the standards issued by the AML body are twisted by strongmen governments to target political opponents.

Now David Lewis, a former senior member of the #FATF, has said there is “little evidence” that FATF recommendations effectively prevent money laundering.

He did this citing the fact that the small number of jurisdictions which do largely comply with the Paris-based organisation’s standards includes the likes of the Bahamas and the Cayman Islands.

Ilze Znotina, the former chair of Latvia’s FIU, responded in a column for AML Intelligence, writing how international standards such as those issued by the FATF are the “foundation for resilience and sustainability”.

Effectively, Ilze writes, he questioned “the value of compliance given that one can be FATF compliant without being effective. While I may not have a perfect answer to David’s question, I feel compelled to share my thoughts – especially since one of the countries he mentioned is Latvia.”

“While sometimes intangible and not immediately obvious, in today’s global geopolitical instability, compliance is our superpower—our foundation for resilience and sustainability. I have repeatedly stated over the last five years that the fight against financial crime is not about prosperity; it’s about economic and even physical security of our countries,” she says.

Don’t miss Ilze’s column here: In fight against financial crime, compliance is our superpower – the foundation for resilience and sustainability

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VON DER LEYEN: Yesterday Ursula von der Leyen won a second term as European Commission president, securing a comprehensive victory to keep herself at the helm of the #EU.

Having previously served as federal minister of defence in Angela Merkel's cabinet, von der Leyen has always had a strong security interest, with the sector likely to be a key focus during her upcoming five-year term.

Speaking to MEPs in Strasbourg, she said she now plans to double the size of #Europol to tackle financial crime.

The speech also contained pledges to crack down on trafficking and strengthening Europe’s borders - further indications, if they were needed, of the increasing importance the EU is placing on AML initiatives.

U.S. HOUSING: There finally seems to be light at the end of the tunnel on the U.S.’s eagerly-awaited rule for further oversight of the American residential property market.

The measure would require real estate professionals to report information about all-cash property sales to legal entities or trusts, something which officials have said could help stem the flow of illicit finance into the sector.

While it had initially been hoped the rule could be introduced in early 2024, submissions for a public consultation ended up running until April.

Brian Nelson , a senior figure in the U.S. Treasury, has now given some detail on how quickly the rule could come into effect.

International Anti-Financial Crime Summit 2024 takes place in London on October 9 next. The summit will hear from top banking, regulator, fintech and law enforcement leaders from the UK, EU and North America. The conference is designed for AFC decision-makers motivated by a desire to be professionally successful. Are you attending? Book your place here: International Anti-Financial Crime Summit 2024

OUTREACH: FinCEN has had its hands full lately, grappling with the twin threats of the fentanyl epidemic and how Mexican cartels are increasingly defrauding U.S.-based timeshare owners.

The two issues were highlighted at separate events in Miami earlier this week, with both including tips for financial institutions and law enforcement on how they can spot potential red flags.

With the opioid crisis in particular continuing to cut a swathe through many American cities, #FinCEN is planning to hold more similar events across the country in an effort to combat money laundering and starve criminals of their profits.

EUROPOL: Finally, in an indication of why Ursula von der Leyen wants to give Europol a boost, the agency has highlighted how it is increasingly having to grapple with human traffickers using cryptocurrencies.

While cash payments still prevail as the preferred means of payment in migrant smuggling, more and more, digital currencies are becoming the method of choice to launder cash.

This presents a further headache for officials trying to secure the EU’s borders and is something Europol will want to stem before it can spiral further.

CARTELS WARNING

CARTELS: While a timeshare may seem like a dream come true for American tourists on holiday in Mexico, U.S. officials have warned that it can quickly turn into a nightmare.

A variety of prominent law enforcement officials, including FinCEN, issued an extraordinary joint statement cautioning that cartels are targeting U.S. owners of timeshare properties in Mexico.

Many of these are tied to the notorious Jalisco New Generation Cartel, one of Mexico’s largest international crime gangs.

At AML Intelligence, we have all the coverage of the topic you need.

This includes more details of the initial announcement, which revealed that several Mexican accountants have already been sanctioned.

We also covered how FinCEN has already held a community outreach event in Miami to educate local businesses and law enforcement on how to spot potential cartel-related red flags.

Finally, our special correspondent Sarah Beth Felix had a dive into the documents published alongside the joint statement to draw up a list of the seven steps U.S. banks should take to stop their customers being targeted by the cartels.

SYMPHONY AI: As AML rules get ever tighter, banks are spending more and more money in an effort to make sure they keep up and don’t fall foul of regulators.

This means that many financial institutions are desperate for any new technology which can cut down on AML costs.

Step forward, #SymphonyAI. The U.S. artificial intelligence company provides a range of products which are used in areas including #fincrime and #fraud detection.

The company, which is profitable and reached $500 million in revenue run rate last year, is planning to press the button on an IPO in the second half of next year.

How it gets on in the public markets could give another indication of the size of the potential financial reward that comes with solving AML problems.

BENEFICIAL OWNERSHIP: As well as trying to crack down on cartels, FinCEN also has its hands full in trying to get small firms to comply with beneficial ownership reporting.

Companies registered to do business in the U.S. before the start of 2024 must file beneficial ownership information to the Department of the Treasury by January 1, 2025.

However, there has been significant pushback on this, with small firms questioning if they will face big fines for small paperwork transgressions and why larger companies have exemptions.

FinCEN deputy director Jimmy Kerby tried to provide reassurance on both fronts at a small business event earlier this week.

He said that bigger firms are often already “disclosing their ownership in some way” and - using a phrase invoked by FinCEN boss Andrea Gacki - claimed the filing requirements would not be a ‘gotcha’ exercise.

NORDEA: Earlier this month, Danish authorities indicted Finland-based #Nordea, one of Northern Europe’s largest banks, for violating AML laws.

It was found that the organisation had failed to stop $3.7 billion of suspicious transactions involving Russian clients, something which was exposed by the International Consortium of Investigative Journalists.

It now looks like the company’s AML woes may only just be beginning.

While Nordea has made provisions for penalties of up to $95 million as a result of the issue, new reports suggest this figure could balloon close to $1 billion.

NETHERLANDS: Finally, the risks of money laundering in cryptocurrencies has been highlighted yet again by two arrests in the Netherlands.

Officials announced that almost €1 million was deposited into an account for trading cryptocurrencies the day after it was opened by a 52 year old man.

The same day, the deposited cryptocurrencies were converted into euros.

A raid on the man’s property found, among other suspicious assets, more than half a million euros in cash.

The man, along with a 54 year old woman also at the property, were arrested on suspicion of money laundering.

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Have a great Weekend👋

Stephen and the team at AMlintelligence.