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FinCEN Issues Advisory on FATF's List of Jurisdictions with AML/CFT Deficiencies
On July 20, FinCEN issued an advisory to financial institutions with updates to the Financial Action Task Force’s (FATF) list of jurisdictions containing strategic anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies. According to FinCEN’s Advisory, on June 26, FATF updated two documents to reflect changes that have the potential to affect U.S. financial institutions’ due diligence obligations and risk-based policies, procedures, and practices. The first document, the FATF Public Statement, identifies jurisdictions that are subject to Enhanced Due Diligence or countermeasures due to the jurisdiction’s AML/CFT deficiencies. Revisions to the FATF Public Statement include the removal of Ecuador from the Public Statement because of progress in addressing its FATF action plan. Ecuador now appears on the list of jurisdictions requiring general due diligence. The second document to be updated, Improving Global AML/CFT Compliance: On-going Process, identifies new jurisdictions with AML/CFT deficiencies. Bosnia and Herzegovina have been downgraded to the Improving Global AML/CFT Compliance: On-going Process document due to its “strategic deficiencies in its AML/CFT regime." However, the country has made a “high-level political commitment” to work with FATF and regional authorities to address their deficiencies. Indonesia was removed from the listing and monitoring process, according to the Advisory, for “its significant progress in establishing the legal and regulatory framework to address all or nearly all of its strategic AML/CFT deficiencies.”
Financial Action Task Force Issues Guidance Urging Risk-Based Approach to Virtual Currencies and Services
On June 29, the Financial Action Task Force (FATF) issued a report, Guidance for a Risk-Based Approach to Virtual Currencies,part of a staged approach focusing on the points of intersection that provide gateways to the regulated financial system, in particular, convertible virtual currency exchangers. The Guidance explains the application of the risk-based approach to AML/CFT measures in the virtual currency context, identify the entities involved in virtual currency payment products and services (VCPPS), and clarify the application of the relevant FATF Recommendations to convertible virtual currency exchangers. The guidance provides, among other things, recommendations and encourages member nations to adopt regulations and guidelines similar to those applicable to traditional financial institutions to reduce risk exposure to the banking system.
White House Proposes To Rescind Cuba's Designation as a State Sponsor of Terrorism
On April 14, President Obama submitted to Congress a report and certifications signaling the Administration’s intent to rescind Cuba’s designation as a State Sponsor of Terrorism, according to a statement by the White House Press Secretary. The decision to rescind Cuba’s designation, which has been in effect since 1982, was based on a recommendation from the Secretary of State, resulting from the Department of State undertaking a comprehensive review of Cuba’s record. As statutorily required for a country’s designation to be rescinded, the President must submit a report to Congress at least 45 days before the proposed rescission would be effective and certifying that (i) Cuba has not provided any support for international terrorism during the preceding 6-month period; and (ii) the Cuban government has provided assurances that it will not support acts of international terrorism in the future. The White House’s announcement follows recent policy changes by the Administration aimed at normalizing U.S.-Cuba relations.
Special Alert: Lessons Learned from Arab Bank's U.S. Anti-Terrorism Act Verdict
On September 22, 2014, following a two-month trial, a federal jury in the Eastern District of New York ruled in favor of a group of 297 individual plaintiffs in a civil suit accusing Arab Bank PLC, headquartered in Amman, Jordan, of supporting terrorism. Linde vs. Arab Bank PLC, No. 1:04-CV-2799 (E.D.N.Y. filed July 2, 2004).
In summary, the plaintiffs alleged that Arab Bank was liable under the U.S. Anti-Terrorism Act, 18 U.S.C. § 2331, et seq. (the “ATA”), for the deaths and/or severe injuries resulting from acts in international terrorism that occurred between 2001 and 2004, because the bank had processed and facilitated payments for Hamas and other terrorist or terrorist-related organizations, their members, the families of suicide bombers, or Hamas front organizations.
What this means for financial institutions, particularly foreign banks that increasingly face the potential reach of U.S. laws and plaintiffs, remains to be seen. But there are three take-aways worthy of immediate consideration.
Click here to view the full special alert.
Department Of Treasury Continues Work To Support Money Transmitters
On October 8, the Treasury released a statement regarding its continued efforts to support the legitimate use of money transmitters by fostering financial inclusion and financial transparency, while simultaneously addressing its vulnerabilities of money laundering and terrorist financing. Highlighting its progress in the last 15 years, the statement notes that “record volumes of remittances are being transmitted through legitimate and transparent channels.” Looking forward, the treasury will improve upon its efforts to increase banking access for money transmitters by (i) making its expectations for banks clearer; (ii) improving AML/CFT controls and compliance; (iii) heightening AMC/CFT oversight; and (iv) reaching out to financial institutions and their customers. Finally, the Treasury is working with federal banking agencies to ensure that not all money transmitters are treated as high risk by banking institutions. Ensuring that these efforts are both domestic and international, the Treasury is working with the United Kingdom, the World Bank, and G-20.
FinCEN Advisory Updates FATF AML/CFT Deficient Jurisdictions List
On August 5, FinCEN issued an advisory, FIN-2014-A006, which provides guidance to financial institutions for reviewing their obligations and risk-based approaches with respect to certain jurisdictions. The Financial Action Task Force (FATF) recently updated its lists of jurisdictions that appear in two documents: (i) jurisdictions that are subject to the FATF’s call for countermeasures or Enhanced Due Diligence as a result of the jurisdictions’ Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) deficiencies; and (ii) jurisdictions identified by the FATF as having AML/CFT deficiencies. The advisory notice (i) summarizes the changes made by the FATF; (ii) provides specific guidance regarding jurisdictions listed in each category including when Enhanced Due Diligence is required; and (iii) reiterates that if a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation, the financial institution must file a Suspicious Activity Report.
FinCEN Guidance Updates FATF AML/CFT Deficient Jurisdictions List
On March 25, FinCEN issued an advisory notice, FIN-2014-A003, in which it provided guidance to financial institutions for reviewing their obligations and risk-based approaches with respect to certain jurisdictions. The Financial Action Task Force (FATF) recently updated its lists of jurisdictions that appear in two documents: (i) jurisdictions that are subject to the FATF’s call for countermeasures or Enhanced Due Diligence as a result of the jurisdictions’ Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) deficiencies, or (ii) jurisdictions identified by the FATF as having AML/CFT deficiencies. The advisory notice (i) summarizes the changes made by the FATF; (ii) provides specific guidance regarding jurisdictions listed in each category; and (iii) reiterates that if a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation, the financial institution must file a Suspicious Activity Report.
FinCEN Director Discusses 2014 Priorities
On February 20, in remarks to the Florida International Bankers Association Anti-Money Laundering Conference, FinCEN Director Jennifer Shasky Calvery reviewed FinCEN’s key initiatives over the past year and outlined priorities going forward. She discussed FinCEN’s efforts with regard to virtual currency risks and stated that it is important for financial institutions that deal in virtual currency to put effective AML/CFT controls in place. She noted that it is also important for all stakeholders to keep virtual currency concerns in perspective given the relatively small size of the market. FinCEN is growing increasingly concerned with third party money launderers who layer transactions, create or use shell or shelf corporations, use political influence to facilitate financial activity, or engage in other schemes to infiltrate financial institutions and circumvent AML controls. FinCEN intends to pursue such actors regardless of where they are located. Director Shasky Calvery also reiterated concerns about securities firms that offer services similar to banks, and promised continued focus on threats posed by trade-based money laundering. With regard to its policy initiatives, FinCEN intends to engage stakeholders in a discussion of “balancing the policy motivations behind data privacy and secrecy laws in different jurisdictions with the need for an appropriate level of transparency to combat money laundering and terrorist financing.” The Director noted that this issue is particularly critical in the area of correspondent banking.
Basel Committee Finalizes AML/CFT Risk Management Guidance
On January 15, the Basel Committee on Banking Supervision issued final guidance regarding anti-money laundering/combating the financing of terrorism (AML/CFT) risk management. The Committee states that the guidelines are consistent with and supplement the 2012 International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation issued by the Financial Action Task Force. The guidelines supersede two previously-issued Basel Committee publications: Customer due diligence for banks (October 2001) and Consolidated KYC management (October 2004). The final guidelines detail the “essential elements” of sound AML/CFT risk management, including those related to (i) assessing and understanding risks; (ii) customer acceptance policies; (iii) customer and beneficial owner identification; (v) ongoing monitoring; (vi) information management and record keeping; and (vii) reporting suspicious transactions and asset freezing. The guidelines also address AML/CTF in the group-wide and cross-border context, and outlines expectations for banking supervisors.
FinCEN Provides Guidance Regarding Updated FATF Jurisdictions List
On September 17, FinCEN issued Advisory FIN-2013-A006, which provides considerations for financial institutions when reviewing their obligations and risk-based approaches with respect to certain jurisdictions. The Financial Action Task Force (FATF) recently updated its lists of jurisdictions that appear in two documents: (i) jurisdictions that are subject to the FATF’s call for countermeasures or are subject to Enhanced Due Diligence due to their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) deficiencies and (ii) jurisdictions identified by the FATF to have AML/CFT deficiencies. The Advisory summarizes the changes made by the FATF, provides specific guidance regarding jurisdictions listed in each category, and reiterates general guidance that if a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation, the financial institution must file a Suspicious Activity Report.