anti-money laundering (AML)

Federal Banking Agencies Exempt Premium Finance Lending from BSA/AML Customer Identification Program Requirements

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On October 9, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and National Credit Union Administration (NCUA), with approval from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), issued a revised order exempting premium finance loans (loans made to facilitate a borrower’s purchase of property and casualty insurance policies) from the customer identification program requirements applicable to a lender’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program. Order.

Federal Bank Regulatory Agencies Release Joint Statement on Risk-Based Approach to BSA/AML Supervision

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On July 22, the Federal Reserve Board, FDIC, Office of the Comptroller of the Currency (OCC), National Credit Union Administration (NCUA) and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) released a joint statement outlining the agencies’ risk-based approach to examining banks’ BSA/AML compliance programs. Release.

NY DFS Charges the NY Branch of Habib Bank and Habib Bank Limited for Compliance Failures

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On August 24, 2017, the New York State Department of Financial Services (“NY DFS“) issued a Notice of Hearing and Statement of Charges to the New York Branch of Habib Bank Limited and Habib Bank Limited, the largest bank in Pakistan, based upon its determination that “compliance failures at the New York Branch are serious, persistent and apparently affect the entire Habib banking enterprise.” The NY DFS asserted that the Bank’s compliance function is dangerously weak and indicates “a fundamental lack of understanding of the need for a vigorous compliance infrastructure, and the dangerous absence of attention by Habib Bank’s senior management for the state of compliance at the New York Branch.” The deficiencies cited include the New York Branch’s failure to comply with New York and Federal laws and regulations concerning anti-money laundering (“AML“) compliance, including the Bank Secrecy Act.

The Superintendent is seeking to impose a civil monetary penalty upon the Respondents in an amount of up to approximately $620 million.

A hearing is scheduled for September 27, 2017, before the NY DFS’s Deputy Superintendent for Compliance. The Bank is contesting the NY DFS’s allegations and has indicated that it plans to challenge the penalty and surrender its DFS banking license, thus eliminating its only U.S. branch.

On August 24, 2017, the NY DFS also issued two companion orders. One expands the scope of a review of prior transactions for AML and sanctions issues that was already underway under the terms of an earlier consent order; the other outlines the conditions under which the Bank could surrender its NY DFS banking license, including the retention of a consultant selected by NY DFS to ensure the orderly wind down of the Bank’s New York Branch. Read more here.

Transparency International Publishes “Top Secret: Countries Keep Financial Crime Fighting Data to Themselves”

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On February 15, 2017, Transparency International (“TI“) published the above report, recommending that national authorities engage to a greater level in making public disclosure of their countries’ anti-money laundering (“AML“) statistics.

TI’s report investigated leading EU nations (notably the UK, France, Italy and Germany) as well as the U.S. and found, in particular, that AML work was only partially available as a matter of public record and that it was largely only available from international AML institutions, rather than by any national bodies themselves.

TI made a number of recommendations in its report, chief among them being a desire to see the publishing of yearly AML statistics as a standard recommendation by international AML institutions such as the Financial Action Task Force (FATF).

European Commission Adopts Delegated Regulation Amending List of High-Risk Third Countries Under the Fourth Money Laundering Directive

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On November 28, 2016, the Council of the EU published a Commission Delegated Regulation (C(2016) 7495 final) amending Commission Delegated Regulation (EU) 2016/1675 supplementing the Fourth Money Laundering Directive ((EU) 2015/849) (“MLD4“) by identifying high-risk third countries with strategic deficiencies.

The Commission adopted Delegated Regulation (EU) 2016/1675 in July 2016. The Delegated Regulation, for the first time, identified high-risk third countries with strategic anti-money laundering (“AML“) and counter-terrorist financing (“CTF“) deficiencies. The Commission advised at the time that it had taken into account the most recent Financial Action Task Force (“FATF“) public statements and that it would review the list, where appropriate.

The explanatory memorandum to the new Delegated Regulation explains that, as stressed in recital 28 to MLD4, the Commission will adapt its assessment to changes made to information sources from international organizations and standard setters, such as those issued by the FATF. As a consequence, the Commission aims to update the list to reflect the progress, or the lack of progress, made by high-risk third countries in removing the strategic deficiencies.

According to this latest information available to the Commission, it was found that Guyana has made significant progress on AML and CTF matters. On the basis of the progress made, with Guyana substantially completing all the action plan items agreed upon with the FATF, the FATF decided to conduct an on-site visit to Guyana to confirm that implementation had begun and that there is political commitment to continue to strengthen the AML and CTF regime. The FATF on‑site visit concluded that Guyana has a legal and institutional framework in place that addresses the strategic deficiencies of its AML and CTF regime. As a result, the FATF has removed Guyana from its document Improving global AML/CTF compliance: ongoing process.

The Commission’s analysis has similarly concluded that Guyana should no longer be considered to be a third country with strategic AML and CTF deficiencies. As a result, it is removing Guyana from the list of high-risk third countries under MLD4.

The Commission adopted the Delegated Regulation on November 24, 2016. The new Delegated Regulation states that it will enter into force the day after it is published in the Official Journal of the EU (OJ).

BCBS Consults on Proposed Revised Version of General Guide to Account Opening

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On July 16, 2015, the Basel Committee on Banking Supervision (BCBS) issued a consultation paper on a proposed revised version of its general guide to account opening.

The guide was first published in February 2003. The proposed revised version takes into account the significant enhancements that have been made to the Financial Action Task Force (FATF) recommendations and related guidance since it was first published.

The guide focuses on account opening. It is not intended to address every possible situation, but instead focuses on some of the mechanisms that banks can use in developing an effective customer identification and verification program that enables them to meet their obligations under anti-money laundering (AML) and counter-terrorist financing (CTF) requirements. The guide also sets out the information that should be gathered at the time of account opening and will help the bank to complete the customer risk profile. The aim is to support banks in implementing the FATF standards and guidance, which require the adoption of specific policies and procedures, in particular on account opening.

When finalized, the revised version of the guide will be added as an annex to the BCBS’ guidelines for a sound management of risks related to money laundering and financing of terrorism, which were published in January 2014.