In this edition of Regulation Around the World we catch up on anti-money laundering (AML) developments that have occurred in the past six months.
At the international level, the Financial Action task Force (FATF) has been focussing on virtual asset service providers (VASPs) and wire transfers. It has also made changes to its so-called grey list, notably removing the UAE. In most of the jurisdictions reviewed, changes are being made to AML regulation, most notably in the European Union, United Kingdom, Canada, United States and Australia. Regulators have been active in all jurisdictions with many focussing on customer due diligence and in the United Kingdom and Hong Kong there has been a spotlight on Politically Exposed Persons (PEPs). In the United States, corporate entities are coming to terms with new registration obligations and consideration is being given to imposing AML program requirements on investment advisors that are not affiliated with banks or broker-dealers. Also in Hong Kong and Singapore there are initiatives under way to allow financial institutions to share information on customer accounts for the purposes of preventing and detecting financial crime. Regtech and its use in detecting money laundering and terrorist financing are also key themes in these jurisdictions.
This publication covers developments to August 31, 2024.
Key developments include:
- International – The FATF has been looking at developments concerning Recommendations 15 and 16. A recent FATF survey on Recommendation 15 saw 27% of respondents stating that they had not yet decided if and how to regulate the VASP sector. More FATF activity in this area is expected. The FATF is also consulting on revisions to Recommendation 16 which deals with wire transfers to ensure that they remain technology neutral and follow the same principle of “same activity, same risk, same rules”.
- United Kingdom - The UK Government is committed to consulting on changes to the key piece of AML legislation, the MLRs 2017. The UK’s regulator, the FCA, is also updating its Financial Crime Guide. Another area of FCA activity concerns the treatment of PEPs.
- United States – Corporate entities in the US that were formed on or after January 1, 2024 now have 30 days in which to file beneficial ownership information with a database maintained by FinCEN. Companies in existence prior to January 1, 2024, have until January 1, 2025 to completed their beneficial ownership filings. The registration requirement also applies to foreign companies authorized to do business in the US. In addition, FinCEN enacted a regulation that imposes new AML program requirements on investment advisors. As a result of this new regulation, as of January 1, 2026, much of the investment adviser sector will be required to implement AML policies and procedures similar to those that have long applied to broker-dealers and to banks. In a related vein, FinCEN proposed amendments to the AML program requirements for all covered financial institutions remains outstanding. If implemented, that regulation will bring additional uniformity to the AML compliance requirements that apply to all types of covered institutions and additionally will require covered entities to reflect elements of the US AML national priorities in their compliance programs.
- Canada – Canada is about half-way through its first AML/CFT strategy which covers the period 2023 to 2026. The Department of Finance has released draft regulations under the PCMLTFA, which, among other things, implement some of the changes outlined in the Fall Economic Statement of 2023. Further changes to the PCMLTFA and other legislation are also envisaged. FINTRAC has issued an Advisory identifying red flags for virtual currency automated teller machines.
- European Union – Significant change is on the horizon. On June 29, 2024, the EU’s new AML/CFT regime was published in the offical journal. In essence the new regime comprises of two key components, a new EU AML/CFT authority and an EU Single AML/CFT Rulebook.
- Netherlands - DNB has been discussing with banks a more focused and risk-based approach to Anti-Money Laundering and Anti-Terrorist Financing Act compliance. DNB has published Integrity Supervision in Focus 2024-2025 setting out issues that boards and those responsible for managing AML/CFT risk should consider.
- France – The regulatory landscape for PEPs has evolved considerably, transitioning from a risk-based approach to a more structured and defined regime. The implementation of the Arrêté of March 17, 2023, specific to domestic PEPs, alongside the forthcoming European Regulation 2024/1624, represent a significant advancement in defining more precisely the status of PEPs. In this context, the French regulator ACPR has issued guidance to summarize the definitions and the due diligence applicable to PEPs to prepare for the implementation of the EU Single AML/CFT Rulebook.
- Germany – The German Government has recently proposed or enacted several legislative projects that aim to enhance the AML framework in Germany and implement relevant EU regulations and directives. These projects include the German Act for Combating Financial Crime, the draft German Act on the Digitalization of the Financial Market, and the draft German Ordinance on Video Identification for AML Purposes.
- Luxembourg – The CSSF has issued a new Circular 24/854 setting out guidelines for the submission of the AML/CFT Summary Report RC which must be submitted by all Luxembourg investment fund managers, Luxembourg branches of foreign investment fund managers and investment funds supervised by the CSSF. For the private banking sector, an updated version of the CSSF’s Private Banking Sub-Sector Risk Assessment has been issued and contains updated recommendations (e.g. on the terrorist financing risk in private banking as well as new or developing risks). A Government Order in Council has been published establishing an inter-ministerial steering committee for the fight against money laundering and the financing of terrorism.
- Italy – In June the FIU issued a working paper intended to help develop a machine learning algorithm designed to detect firms that may have connections with organized crime.
- Australia – In May 2024, the Commonwealth Attorney-General’s Department released its second consultation on the implementation of proposed reforms to bring Australia's AML/CFT laws in line with standards recommended by the FATF. This has now been followed in September by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 being tabled in Parliament. These will be the most significant reforms to Australia’s AML/CFT regime since its introduction. Furthermore, in July AUSTRAC, Australia’s AML/CFT regulator, released two national risk assessments on money laundering and terrorism financing in Australia.
- Hong Kong - The HKMA has issued a public consultation on proposals to allow authorized institutions to share information on customer accounts for the purposes of preventing and detecting financial crime. The HKMA is preparing further practical guidance on how to apply a risk-based approach on PEPs, particularly around local PEPs and former PEPs.
- Singapore – Singapore has refreshed its money laundering and terrorism financing risk assessments, which financial institutions are expected to consider in analysing their own enterprise-level risks. A public-private working group has recently published papers discussing the risks of customer referrals from corporate service providers, and recent data analytics use cases explored by financial institutions to detect and prevent financial crime. MAS has proposed to impose AML/CFT requirements on organised market operators, issued high-level guidance on establishing source of wealth, and launched the initial phase of an information-sharing platform allowing financial institutions to share customer information to facilitate the prevention financial crime. There have also been some pertinent AML legislative developments including amendments to the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 which introduce significant new offences of rash and negligent money laundering.
- PRC – China is proposing significant changes to its AML and CFT regime. Draft amendments to the AML Law were first released for public consultation in June 2021. Thereafter the proposals have been updated several times, the most recent version of the draft amendments was published for comment on April 26, 2024.
- UAE - The UAE has been removed from the FATF grey list but remains on the EU grey list.
- South Africa – De-risking remains a hot topic in South Africa and a recent FSCA article provides a useful discussion on what institutions need to know as regards terrorist financing and targeted financial sanctions.
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