UNIT 3 - National Legal and Regulatory Framework Flashcards
What are the four recognised stages of the AML and CFT hierarchy of legislation and regulation that typically apply in jurisdictions?
- Primary legislation e.g. Fourth EU Directive or in the UK the Proceeds of Crime Act 2002 and the Terrorism Act 2000 (as amended)
- Secondary legislation – e.g. the Money Laundering Regulations 2017 (as amended)
- Regulator/supervisory rules and guidance – e.g. Financial Conduct Authority and Law Society
- Industry and professional guidance - e.g. Joint Money Laundering Steering Group
What was published in February 2012 that has been instrumental in requiring a higher level of regulation to be applied internationally to counter the threat of money laundering and the financing of terrorism and proliferation, and which may prompt new legislation to be applied in your jurisdiction such as already conducted in the EU in the form of the 4th European Directive (May 2015)?
FATF 40 Recommenations
What are some of the important changes that were made in the FATF 40 Recommendations that must be considered in your jurisdiction?
New standards included the use of the risk based approach (Recommendation 1) and the financing of proliferation (Recommendation 7). Important other changes included:
- The definition of PEPs was extended to include domestic PEPs
- The regulated sector was widened to include all gambling services and not just casinos
- Tax evasion was listed as a predicate offence for money laundering
- New beneficiary information disclosure requirements were added to wire payment transactions
- Greater transparency was encouraged by the setting up of registers of beneficial ownership
According to local AML laws and regulations, what are the three principal money laundering offences in your jurisdiction?
Your answer is likely to include the offences that are listed in the UN Palermo Convention which provides model law guidance as follows:
- Concealing, disguising, converting or transferring criminal property – this is likely to include removing criminal property from the jurisdiction. Including concealing or disguising the nature, source, location disposition, movement or ownership of criminal property or any rights with respect to it.
- Arrangement - entering into or becoming concerned in an arrangement which the person knows or suspects facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person.
- Acquisition, use and possession - Acquiring, using or having possession of criminal property.
What was the intention of The Bank Secrecy Act and what does it require US FIs to do? (US legislation)
Full name is The Currency and Foreign Transactions Reporting Act of 1970. Intended to prevent the use of secret foreign bank accounts and assist law enforcement agencies by legislating for regulatory reporting and record keeping by financial institutions.
It requires FIs to:
- file reports of cash transactions exceeding $10 000
- report suspicious activity
- maintain a paper trail by keeping appropriate records for financial transactions.
Describe the USA Patriot Act (US legislation)
Signed on 26 Oct 2001. Introduced the need for certain FIs to have customer identification programmes (CIPs) for new customers and EDD measures for correspondent banking and PB-customers.
What does the special measure in the Patriot Act include?
- additional record keeping for certain transactions
- collection of information relating to beneficial ownership of accounts
- the collections of information relating to certain payable through accounts
- collection of info relating to certain correspondent accounts
What are the most significant aspects of the Patriot Act (for both non-US institutions and persons)?
- US banks must take reasonable steps to identify the BOs of accounts owned by foreign persons.
- US banks must identify foreign persons whose funds move through payable/correspondent bank accounts held with them.
- US banks must sever correspondent banking relationships with all foreign shell banks.
- US banks must apply EDD for all foreign PB-customers and international correspondent accounts .
Name US ML laws besides the BSA and the Patriot Act
- The ML and Financial Crimes Strategy Act (1998) - made ML a criminal offence with penalties of up to 20 years’ imprisonment and $500 000 fines.
- Anti-Drug Abuse Act (1988)
- The Annunzio-Wylie AML Act (1992) - gave protection from civil liability to and FI that filed a SAR.
- The ML Suppression Act (1994) - specifically addressed MSBs and required them to be registered.
- The Intelligence Reform and Terrorism Prevention Act (2004)
Who have the authority to assess civil penalties (USA)?
The Financial Crimes Enforcement Network (FinCEN) - delegated by the Secretary of the Treasury.
Also The Financial Industry Regulatory Authority (FINRA) and the US Securities Exchange Commission (SEC).
Name other regulatory bodies (USA)
- FRB (Board of Governors of the Federal Reserve System)
- FDIC (Federal Deposit Insurance Corporation).
- OCC (Office of Comptroller of Currency)
- CFTC (Commodity Futures Trading Commission)
- NYSE (New York Stock Exchange).
Name agencies responsible for combating ML and TF (USA)
- DEA (Drug Enforcement Agency)
- FBI
- ICE (Immigration and Customs Enforcement)
- CBP (Customs and Border Protection)
- IRS-CI (Internal Revenue Service Criminal Investigation).
What is the role of FinCEN?
It acts as the FIU for the US ans supports law enforcement through the collection, analysis and sharing of information obtained through the SAR and CTR processes. It may also issue enforcement notices for violations of the BSA and the Patriot Act.
Name some types of US enforcement actions
- Commitment letter
- Mou (an agreement between bank’s board of directors and the regulator to take action
- Formal Agreement
- Consent Order/Order to Cease and Desist
- Civil Monetary Penalty
- Death Penalty - revocation of licence.
What is the primary UK legislation and what does it do?
The Proceeds of Crime Act 2002 (PoCA). It criminalises the laundering of criminal property and provides associated regulated offences.
