AML/CTF -Latest Update

Egmont Group

The increasing actions of terrorists and terrorist organizations such as ISIL, al-Qaida and their respective affiliates, as demonstrated by recent attacks in Indonesia, Egypt, France, Lebanon, Mali, Saudi Arabia, Turkey and the United States, and the proliferation of Foreign Terrorist Fighters (FTFs), pose a serious threat to security and international financial stability. In response, the Egmont Group members have cooperated to produce an operational analysis of the financing for ISIL FTFs. The project identified challenges and highlighted the success of information-sharing in combating terrorist financing (TF). During an extraordinary intersessional meeting held on February 1st 2016 in Monaco, the Heads of 102 Financial Intelligence Units (FIUs), within the context of each jurisdiction’s TF risk assessment, adopted recommendations and initiatives to respond to this increasing threat.

During its Plenary Session held February 17th-19th 2016, The Financial Action Task Force (“FATF”) covered the following issues:

  • Work on terrorist financing through the approval of a Consolidated FATF Strategy on Combating Terrorist Financing (“CTF”);
  • A statement on Brazil’s continued failure to address the serious deficiencies identified in its mutual evaluation reports;
  • Two public documents identifying jurisdictions that may pose a risk to the international financial system;
  • An update on AML/CFT improvements in Algeria, Angola and Panama;
  • Malaysia welcomed as a member and Israel as an observer to the FATF;
  • Adoption of Guidance for a Risk-Based Approach for Money or Value Transfer Services.

Iran sanctions lifted. But which ones?

Further to the verification by the International Atomic Energy Agency (IAEA) that Iran has implemented the agreed nuclear-related measures as set out in the Joint Comprehensive Plan of Action (JCPOA), the Council of the European Union terminated all EU nuclear-related economic and financial sanctions on January 16th 2016. However, Iranian citizens who are listed under EU terrorism and Syria sanctions regimes (or any other EU sanctions regime) continue to be subject to restrictive measures. It should be stressed that enhanced due diligence measures are still required for any operation with Iran whose anti-money laundering and counter-terrorism financing legal framework is still considered to have substantial and strategic deficiencies. As required by the newly issued CSSF Circular 16/634, all professionals supervised by the CSSF are therefore requested to apply enhanced due diligence and monitoring measures for any business relationship and transaction as well as correspondent banking relationships with Iran. In its last statement dated February 19th 2016, FATF mentioned that it remains particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system.

FATF assessment of Italy

The FAFT mutual evaluation report about Italy’s measures to combat money laundering and terrorist financing has been available since February 10th February 2016. The assessment is a comprehensive review of the effectiveness of Italy's AML/CFT system and its level of compliance with the FATF Recommendations.

Luxembourg Ministry of Finance: Guidance

Two sets of guidelines have just been made available by the Ministry of Finance in the context of the prohibitions and restrictive measures:

  • Guide on prohibitions and restrictive financial measures with respect to the fight against terrorist financing;
  • Guide on other prohibitions and restrictive financial measures.

International financial sanctions within the context of the fight against AML-TF may consist of the prohibition or restriction of financial activities, the seizure of goods, freezing of funds, assets or other economic resources, as well as the prohibition or restriction to provide financial services. Pursuant to the law of October 27th 2010 regarding financial restrictive measures or a directly applicable European regulation, international financial sanctions are imposed on any Luxembourg natural or legal person, as well as on any other natural or legal person operating in or from the Luxembourg territory.

Basel Committee

On February 4th 2016, the Basel Committee on Banking Supervision issued the final revised version of the guidelines for a sound management of risks related to money laundering and financing of terrorism. The change relates to an update of its Annex IV (General Guide to Account Opening). The customer information collected and verified during the account-opening procedure is crucial to the bank in order for it to fulfil its AML/CFT obligations, both at the inception of the customer relationship and thereafter, but it is also useful in protecting it against potential abuses, such as fraud or identity theft. The revised version of the General Guide to Account Opening and customer identification takes into account the significant enhancements to the FATF Recommendations and related guidance, namely the Guidance for a risk-based approach: The banking sector and Transparency and beneficial ownership, both issued in October 2014. The link to the guide is available here

Dutch interpretation of accessibility to UBO-registers
On February 10th 2016, the Dutch Finance Minister announced that the Netherlands would make the upcoming register of beneficial ownership (“the UBO-register”) open to the public. Pursuant to the EU Fourth AML Directive (entered into force on June 26th 2015, to be implemented into the national legislation of European Union Member States by June 26th 2017) the central and interconnected UBO- registers shall contain accurate and up-to-date identification information on the real owners behind corporate and other legal entities incorporated within European Union. The Fourth AML Directive states that the ultimate owners of companies will have to be listed in central registers in the European Union, accessible to the competent authorities and their FIUs (without any restriction), to Obliged Professionals, and also to any persons or organisations that can demonstrate a “legitimate interest”, such as investigative journalists. The identity of the persons involved in a trust generating tax consequences shall also be held in a UBO register, but, as provided for by the Fourth AML Directive, this information will not be accessible to the public. There’s one important caveat to this EU legislation: public access may be subjected to a ‘legitimate interest test’ which remains to be defined by Member States. The Netherlands is one of the first Member States who have decided to grant wide access to the UBO register, to the public.

Case law

In its judgment issued on March 10th 2016 (case C-235/14), the Court of Justice of European Union ruled:
The Anti Money-Laundering Directive must be interpreted as not precluding national legislation which, first, authorises the application of standard customer due diligence measures in so far as the customers are financial institutions whose compliance with due diligence measures is supervised when there is a suspicion of money laundering or terrorist financing and, secondly, requires the institutions and persons covered by the directive to apply, on a risk-sensitive basis, enhanced customer due diligence measures in situations which by their nature can present a higher risk of money laundering or terrorist financing, such as that of the transfer of funds.
The Anti Money-Laundering Directive must be interpreted as meaning that, whilst a financial institution may, in performing the supervisory obligation which it owes in respect of its customers, take account of the due diligence measures applied by a payment institution in respect of its own customers.
Directive 2005/60 must be interpreted as meaning that national legislation adopted pursuant to that directive, must be compatible with EU law, in particular the fundamental freedoms guaranteed by the Treaties. National legislation designed to combat money laundering or terrorist financing pursues a legitimate aim capable of justifying a restriction on the fundamental freedoms. To presume that the transfer of funds by an institution covered by that directive to States other than the State in which it is established always presents a higher risk of money laundering or terrorist financing is an appropriate assumption to attain  the legitimate aim of the national legislation. However, the legislation exceeds, what is necessary to achieve its aim because;  the presumption which it establishes applies to any transfer of funds, without providing for the possibility of rebutting the presumption in the case of transfers of funds which do not, objectively, present such a risk.