Welcome to our AML Round-up for Q3. Measures to increase transparency around beneficial ownership are a clear theme around the globe. Recent proposals for beneficial ownership registers in Canada and Switzerland, the introduction of a Beneficial Ownership Transparency Bill in the Cayman Islands and a “Thematic Examination” of Beneficial Ownership and Control in Jersey are covered within this round-up. In the US, the countdown to the introduction of new Beneficial Ownership Information Reporting Requirements under the Corporate Transparency Act in January 2024 continues.
Europe
July
The European Court of Justice (“ECJ”) has published a decision (Case C-106/22 – Xella) that clarifies the conditions under which EU Member States can screen and block foreign direct investments.
- The Situation: In recent years, EU Member States have reinforced their national Foreign Direct Investment (“FDI”) screening systems, preventing an increasing number of transactions by non-EU investors from proceeding. This decision outlines the conditions under which Member States’ can screen and block FDI as well as the justifications they might use to explain such decisions.
- Going forward: EU Member States will need to evaluate how effectively their FDI screening processes comply with the ECJ’s guidance. If they want to prevent purchases of EU enterprises by EU-based corporations solely because these EU-based acquirers have non-EU owners, they will face tough battles. The ECJ will ensure that EU Member States only block transactions where it is “appropriate and necessary for the protection of a genuine threat to a fundamental interest of the society of a Member State.”
Switzerland
August
The Swiss Federal Council initiated a consultation on a bill to strengthen the anti-money laundering framework, the aim of which is to reinforce the integrity and competitiveness of Switzerland as a financial and business location. The measures are in line with international standards. The key elements of the bill are:
- The introduction of a federal beneficial ownership register – in which companies and other legal entities in Switzerland will have to be entered, together with information on their beneficial owners;
- Anti-money laundering due diligence rules should henceforth also apply to certain consultancy activities (especially legal advice) which carry an elevated risk of money laundering; and
- A series of additional measures to strengthen the anti-money laundering framework. These include measures to prevent sanctions under embargo legislation from being breached or circumvented.
The consultation will last until 29/11/23 before being dispatched to Parliament in 2024.
Luxembourg
September
The FATF has published its Mutual Evaluation Report of Luxembourg’s Anti-money laundering and counter-terrorist financing measures. The report summarises the AML/CFT measures in place in Luxembourg as at the date of the on-site visit: 2-18 November 2022. It analyses the effectiveness of Luxembourg’s AML/CFT system and provides recommendations on how the system could be strengthened. Overall Luxembourg has strong results on technical compliance with the FATF standards. The FATF summarised that Luxembourg has a solid anti-money laundering and counter-terrorist financing (AML/CFT) framework and a good understanding of its money laundering and terrorist financing risks.
July
The CSSF, in its July newsletter, drew attention to recent FATF reports on environmental crime, offering a panorama of relevant indicators for detecting money laundering from environmental crime. The reports emphasise that financial institutions have a part to play in revealing environmental crimes and should incorporate or give greater weight to the environmental crime ML risk indicators identified by the FATF in the reports.
Guernsey
Guernsey is preparing for its upcoming Moneyval visit in 2024. Ahead of this visit, the jurisdiction will publish an updated National Risk Assessment, which is expected before the end of the year.
July
- The GFSC has issued an updated Handbook on Countering Financial Crime and Terrorist Financing following consultations on rules and guidance in relation to an independent audit function, business risk assessments, virtual asset service providers and additional information disclosures for licensed trustees and partners. This includes an update to its compliance audit requirement. All ‘specified businesses’ including financial services businesses are required to establish and maintain an independent audit function “where appropriate” for the purpose of evaluating the adequacy and effectiveness of the policies, procedures and controls adopted by them to comply with the AML/CFT requirements outlined in in the Handbook.
- Appendix I of the Handbook which lists jurisdictions identified by external sources as presenting higher risk of money laundering and terrorist financing has been updated. It now includes Cameroon, Croatia, Vietnam, Chile, Curacao and Macau. Belize, Kiribati, Morocco, and Rwanda have been removed.
Following a private law action to release assets effectively frozen as a result of a suspicious activity report and no-consent from the FIU, the Royal Court has proposed changes to Guernsey’s legal framework surrounding suspicious activity reporting and consent in order to bring it into line with other jurisdictions whereby a time limit is placed on the efficacy of “do not pay” instructions such as this one. In effect, the relevant authority is required to take steps within a certain period to justify its prohibition or allow it to lapse.
Jersey
August
- Beneficial Ownership and Control: Thematic Examination Programme 2022 – Feedback: During Q4 2022, The JFSC assessed the extent to which supervised persons had complied with their regulatory obligations with respect to Beneficial Ownership and Control. Their recently shared the findings, along with best practices identified, provide a useful insight into the Commission’s expectations in respect of beneficial ownership and control.
- Update for Directors on anti-money laundering and countering the financing of terrorism: The Government, in consultation with the Jersey Financial Services Commission (JFSC), has decided to make further legislative changes as part of the ongoing supervisory implementation of the Proceeds of Crime (Amendment No. 6) (Jersey) Law 2022 (“Amendment No. 6”) and following the extension of the initial registration deadline for certain businesses including Directors, from 30 June to 30 September 2023. This will clarify certain ongoing anti-money laundering and countering the financing of terrorism requirements (AML/CFT) and support the industry with efficient implementation.
USA
September
- The Financial Crimes Enforcement Network (FinCEN) issued a Financial Trend Analysis (FTA) on patterns and trends contained in Bank Secrecy Act (BSA) reporting on suspected evasion of Russia-related export controls. The BSA reports analysed for this FTA were filed in response to previous joint Alerts on this topic and indicate almost $1 billion in suspicious activity.
- FinCEN has issued a Notice of Proposed Rulemaking (NPRM) to extend the deadline for certain reporting companies to file their initial beneficial ownership information (BOI) reports. It is proposing to amend its final BOI Reporting Rule to provide 90 days for reporting companies created or registered in 2024 to file their initial reports, instead of 30 days. Interested parties are encouraged to submit their written comments on the NPRM by 30 October 2023.
August
- The Securities and Exchange Commission adopted new rules and amendments under the Investment Advisers Act of 1940 (Advisers Act) to enhance the regulation of private fund advisers. The new rules require private fund advisers registered with the Commission to:
- Provide investors with quarterly statements detailing information regarding private fund performance, fees, and expenses;
- Obtain an annual audit for each private fund; and
- Obtain a fairness opinion or valuation opinion in connection with an adviser-led secondary transaction.
- Prohibit engaging in certain activities and practices that are contrary to the public interest and the protection of investors unless they provide certain disclosures to investors, and in some cases, receive investor consent; and
- Prohibit providing certain types of preferential treatment that have a material negative effect on other investors and prohibit other types of preferential treatment unless disclosed to current and prospective investors.
- Additionally, the amendments will require all registered advisers, including those that do not advise private funds, to document in writing the annual review of their compliance policies and procedures.
Canada
The Government of Canada has tabled new legislation to create a beneficial ownership registry. At the end of June, Bill C-42 was adopted to strengthen the country’s anti-money laundering regime. This bill aims to establish a Canadian corporate beneficial ownership registry. You can read more about it here.
Cayman Islands
September
FATF Completes Onsite Visit of the Cayman Islands – A delegation from the Americas Joint Group (Joint Group), a sub-working group of the Financial Action Task Force’s International Co-Operation Review Group, completed its onsite visit to the Cayman Islands on 1 September. The Joint Group will now prepare an onsite visit report, which will be presented at the upcoming FATF Plenary in October – at which point the Cayman Islands will receive confirmation as to whether it will be removed from the FATF’s grey list.
August
- The Cayman Islands Monetary Authority, CIMA, published revised guidance notes on The Prevention and Detection of Money Laundering, Terrorist Financing and Proliferation Financing in the Cayman Islands. The revised Guidance Notes incorporate changes surrounding e-KYC and Remote CDD / Ongoing Monitoring Provisions.
- Beneficial Ownership Transparency Bill – The Cayman Islands is advancing its AML/CFT regime whilst reinforcing its commitment to global efforts in combatting money laundering and terrorist financing with the introduction of the Beneficial Ownership Transparency Bill, 2023. It aligns with the enhanced Recommendation 24 of the FATF’s global standards, ensuring that competent authorities have access to adequate, accurate and current information on beneficial owners of companies.
International
- Hong Kong: Hong Kong Monetary Authority (HKMA) takes disciplinary action for AML/CTF Violations: On August 15, 2023, the HKMA imposed a HK$16 million penalty on a Hong Kong bank (referred to as the “Bank”) for violating five provisions of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). These violations occurred between 2016 and 2018 (in one case) and from 2012 to 2018 (in four cases). The penalty resulted from an investigation and disciplinary proceedings conducted by the HKMA, which identified significant control deficiencies in the Bank’s practices related to customer due diligence (CDD) and ongoing monitoring of its business relationships with customers.
- Australia: The new Register of Foreign Ownership of Australian Assets (Register) came into effect on 1 July 2023. The Register, which replaces existing investment registers, expands on assets to be registered. It is intended to support compliance with Australia’s foreign investment framework and increase the Government’s visibility of foreign investments made in Australia. The Register holds details about foreign ownership of Australian assets, including business and entity related interests “where applicable”. It creates a variety of new reporting obligations for foreign investors, as well as Australian entities that become “foreign persons”.
