AML Round-up Q4 2023 

• The EU published a list of: “Prominent public functions at national level, at the level of International Organisations and at the level of the European Union Institutions and Bodies”.  PEPs are defined as “a natural person exercising or having exercised prominent public functions”, as outlined within the list but not covering middle-ranking or more junior officials. 
• An Amending Directive that will make changes to the EU Alternative Investment Fund Managers Directive referred to as “AIFMD II” has been published.  The proposals relating to which are likely to come into effect during 2026. Fund managers based outside the EU will need to prepare for changes in relation to marketing funds into the EU. Particularly in relation to reporting requirements and enhanced AML and tax compliance requirements. 
• In Switzerland, The Swiss Financial Market Supervisory Authority (FINMA) published its 2023 Risk Monitor. The report provides an overview of what it believes to be the most important risks currently facing supervised institutions and outlines the resulting focus of its activities. This latest report identified nine significant risks for the financial sector, which include two new risks vs the previous year relating to liquidity and funding and the outsourcing of business activities. The report also explored the impact of the use of AI on the Swiss Financial Market over the long term.  It highlighted particular challenges in connection with the responsibility for AI decisions, the reliability of AI applications, the transparency and explainability of AI decisions and the equal treatment of financial market clients. 
  

• New European authority for countering money laundering and financing of terrorism (AMLA) – The European Council and Parliament have reached a provisional agreement on creating a new European authority for countering money laundering and financing of terrorism. AMLA will have direct and indirect supervisory powers of high-risk obliged entities in the financial sector. Additionally, in cases of serious, systematic or repeated breaches of directly applicable requirements, the Authority will impose pecuniary sanctions on the selected obliged entities. AMLA’s creation forms part of a wider anti-money laundering package first presented by the Commission in 2021.  
• The European Parliament and the Council of the EU reached a provisional agreement on the coming regulation of artificial intelligence (“AI Act”) – Ursula von der Leyen, President of the European Commission, welcomed the agreement, pointing out that the AI Act “is the first-ever comprehensive legal framework on Artificial Intelligence worldwide“. Designed on the same pattern as the GDPR, the AI Act should provide national surveillance authorities with the power to supervise the implementation of the AI Act at national level, while a European body would ensure coordination at European level. In the case of any infringement of the AI Act, the fines will be set as a percentage of the offending company’s global annual turnover in the previous financial year or a predetermined amount, whichever is higher. Reduced caps should apply to SMEs and start-ups.

• Publication of Financial Action Task Force (FATF) mutual evaluation report of Luxembourg: The FATF recognised the quality of the existing framework of Luxembourg regarding the fight against money laundering and the financing of terrorism (AML/CFT) with the jurisdiction achieving strong results on technical compliance with the FATF Standards. The FATF also outlined 7 ‘priority actions’ to improve the effectiveness of the overall system.   
• The CSSF issued Circulars CSSF 23/842 and 23/843, respectively endorsing the following European Banking Authority (EBA) guidelines:
  (i) EBA Guidelines of 31 March 2023 (EBA/GL/2023/03) amending the EBA ML/TF Risk Factors Guidelines (EBA/GL/2021/02), through the addition of a dedicated Annex setting out specific risk-sensitive measures and risk factors that should be considered when entering into a business relationship with customers that are not-for-profit organizations, notably in terms of governance and control, reputation, funding methods and jurisdictions of operation; and
  (ii) EBA Guidelines of 31 March 2023 (EBA/GL/2023/04) on policies and controls for the effective management of ML/TF risks when providing access to financial services. These EBA Guidelines supplement the EBA ML/TF Risk Factors Guidelines with a view to reducing the practice of de-risking, notably encouraging a more tailored and incremental approach before refusing to enter into, or terminating relationships with a customer, or a population of customers identified as presenting higher ML/TF risk.
  

Each of the aforementioned EBA Guidelines have been applicable since 3 November 2023 to all credit and financial institutions within the meaning of the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (thus including, without limitation, banks, PFS, investment fund managers and investment funds).

• 2023 Survey on Financial Crime – CSSF – the CSSF announced that it will begin its annual online survey for the year 2023 on 19 February 2024. Final submissions should be completed through the CSSF eDesk Portal by 1 April 2024.The survey’s objective is to collect standardised key information concerning money laundering and terrorism financing (ML/TF) risks to which professionals under CSSF supervision are exposed and the implementation of measures to mitigate these risks.
• The CSSF has advised that whilst the 2023 survey remains mostly unchanged compared to the previous year, some questions have been removed, added, or amended. New and amended questions are highlighted. Respondents are also advised to take advance notice that the Country List has been modified with the addition of Palestine (ISO Code PS).
• Communication on UCITS marketing notifications – The CSSF published a communication informing Luxembourg UCITS wishing to notify or de-notify arrangements for marketing of shares in another Member State in accordance with Article 6 of the amended Luxembourg Law of 17 December 2010 on undertakings for collective investment, that they must comply with the marketing notification and de-notification procedures, available via the eDesk Portal since 2 January 2024. More details are provided in the new version of the “User guide – eDesk – ePassporting module“. 

• The FCA outlined key milestones and achievements for 2023 highlighting its “unwavering” commitment to “reducing and preventing harm” including measures taken to reduce and prevent serious harm, tackling online harms, setting higher standards and promoting competition and positive change. This commitment has been underpinned by enforcement action. The FCA cancelled 1,266 firms that failed to meet minimum standards for authorisation in the period January to October (double the number of firms in the previous year). It also imposed record fines totalling £52,802,900 during 2023. 

• Guernsey carried out its second National Risk Assessment (NRA) of the money laundering and terrorist financing risks it faces. The second NRA (NRA2) has developed the first NRA based on the further knowledge and findings of Bailiwick authorities and includes the Bailiwick’s first assessment of the risks of financing of proliferation of weapons of mass destruction. NRA2 also highlights the Russian invasion of Ukraine and the extensive financial and sectoral sanctions imposed on the Russian Federation as being a significant development since the first report in 2020.  

• Guernsey is preparing for a MONEYVAL inspection to take place in April. MONEYVAL is a permanent monitoring body of the Council of Europe. It is entrusted with the task of assessing compliance with the principal international standards to counter money laundering and the financing of terrorism and the effectiveness of their implementation, as well as with the task of making recommendations to national authorities in respect of necessary improvements to their systems.    

• Jersey is expecting a MONEYVAL report in April or May this year following a visit from the assessment team in September 2023. 

• FinCEN Proposes New Regulation to Enhance Transparency in Convertible Virtual Currency Mixing and Combat Terrorist Financing: FinCEN announced a Notice of Proposed Rule Making (NPRM) that identifies international Convertible Virtual Currency Mixing (CVC mixing) as a class of transactions of primary money laundering concern. The NPRM highlights the risks posed by the extensive use of CVC mixing services by a variety of illicit actors throughout the world and proposes a rule to increase transparency by malicious actors including Hamas, Palestinian Islamic Jihad, and the Democratic People’s Republic of Korea (DPRK).  

FinCEN Issues Final Rule Regarding Access to Beneficial Ownership Information – The final rule is the second of three key rulemakings planned to implement the Corporate Transparency Act (CTA). It will be effective on 20 February 2024, when FinCEN will begin to provide access to BOI in phases to authorised government agencies and financial institutions that meet the requirements of the final rule.  

Update to FAQ B2 regarding beneficial ownership information reporting deadlines:  

• A reporting company created or registered to do business before 1 January 2024, will have until 1 January 2025 to file its initial beneficial ownership information report.
• A reporting company created or registered on or after 1 January 2024, and before 1 January 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report.  
• Reporting companies created or registered on or after 1 January 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports with FinCEN. 
• FinCEN began accepting reports on 1 January 2024. 

• 31 January – Economic Substance Notification (ESN) due for all entity types with the Department for International Tax Co-Operation (DITC). Filing to be made via the online DITC portal.  
• 31 January  – Annual return and payment of annual fees for entities incorporated or registered in the Cayman Islands. 
• 30 April – FATCA / CRS registration notification filing deadline. Notification to be filed via the online DITC portal. 
• 30 June – Filing deadline for Fund Annual Return (FAR) and 2023 audited financial statements for all funds with a 31 December financial year end.  

• Monetary Authority of Singapore (MAS) Enforcement Report: The Report sets out details of key enforcement actions taken by MAS for the period of 1 January 2022 to 30 June 2023, as well as statistics on cases opened and enforcement outcomes. It also provides an update on the progress of MAS’ enforcement priorities for 2022/2023 and outlines MAS’ key enforcement priorities for 2023/2024. These key areas of focus cover: market abuse, financial services misconduct, money-laundering related control breaches and leveraging technology to enhance investigations with the implementation of an ‘e-Discovery’ platform.  

The Corruption Perceptions Index 2023 will be published on 30 January. This year, analysis will focus on how weakening justice systems contribute to a lack of accountability for public officials, thereby allowing corruption to thrive.