The G20 has published a Communiqué following the meeting of Finance Ministers & Central Bank Governors in Buenos Aires on March 19 – 20, 2018.

Among other things, the Communiqué states that the G20 welcomes the finalization of Basel III and remains committed to full, timely and consistent implementation and finalization of the reforms. The G20 looks forward to the outcome of the evaluation of the reforms to identify and address any unintended consequences, which is being led by the Financial Stability Board.

The G20 also commits to continue to address the decline in correspondent banking relationships. It welcomes the FSB's March 2018 progress report on correspondent banking and calls on the FSB to monitor, with the FATF, the International Monetary Fund, the World Bank Group and the Global Partnership for Financial Inclusion, the adoption of the recommendations in the FSB's March 2018 report "Stocktake of Remittance Service Providers' Access to Banking Services."

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The Financial Action Task Force has published its report to G20 Finance Ministers and Central Bank Governors, in advance of their meeting in Buenos Aires scheduled for March 19 – 20, 2018. In the report, the FATF reiterates its commitment to tackle all sources, techniques and channels used in terrorist financing and to continue its work to increase financial transparency and improve the environment for remittances.

The report gives an overview of the FATF's recent work by providing stock-takes on the following workstreams:

• strengthening the FATF's institutional basis, governance and capacity;
• countering the financing of terrorism and proliferation;
• improving transparency and the availability of beneficial ownership information;
• supporting financial inclusion and access to regulated financial services;
• bank de-risking and the impact on remittances;
• FATF engagement with judges and prosecutors to improve the effectiveness of the criminal justice system; and
• the risks and opportunities of FinTech, RegTech and virtual currencies.

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The Financial Stability Board has published two reports relating to its actions to address the decline in correspondent banking. The first report is a progress report addressed to the G20 Finance Ministers and Central Bank Governors on the FSB's four-point action plan to assess and address the decline in correspondent banking relationships. It sets out the actions taken since the FSB's July 2017 progress report and describes the work that remains to be completed at international level and implemented at national level by regulators and banks. That work includes:

• Implementing the recommendations and action plan on access to banking services by remittance providers (set out in the second report, which is described below);
• National implementation of the new Financial Action Task Force and revised Basel Committee guidance on correspondent banking, which the FSB thinks can mostly be achieved by national regulators issuing statements to clarify their expectations so that they are reflected in supervisory practices as well as banks' risk management practices;
• Improving efficiencies in and enhancing standardization of Know Your Customer utilities, including encouraging the use of the Wolfsberg Correspondent Banking Due Diligence Questionnaire; and
• Progressing the enhancement and further development of solutions to capture the trade finance components of correspondent banking.

Read more. 

The U.K. Joint Money Laundering Steering Group has launched a short consultation on minor changes to Part II of its anti-money laundering and counter-terrorist financing guidance in relation to two sectors, namely asset finance and syndicated lending.

In the press release announcing the draft revised guidance, the JMLSG clarifies that the revisions do not make substantive changes to the existing guidance. Instead, the proposals provide clarification on the workings of these two sectors, how to identify customers and how risks should be assessed.

The JMLSG invites comments on the proposed revisions by March 30, 2018.

View the consultation.

The Financial Stability Board has published an update to its correspondent banking data report. The latest data report updates the data report the FSB published in July 2017 alongside a report for the G20 on progress made on the four point action plan the FSB launched in November 2015 to address the decline in correspondent banking relationships. The latest data report updates the July 2017 data report with additional information provided by SWIFT incorporating the period from January to June 2017.

This new data reveals the average number of active corridors per country (that is, direct relationships between countries, measured by the flow of SWIFT messages) increased in the first half of 2017 in Oceania, Eastern Europe, and Northern America but declined in the rest of the Americas and of Europe, as well as Africa and Asia. There was continued reduction in the total number of active correspondents (as measured by the number of banks that have sent or received messages corridor by corridor in a given month). This decline in active correspondents has not resulted in a lower number of payment messages (volume) or a lower underlying value of the messages processed through SWIFT, leading the FSB to conclude that the higher volume of messages could in part reflect a lengthening of payment chains, as previously discussed in its July 2017 report. Concentration levels of correspondent banking remain high.

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The Wolfsberg Group has published an updated version of its Correspondent Banking Due Diligence Questionnaire (dated February 22, 2018). The CBDDQ has been enhanced and expanded in line with regulatory expectations on strengthening and building due diligence tools. The Group has also published guidance on completing the CBDDQ, frequently asked questions and a glossary. The CBDDQ is intended to provide a standardized document for use by those needing to conduct due diligence on correspondent banks. Over time, it is hoped that use and availability of the CBDDQ may, among other things, help prevent unnecessary de-risking.

The Wolfsberg Group was established in 2002 and comprises thirteen banks. Its objective is to develop frameworks and guidance for the management of financial crime risks. The CBDDQ is intended to support the work on de-risking in correspondent banking by the Financial Stability Board, the Financial Action Task Force and the Committee on Payments and Market Infrastructures.
 

View the updated CBDDQ (version 1.2).

View the completion guidance.

View the FAQs.

View the Glossary.

The U.K.’s Joint Money Laundering Steering Group has confirmed that it has received approval from HM Treasury for the final revised guidance it published in December 2017 on anti-money laundering and counter-terrorist financing for the financial services sector. The revisions to the guidance align it with the provisions of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which is the UK implementing legislation for the Fourth EU Money Laundering Directive (4MLD) and the revised Wire Transfer Regulation (WTR) which came into effect on June 26, 2017. 4MLD seeks to give effect to the updated Financial Action Task Force (FATF) global standards which promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. WTR sets out the minimum requirements that are essential to ensure the traceability of transfers of funds.

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A Commission Implementing Regulation providing Implementing Technical Standards on the procedures and forms for exchange of information and assistance between national regulators under the Market Abuse Regulation has been published in the Official Journal of the European Union. MAR, which entered into force on July 3, 2016, requires national regulators to cooperate with each other in investigations and on supervision and enforcement matters by exchanging information, taking statements from individuals, conducting on-site inspections or investigations and in the recovery of monetary sanctions. The new ITS describe the procedures to be followed by national regulators when making, acknowledging, processing and replying to requests for assistance and when unsolicited assistance is provided and contain standard forms for national regulators to use when doing so.

The ITS enters into force on February 28, 2018 and apply directly across the EU.

View the Commission Implementing Regulation.

The European Securities and Markets Authority has published a final report and final draft Implementing Technical Standards on forms and procedures for cooperation of National Regulators and ESMA with other EU Authorities under the Market Abuse Regulation. MAR, which entered into force on July 3, 2016, requires national regulators and ESMA to cooperate and exchange information with certain EU authorities in investigations and on supervision and enforcement matters by exchanging information, taking statements from individuals and conducting on-site inspections or investigations. The other authorities are the European Commission, the Agency for Cooperation of Energy Regulators, national regulatory authorities responsible for related spot markets and, in relation to emission allowances, the auction monitor and relevant auction national regulators. The final draft ITS describe the procedures to be followed for making, acknowledging, processing and replying to requests for assistance and when unsolicited assistance is provided and contain standard forms to be used when doing so. The European Commission has three months to consider whether to adopt the ITS.

View the final report and draft ITS.

The U.K. Home Office has published guidance on sharing of information within the regulated sector under the Criminal Finances Act 2017. The CFA 2017 amends the Proceeds of Crime Act 2002 and the Terrorism Act 2000 to allow banks and other financial institutions to voluntarily share information with each other about a suspicion that a person is engaged in money laundering or a terrorist financing offense. The National Crime Agency is also permitted to request banks and financial institutions to voluntarily share information. The new information sharing provisions cover the entire regulated sector. However, implementation is being phased in, starting with banks and financial institutions.

The guidance confirms that sharing of information is voluntary and does not change the mandatory obligation to file a Suspicious Activity Report if appropriate. It also confirms that in sharing information, firms must ensure that they comply with data protection requirements, including under the incoming General Data Protection Regulation. In addition, the guidance confirms that where information is shared in good faith under the relevant CFA 2017 provisions, the POCA 2002 tipping off offense does not apply.

The guidance sets out the roles and responsibilities of firms involved in information sharing, the processes and procedures for submitting notifications and disclosures to the NCA and the interaction of the new provisions with the existing money laundering provisions.

View the guidance.

The European Commission has published a report to the European Parliament and the Council of the European Union on the implementation and impact of the second Electronic Money Directive, known as 2EMD. 2EMD establishes a legal framework for the issuance and redemption of e-money and covers the rights and obligations linked to the redemption of funds by consumers, the licensing of e-money institutions and the prudential requirements applicable to e-money institutions, which updates the regime under the first Electronic Money Directive to align it with requirements on payment institutions under the revised Payment Services Directive. It applies to e-money service providers in the EEA. The regime has been sparsely used in practice, with few firms operating under its auspices.

2EMD requires the Commission to assess its implementation and impact and to propose legislative changes, if appropriate. The report was due on November 1, 2012, however, the Commission delayed its publication because a majority of member states had failed to transpose 2EMD into their national laws by the transposition date of April 2011. The Commission also wanted to take into account the impact of PSD2, which includes numerous cross-references to 2EMD.

Read more.

The Joint Committee of European Supervisory Authorities has published an Opinion addressed to EU national regulators to develop a common understanding of the appropriate use, by credit and financial institutions, of innovative methods to meet Customer Due Diligence obligations.

All firms that are subject to the Fourth Money Laundering Directive must put in place effective policies and procedures, including effective CDD procedures, to address the risk that their businesses may be used for money laundering or for terrorist financing purposes. 4MLD is "technology neutral" and does not set out specific steps or procedures that must be followed for CDD. There is scope, therefore, for new ways to verify customers' identity, for example non-face-to-face verification using traditional identity documents (such as passports) through portable devices or verification via centralized databases. Innovative means such as artificial intelligence are also increasingly used for monitoring customer relationships, for risk assessment and in decision-making processes.

The ESAs recognize that innovative solutions can improve the effectiveness and efficiency of AML/CFT controls and firms often use innovative solutions to meet demand for improved customer experience and costs savings. The ESAs believe that firms should not be prevented from using such solutions, provided that proper safeguards have been put in place to mitigate the ML/TF risk associated with the firm's business relationships and risk profile. The ESAs' Opinion highlights additional factors that national regulators can take into account when assessing the adequacy of any proposed use of innovative CDD solutions. These include: oversight and control mechanisms; the quality and adequacy of CDD measures; the reliability of CDD measures; delivery channel risk; and geographical risks.

View the Opinion.

The Joint Committee of the European Supervisory Authorities has published final Guidelines on preventing terrorist financing and money laundering in electronic fund transfers under the EU Wire Transfer Regulation. The Wire Transfer Regulation, which applied from June 26, 2017, requires payment service providers, among other things, to have effective procedures to detect transfers of funds that lack the required information on the payer and the payee and to determine whether to execute, reject or suspend a transfer of funds that lacks that information.

The Guidelines set out the factors that payment service providers should consider when establishing and implementing procedures to detect and manage transfers of funds which do not have the required payer and payee information to ensure that their procedures are effective. The Guidelines also specify what a payment service provider should do to manage the risk of money laundering or terrorist financing where that information is missing or incomplete. Further, the Guidelines will assist payment service providers to determine which fund transfers fall within the scope of the Wire Transfer Regulation and how the exemptions might apply. National regulators are required to use the Guidelines when assessing the adequacy of a payment service provider's procedures.

The Guidelines will apply to all payment service providers and intermediary payment service providers as well as their national regulators from July 16, 2018.

View the Guidelines.

The Financial Action Task Force has published a Report on the financing of recruitment for terrorist purposes, as part of its strategy on combating terrorist financing. The Report has been compiled using input from relevant authorities and country experts from jurisdictions within the FATF Global Network, including the Asia Pacific, Eurasian, Middle-East and North African regions.

The Report examines the typical methods of recruitment to terrorist organizations and the costs associated with those methods. Recruitment methods vary from region to region. Techniques include recruitment via religious groups in some regions and online recruitment via social media in others. The Report also presents case study data on the sources of funds available to terrorist recruiters and the general expenditures involved in the recruitment process.

The Report concludes by recommending improved inter-agency and international co-operation to share information and analyze suspected recruiters and financial supporters of terrorist organizations. The Report recommends that national operational and security agencies engage more with the private sector, non-profit organizations and social media and other internet providers, by providing better contextual information and guidance to enable those providers to identify the financial flows associated with terrorist recruitment.

View the Report.

The Joint Money Laundering Steering Group has published final revised guidance on anti-money laundering and counterterrorist financing for the financial services sector. The revised guidance will only replace the existing guidance once it has been approved by HM Treasury, however, the JMLSG notes that firms may use the revised version if they wish to.

View JMLSG's announcement.

The European Commission has published a consultation paper in which it seeks views on the main challenges for SME-dedicated markets and possible changes to EU legislation that might help build the EU high-growth SME markets. The consultation paper follows previous consultations and papers relating to the Capital Markets Union Action Plan.

The consultation focuses on SME Growth Markets, a new type of trading venue introduced under the Markets in Financial Instruments package. The consultation paper is split into two sections, the first of which considers the main drivers behind the downward trend of SME initial public offerings and bond issuances. The second section considers specific regulatory barriers to SME markets, small issuers and the local ecosystems surrounding SME markets. In particular, the Commission is seeking views on the MiFID II provisions which set the scope of SME Growth Markets, the market requirements for SME issuers to be assisted by a key adviser, delisting rules on SME Growth Markets and transfer of listings. 

Read more. 

The U.K. Government has published a U.K. Anti-Corruption Strategy 2017 to 2022 setting out how the U.K. Government intends to combat corruption over the next five years. The Strategy identifies the following six priorities:

1. Reduce the insider threat in high risk domestic sectors;

2. Strengthen the integrity of the United Kingdom as an international financial centre;

3. Promote integrity across the public and private sectors;

4. Reduce corruption in public procurement and grants;

5. Improve the business environment globally; and

6. Work with other countries to combat corruption.

In strengthening the United Kingdom’s position as an international financial centre, the Government intends to ensure greater transparency over ownership and control of legal entities, stronger enforcement, enhanced anti-money laundering and counter-terrorist financing measures and a better means for sharing information between the public and private sectors.

View the strategy.

The Joint Committee of the European Supervisory Authorities has published a final Report and final draft joint Regulatory Technical Standards on the measures that financial institutions should take to mitigate the risks of money laundering and terrorist financing where a third country's laws do not permit the application of group-wide policies and procedures. The Fourth Money Laundering Directive, which entered into force on June 26, 2015, requires a financial institution to put policies and procedures in place to mitigate and manage the money laundering and terrorist financing risks to which it is exposed. Where a financial institution is part of a group, the policies and procedures must be implemented at group level. Additional policies and procedures must be implemented where a financial institution has a branch or majority-owned subsidiary in a third country whose laws do not allow the implementation of group-wide policies.

Read more.

The UK Financial Conduct Authority has issued two consumer warnings on the risks of investing in contracts for differences relating to cryptocurrencies (that is, digital assets such as Bitcoin or Ethereum) and the risks of trading binary options.

Read more.

The European Securities and Markets Authority has published a statement alerting investors about the high risks of investment in Initial Coin Offerings, including the risk of total loss of their investment. The statement is accompanied by an alert to EU firms involved in ICOs reminding them of their regulatory obligations.

Read more.

The Office of Foreign Assets Control has amended the Cuban Assets Control Regulations to implement changes to the Cuba sanctions program announced by President Trump in June of this year, which aimed to reinforce certain policies that had been relaxed by the Obama Administration. Most significantly, President Trump directed OFAC to impose new travel restrictions and curtail transactions with businesses controlled by the Cuban military, intelligence, and security sectors - a prohibition many companies feared would heavily impact the tourism industry.

According to OFAC, the changes are "intended to channel economic activities away from the Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba." The new regulations impose new travel restrictions on Americans and prohibit direct financial dealings with more than 80 hotels and dozens of other companies considered to be tied to Cuba's military, intelligence, or security services.

Read more.

The Financial Action Task Force has published a 2017 Supplement to the 2013 Guidance on AML/CFT Measures and Financial Inclusion. The 2013 Guidance sets out how anti-money laundering and counter terrorist financing measures could be designed to achieve financial inclusion without compromising financial crime fighting. The 2017 Supplement is intended to encourage financial inclusion by providing examples of how countries have adapted their customer due diligence measures for this purpose through simplified CDD or alternative forms of identity verification.

View the FATF Supplement.

View the 2013 Guidance.

The Financial Action Task Force has published new Guidance on private sector information sharing in the context of anti-money laundering and counterterrorist financing. The Guidance is intended to improve information sharing, which is a key part of the FATF Recommendations and Immediate Outcomes, by assisting national regulators and financial institutions to implement the FATF Recommendations. This non-binding Guidance discusses the obstacles to information sharing at a group-wide level and between different financial institutions. Those include different legal frameworks for data protection and privacy, financial secrecy laws, operational issues, such as IT capability and lack of policies and procedures, and, for national regulators, implementing consolidated supervision. The Guidance also includes examples of how some countries have addressed these challenges.

View the FATF Guidance.

HM Treasury has published a National Risk Assessment of money laundering and terrorist financing for 2017. The 2017 NRA identifies risks that have changed since the first NRA was published in 2015, assesses the UK's current understanding of these risks and discusses the high-risk areas in more detail. The key findings of the 2017 NRA for the financial services sector include:

1. The steps to address the risks of money laundering and terrorist financing to the financial services sector are starting to take effect but the risk profile has not moved significantly yet. However, there is now an increased understanding of the varying risk profiles across different parts of the sector.

2. The risks of money laundering and terrorist financing to the retail banking sector are both high, mostly due to the criminal intent to exploit retail banking products and the increasing speed and volume of transactions.

Read more.

The European Securities and Markets Authority has announced the launch of the second phase of its Financial Instrument Reference Database (FIRDS). FIRDS covers the requirements under both the Markets in Financial Instruments Regulation and the Market Abuse Regulation for reference data collection, transparency reporting obligations, submission of the Double Volume Cap data and the transaction exchange reporting mechanism. With the launch, ESMA is providing access to the database holding the currently available reference data that market participants will use to identify instruments subject to the reference data reporting requirements. The aim of the launch is to assist market participants in preparing their systems in advance of the obligation coming into effect on January 3, 2018.

View ESMA's announcement.

The Wolfsberg Group has published two new standards, the Correspondent Banking Due Diligence Questionnaire (CBDDQ) and the revised Payment Transparency Standards. The Wolfsberg Group was established in 2002 and comprises thirteen banks. Its objective is to develop frameworks and guidance for the management of financial crime risks. Both of the new standards are intended to support the work on de-risking in correspondent banking by the Financial Stability Board, the Financial Action Task Force and the Committee on Payments and Market Infrastructure.

View the CBDDQ.

View the revised Payment Transparency Standards.

The Committee on Payments and Market Infrastructures is consulting on a possible strategy to improve the security of wholesale payments involving banks, financial market infrastructures and other financial institutions. The CPMI is a global standard setter, mandated to promote the safety and efficiency of payment, clearing, settlement and related arrangements. It formed a task force in 2016, to look into the evolving threat and increasing sophistication of wholesale payments fraud. The CPMI taskforce undertook a stocktake of current practices. The resulting discussion note highlights for consultation seven elements relating to preventing, detecting, responding to and communicating about wholesale payments fraud.

Stakeholders are invited to provide input on the proposed strategy by November 28, 2017. Consultation responses will contribute to guidance on the seven elements, which the CPMI aims to develop by early 2018.

View the CPMI Discussion Note.

The UK Government has published its response to its April 2017 public consultation which sought views on the legal measures that would be needed in order to continue to be able to impose and implement sanctions following the UK's withdrawal from the European Union. Due to the fact that many of the current sanctions regimes are established via powers in the European Communities Act 1972, the UK will need new legal powers to replace these once that Act is repealed and the April 2017 consultation set out proposals for a new sanctions framework to address this need. The Government intends to introduce a Sanctions Bill during the current Parliamentary session which will ensure that the UK has the necessary legal powers to implement sanctions after the UK's exit from the EU. The Bill will also give the UK greater flexibility in choosing when and how to introduce new measures. The Government proposes that the Bill will create new powers to impose, implement and enforce sanctions regimes, drawing on the current EU model. Additionally, new asset-freezing provisions will make it easier to stop suspected terrorists from accessing their money. Flexibility will be provided by introducing an annual review of regimes to ensure that they remain appropriate and by provisions that will enable the government to issue exemptions when needed, for example in delivering humanitarian aid in regions affected by sanctions. The Bill will also provide a framework for individuals and organisations to challenge any sanctions imposed on them.

View Government's Press Release.

View Government Response to Consultation.

Implementing Technical Standards on the procedures and forms for national regulators exchanging information with the European Securities and Markets Authority under the Market Abuse Regulation have been published in the Official Journal of the European Union. MAR, which entered into force on July 3, 2016, requires EU national regulators to submit information annually to ESMA on sanctions, investigations and other measures imposed by them. The ITS require national regulators to designate single points of contact for providing the information, provide the dates by which reports are due to ESMA and contain the forms for regulators to provide the information. The ITS will enter into force on July 20, 2017.

View the ITS.

The European Securities and Markets Authority has published a final Report and final draft Implementing Technical Standards on the procedures and forms for national regulators to use when exchanging information with each other under the Market Abuse Regulation. MAR, which entered into force on July 3, 2016, requires national regulators to cooperate with each other in investigations and on supervision and enforcement matters by exchanging information, taking statements from individuals, conducting on-site inspections or investigations and the recovery of monetary sanctions. The final draft ITS describe the procedures to be followed by national regulators when making, acknowledging, processing and replying to requests for assistance and when unsolicited assistance is provided and contain standard forms for national regulators to use when doing so. The European Commission has three months to consider whether to adopt the ITS.

View ESMA's Report.

The European Securities and Markets Authority has announced that its IT system for the collection of financial instrument reference data under the Market Abuse Regulation will become operational from July 17, 2017. The IT system is known as Financial Instrument Reference Data System - FIRDS. MAR requires market operators of exchanges and investment firms and market operators operating multilateral trading facilities and organised trading facilities to notify their national regulator of any financial instrument for which a request for admission to trading is made, which is admitted to trading or is traded for the first time. This notification will be made to national regulators or via FIRDS for those jurisdictions where the national regulator has delegated the task to ESMA. All notifications must be made in accordance with the relevant secondary EU legislation setting out the timing, format and templates. Notifications are required for admissions and trades from July 3, 2016 which is when MAR became applicable across the EU. ESMA is required to publish the information on its website.

View ESMA's announcement.

The Joint Money Laundering Steering Group has published and opened up for consultation its proposed revisions to Parts II and III of its Guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry. This follows on from the recent consultation on Part I, which closed on April 28, 2017. The proposed revisions will align the JMLSG Guidance with the proposed Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, on which the Government recently consulted. The draft Regulations are intended to implement into UK laws the EU Fourth Money Laundering Directive and are due to take effect by June 26, 2017 at the same time as 4MLD.

Read more.

The European Securities and Markets Authority has published an opinion addressed to national regulators on points of convergence for Market Abuse Regulation-accepted market practices for liquidity contracts.

Read more.

The Joint Committee of the European Supervisory Authorities has published a consultation on proposed guidelines on preventing terrorist financing and money laundering in electronic fund transfers under the EU Wire Transfer Regulation. The Wire Transfer Regulation, which is applicable from June 26, 2017, requires payment service providers, among other things, to have effective procedures to detect transfers of funds that lack the required information on the payer and the payee and to determine whether to execute, reject or suspend a transfer of funds that lacks that information. The proposed guidelines aim to assist payment service providers in complying with these obligations under the Wire Transfer Regulation. The guidelines will set out the factors that payment service providers should consider when establishing and implementing procedures to detect and manage transfers of funds which do not have the required payer and payee information. They will also specify what a payment service provider should do to manage the risk of money laundering or terrorist financing where that information is missing or incomplete. The proposed guidelines are also intended to assist national regulators to assess the adequacy of a payment service provider's procedures.

View the consultation paper.

The UK HM Treasury's Office of Financial Sanctions Implementation can impose penalties for serious financial sanctions breaches under the Policing and Crime Act 2017. Penalties can be up to £1 million or 50% of the breach, whichever is higher. The monetary penalties regime created under the 2017 Act is an alternative to criminal prosecution for breaches of financial sanctions, which are punishable upon conviction by up to seven years in prison. The UK Government ran a consultation from December 1, 2016 to January 26, 2017 on the process for imposing monetary penalties for breaches of financial sanctions. The Treasury has since published guidance which gives an explanation of its powers to impose penalties, a summary of its compliance and enforcement approach, an overview of how the OFSI will assess whether to apply a monetary penalty and what factors the OFSI will take into account in doing so, an overview of the process that will decide the level of penalty and an explanation of how the OFSI will impose a penalty, including timescales at each stage and rights of review and appeal.

View HM Treasury's Guidance.

The Joint Money Laundering Steering Group has published and opened up for consultation its proposed revisions to Part I of its Guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry. The proposed revisions will align the JMLSG Guidance with the proposed Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, on which the Government recently consulted. The draft Regulations are intended to implement into UK laws the EU Fourth Money Laundering Directive and are due to take effect by June 26, 2017 at the same time as 4MLD.

Read more.

The UK Government has published a review of the UK's Anti-Money Laundering and Counter Financing of Terrorism regime. The document summarizes the views and evidence submitted by businesses to the UK Government's Cutting Red Tape review on the impact of the current Regime. Businesses such as banks, financial institutions and businesses who are asked to comply with banks' and financial institutions' requirements under the Regime. The UK Government launched the CRT Review in 2015 seeking evidence of any needless and ineffective burdens associated with the UK AML/CTF Regime.

Read more.

The Financial Conduct Authority has published draft Guidance on the treatment of politically exposed persons under the UK draft Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The draft Regulations were published by HM Treasury on March 15, 2017. Politically exposed persons or "PEPs" are people who hold high public office. The Money Laundering Regulations 2007 impose an obligation on firms to undertake enhanced due diligence measures when dealing with PEPs who are located outside of the UK, as well as family members and close associates of PEPs. PEPs, as well as their families and persons known to be close associates, have been recognized by the Financial Action Task Force as requiring enhanced scrutiny by firms as PEPs may be in position to abuse their public office for private gain.

Read more.

The UK Government has published draft Money Laundering Regulations 2017 alongside a consultative document. Publication of the draft Regulations follows a consultation launched by HM Treasury on September 15, 2016, entitled "Transposition of the Fourth Money Laundering Directive," where it outlined how the UK Government intended to transpose the 4MLD and the Fund Transfer Regulation. The 4MLD builds on the Third Money Laundering Directive and Money Laundering Regulations, imposing new requirements on businesses and amends some of the existing obligations. The FTR updates the rules contained in the 2006 regulation relating to the information on payers and payees that accompanies transfers of any currency, with a view to preventing, detecting and investigating money laundering and terrorist financing. The FTR applies to the transfer of funds where at least one of the payment service providers involved in the transfer is established in the EU. This consultation outlines the responses submitted to the 2016 consultation and the UK Government's policy decisions following that consultation and requests feedback on further policy questions and the draft Regulations.

Read more.

The Financial Conduct Authority published a Policy Statement and final changes to rules on delaying the disclosure of inside information in the Disclosure Guidance and Transparency Rules. Minor changes have been made since the FCA's consultation last year. The Market Abuse Regulation requires issuers publicly to disclose inside information which directly concerns them as soon as possible. MAR obliges the European Securities and Markets Authority to prepare Guidelines which further specify when an issuer might delay disclosure of inside information. ESMA's Guidelines, published on November 20, 2016, explain what would be considered a "legitimate interest", allowing an issuer to delay disclosure of inside information. It also provides a non-exhaustive indicative list of legitimate interests of the issuer that are likely to be prejudiced by the immediate disclosure of inside information and the situations in which delay of disclosure is likely to mislead the public, which include situations where the inside information which the issuer intends to delay disclosure of is materially different from the issuer's previous public announcement. ESMA's Guidelines have applied directly across the EU since January 10, 2017. The FCA has confirmed that it will comply with ESMA's Guidelines and the changes to the FCA's rules ensure that compliance. The final rules have been in force since February 24, 2017.

View the Policy Statement and final rules.

View ESMA's Guidelines.

The European Supervisory Authorities published a joint Opinion on the risks of money laundering and terrorist financing affecting the EU’s financial sector. The ESAs - the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority - are required by the Fourth Money Laundering Directive to prepare the Opinion. The Opinion is intended to inform the European Commission's assessment of the AML and CFT risks affecting the EU financial market, inform the ESA's work on enhancing supervisory convergence and assist national regulators applying the risk-based approach to AML/CFT supervision. The Opinion sets out the AML/CFT risks that the EU financial sector is exposed to which include, amongst other things, ineffective systems and controls, regulatory arbitrage, lack of access to intelligence on terrorist suspects and the movement of high-risk transactions out of the regulated sector. The ESAs conclude that more is needed to ensure that the EU's AML and CFT defenses are effective, particularly as Member States move to a more risk-based AML/CFT regime. Some existing initiatives will help to address the risks, such as the proposed amendments to the Fourth Money Laundering Directive and the relevant Guidelines issued by the ESAs. However, the ESAs consider that enforcement agencies could assist by ensuring that financial institutions have timely access to relevant information, that national regulator could proactively raise awareness of supervisory expectations, including by providing targeted guidance, that national regulators should collect AML/CFT data in a more consistent manner to facilitate comparisons and track progress and that the EU authorities should identify ways to ensure that the EU's AML/CFT laws and guidelines are implemented effectively and consistently across the EU.

View the Opinion.

The Joint Committee of the European Supervisory Authorities launched a consultation on proposed Regulatory Technical Standards on the criteria for when a central contact point is appropriate and the functions of the central contact point. The Fourth Money Laundering Directive requires electronic money issuers and payment service providers with their headquarters in one EU member state and one or more establishments in other EU member states (other than as a branch) to appoint a central contact point in those other member states to ensure compliance with anti-money laundering and counter-financing terrorism rules and to facilitate supervision by the national authorities, including by providing documents and information on request. The ESAs (comprised of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) have published a proposed draft RTS which supplements those requirements by setting out the criteria that member states should consider when deciding whether a central contact point should be established and what functions it should carry out. If a member state does not require a central contact point to be established, the draft RTS would not apply. Each member state will be required to decide who the central contact point should be and how it should be set up. 

View the consultation paper. 

The European Securities and Markets Authority published a Report on the application of Distributed Ledger Technology to the securities markets. Distributed ledgers, sometimes referred to as blockchains, are essentially records or ledgers of electronic transactions that are maintained by a shared or distributed network of participants instead of a centralized entity. ESMA consulted in late 2016 on how DLT applies to securities markets. The Report provides ESMA's analysis of the key risks and benefits of DLT as applied to securities markets and how DLT maps to existing EU regulation.

ESMA is of the view that DLT could provide a number of benefits to securities markets but is also concerned that it may introduce new risks or magnify existing risks. Benefits of DLT include more efficient clearing and settlement services, enhanced reporting and supervision functions at firms and regulators for data sharing and risk management purposes, reduced costs related to the development of recovery plans in a cyber-attack or system breakdown scenario, reduced counterparty risk and enhanced collateral management. ESMA is concerned with a variety of risks, in addition to the well-documented issues of cyber security and fraud, such as the possible ramifications for market fairness and competition as well as financial instability. 

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The Policing and Crime Act 2017 was enacted. The Act has wide reaching implications, including for the financial services industry.  Among other things, the Act creates new civil monetary penalties and increases the maximum term of imprisonment for breaches of financial sanctions in the UK. The new monetary penalties regime will be administered by the Office of Financial Sanctions Implementation, which was established on March 31, 2016 and sits within HM Treasury. The OFSI may impose a monetary penalty if it is satisfied, on the balance of probabilities, that a breach has been committed and the offending person knew or had reasonable cause to suspect that their actions would be in breach of the obligations under the financial sanctions legislation. The maximum term on conviction for indictment has been set at seven years, and at six months for summary conviction.

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State financial regulators released a new, voluntary tool designed to help banks and non-depository financial institutions better manage Bank Secrecy Act/Anti-Money Laundering risk. The BSA/AML Self-Assessment Tool was developed by the Conference of State Bank Supervisors and state regulators and aims to help institutions better identify, monitor and communicate BSA/AML risk. In this way, the tool is intended to reduce uncertainty surrounding BSA/AML compliance and encourage greater transparency within the financial sector.

View the CSBS press release regarding the BSA/AML Self-Assessment Tool.

The European Securities and Markets Authority published translations of the final Guidelines on information expected or required to be disclosed on commodity derivatives markets or related spot markets under the Market Abuse Regulation in the official languages of the EU. MAR replaced the current Market Abuse Directive and its implementing legislation from July 3, 2016. The publication of the translations triggers the application of the Guidelines from March 17, 2017. The Guidelines are relevant to national regulators and to commodity derivatives market participants such as investors, financial intermediaries, operators of trading venues and persons professionally arranging and executing transactions in commodity derivatives. National regulators have until March 17, 2016 to advise ESMA whether or not they intend to comply with the final Guidelines.

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The US Office of Foreign Assets Control issued a guidance document regarding the provision of certain legal and compliance services by US attorneys and compliance personnel respect to US Sanctions laws. Contemporaneous with the issuance, the US Treasury Department also published new FAQs on the guidance. In the press release accompanying the issuance of the guidance, OFAC made clear that the guidance does not reflect a change in OFAC’s policy, but is published in order to respond to inquiries received by OFAC.

View text of the OFAC guidance.

The New York State Department of Financial Services (NYSDFS) Superintendent Maria T. Vullo announced that the Department’s transaction monitoring and filtering program regulation took effect as of January 1st. Under the final regulation, institutions regulated by the NYSDFS must: maintain programs to monitor and filter transactions for potential Bank Secrecy Act and anti-money laundering violations and suspicious activity reporting; maintain a filtering program to prevent transactions that are prohibited by the Office of Foreign Assets Control; and submit a confirmation to the NYSDFS regarding compliance with the final rule.

View Shearman & Sterling client alert on the final rule.

View press release.

OFAC published updated regulations on Iranian Transactions and Sanctions Regulation. The amended regulation narrows the definition of “goods of Iranian origin” and “Iranian-origin goods,” allowing for the export and reexport of medical devices and agricultural commodities to Iran. Further, the amended regulation expands the definition of “non-Iranian goods” to include goods transported on a vessel or aircraft through Iranian territorial waters or stopped at a port or place in Iran en route to a destination outside of Iran that have not otherwise come into contact with Iran.

View text of the OFAC regulation.

View FAQs on the regulation.

The Joint European Supervisory Authorities published an open letter notifying the European Commission that they would be unable to meet the deadline of December 26, 2016 for submitting final draft Regulatory Technical Standards supplementing the Fourth Anti-Money Laundering Directive. The 4AMLD mandates the ESAs (made up of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) to draft RTS on the measures that banks and other financial institutions should undertake to manage the potential risks of money laundering and terrorist financing where they have branches or majority-owned subsidiaries in third countries that prohibit the implementation of AML and CTF measures consistent with those required by 4AMLD. The delay is attributed to the ESAs' prioritization of other mandates under the 4AMLD for the Joint Committee Work Programme 2016. The ESAs deprioritized the draft RTS as enquiries with regulators and ESA stakeholder groups suggested that there were no countries that prohibited the requisite implementation of AML and CFT measures. Consequently, unlike under other mandates under the 4AMLD, the draft RTS would have limited application in practice. The ESAs intend to start working on the mandate in 2017 and expect to be able to submit final draft RTS by December 31, 2017.

View the letter.