The European Commission published a legislative proposal for a Directive on countering money laundering by criminal law. The proposed Directive is intended to harmonize and establish minimum rules concerning the definition of criminal offenses and sanctions in the area of money laundering. The proposed Directive would implement international obligations such as the Warsaw Convention and Financial Action Task Force recommendations. 
 
The proposed Directive provides for three specific money laundering activities that, when conducted intentionally, would be punishable as a criminal offense. Member States would be able to impose more stringent rules, for example, by making money laundering committed recklessly or by serious negligence a criminal offense. 

Read more.

The Financial Stability Board published an updated progress report outlining its action plan to assess and address the decline in correspondent banking. Correspondent banking relationships enable banks to access financial services in different jurisdictions and provide cross-border payment services to their customers. There has been an increasing concern about the decline in the number of correspondent banking relationships because the ability to send and receive international payments could be impacted, which may have repercussions on growth and the stability and integrity of the financial system. The FSB presented a four point action plan to the G20 in November 2015. The progress report describes the progress that has been made and outlines the deliverables for 2017 to further address the issues. 

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US Financial Crimes Enforcement Network (FinCEN) announced that it is granting a further extension of time for certain Report of Foreign Bank and Financial Accounts (FBAR) filings. The extension was announced in light of the notice of proposed rulemaking FinCEN issued on March 10, 2016, which proposes to revise regulations implementing the Bank Secrecy Act regarding FBARs. Specifically, one of the proposed amendments in the notice would expand and clarify the exemptions for certain US persons with signature or other authority but no financial interests over foreign financial accounts. On December 8, 2015 FinCEN issued Notice 2015-1 to extend filing date for FinCEN Form 114 - FBAR for some individuals with signature authority over but no financial interest in one or more foreign financial accounts to April 15, 2017 (and has granted identical extensions that applied to similarly situated individuals since 2011). FinCEN is now further extending the filing due date to April 15, 2018, for individuals whose filing due date for reporting signature authority was previously extended by Notice 2015-1. This extension applies to reporting of signature authority held during the 2016 calendar year, as well as all reporting deadlines extended by previous Notices 2015-1, 2014-1, 2013-1, 2012-1 and 2012-2, along with Notices 2011-1 and 2011-2. For all other individuals with an FBAR filing obligation, the filing due date remains April 15, 2017.

View FinCEN Notice.
 

The Office of Financial Sanctions Implementation (OFSI), which is a part of HM Treasury, published the UK Government's proposed approach to imposing financial penalties for breach of financial sanctions. OFSI was established earlier in 2016 and has responsibility for ensuring that sanctions are "properly understood, implemented and enforced in the UK". Financial sanctions may include prohibitions on the transfer of funds to a sanctioned country, freezing of the assets of a government, corporate entities or citizens of a particular country or targeted freezing of assets of individuals or legal entities. Provisions in the Policing and Crime Bill, currently going through Parliament, outline new administrative penalties, civil monetary penalties and an increase in the maximum custodial sentence for breaching financial sanctions to seven years on conviction on indictment (or six months' imprisonment on summary conviction) for breach of financial sanctions. OFSI is seeking feedback on its proposed Guidance on the circumstances in which it may consider that a monetary penalty is suitable and how it will set the penalty amount as well as the process for imposing a penalty and the circumstances in which details of any penalty may be published. The consultation closes on January 26, 2017. OFSI has stated that either interim or final Guidance will be published before the power to impose penalties comes into effect in April 2017. The proposed Guidance is based on the current version of the Bill and may need to be amended as appropriate once the final legislation is published.

View the consultation paper. 

The Financial Conduct Authority published a consultation paper on proposed changes to its Disclosure Guidance and Transparency Rules sourcebook in the Handbook on delaying the disclosure of inside information. The Market Abuse Regulation requires issuers to inform the public as soon as possible of inside information which directly concerns them. MAR mandates 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, outline the legitimate interests of issuers to delay disclosure of inside information and provide a non-exhaustive indicative list on the 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. ESMA's Guidelines will apply directly across the EU from January 10, 2017. The FCA has confirmed that it intends to comply with ESMA's Guidelines and is consulting on the consequential changes to its rules. The consultation closes on January 6, 2017. 

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The Basel Committee on Banking Supervision launched a consultation on proposed revisions to the correspondent banking and account opening annexes of its Committee Guidelines on sound management of risks related to money laundering and financing of terrorism. The Guidelines describe how banks should include money laundering and financing of terrorism risks within their overall risk management. The Basel Committee is seeking to confirm regulatory expectations on the assessment of money laundering and financing of terrorism risks in correspondent banking and its proposals follow the publication by the Financial Action Task Force of its Guidance on correspondent banking on October 21, 2016. The proposed revisions to the Guidelines develop the application of the risk-based approach for correspondent banking relationships, including recognizing that not all correspondent banking relationships carry the same level of risk. The proposed revisions also clarify expectations regarding the quality of payment messages and the conditions for using “know your customer” (KYC) services. Responses to the consultation are requested by February 22, 2017.
 
View the consultation paper.

View the Sound Management of Risks Related to Money Laundering and Financing of Terrorism.

View the FATF's Guidance.

The Joint Committee of the European Supervisory Authorities published joint Guidelines on the characteristics of a risk-based approach to anti-money laundering and terrorist financing supervision. The ESAs consist of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The Guidelines build on the ESA’s previous “Preliminary report on anti-money laundering and counter financing of terrorism Risk Based Supervision” that was published in October 2013. The Guidelines outline steps to be taken by regulators when conducting AML/CTF supervision on a risk-sensitive basis. The Fourth Anti-Money Laundering Directive, amongst other things, aims to bring European legislation in line with the Financial Action Task Force’s International Standards on Combating Money Laundering and the Financing of Terrorism. The ESAs emphasize that AML-and CFT-related risk-based supervision is ongoing and cyclical and the Guidelines outline four requisite steps that national regulators should apply. Step 1 involves the regulator identifying the money laundering or terrorist financing risk factors by obtaining information of both domestic, foreign and sector-wide threats. Step 2 requires the information to be used by the regulator to conduct a risk assessment and obtain a holistic view of the risks associated with each firm. Step 3 requires the allocation of supervisory resources factoring in issues such as the required focus, depth, duration and frequency of the on-site and off-site activities and supervisory staffing needs. Step 4 requires regulators to ensure that the risk assessment and level of allocated supervisory resources remains commensurate to AML/CFT risks through ongoing monitoring and reviewing processes. The Guidelines will apply one year after the Guidelines have been issued.
 
View the joint Guidelines.

The US Financial Crimes Enforcement Network published technical amendments to anti-money laundering (AML) regulations implemented pursuant to the Bank Secrecy Act (BSA). The final FinCEN rule, which became effective November 4, 2016, removes and replaces outdated references to obsolete BSA forms, removes references to outdated forms of recordkeeping storage media and replaces other outdated terms and references.

View text of the final rule.

The UK Government Department for Business, Energy & Industrial Strategy launched a consultation on the requirement to maintain a central register of beneficial ownership information of corporate and other legal entities under the Fourth Money Laundering Directive. The Fourth Money Laundering Directive requires member states to hold information on beneficial ownership of corporate and other legal entities incorporated in their territory in a central register and that the information should be available to specific EU authorities and organizations. Since April 6, 2016, the UK has required UK companies, limited liability partnerships and societates europaeae to establish and maintain a register of persons with significant control over them and since June 30, 2016, those entities have been required to file such information with Companies House where it is publicly available. The BEIS is consulting on amendments and additions to the UK's current PSC regime that are needed to properly implement the 4MLD requirements, including, requiring entities to update information in the PSC register every six months of a change (instead of every 12 months) and making the proportion of suppressed PSC information which is not publicly available through Companies House available to banks and investment firms. BEIS also propose that the determination of whether an entity is in scope of the Directive is that is must be UK-incorporated and constitutionally capable of having a beneficial owner. The consultation closes on December 16, 2016. Member states are required to transpose 4MLD by June 26, 2017.

View the Discussion Paper.

You may like to view our client now on the current UK PSC Regime.

The European Securities and Markets Authority issued detailed reporting instructions and XML schema under its Financial Instruments Reference Data System. 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.

View ESMA's announcement.

On October 25, 2016, FinCEN issued an Advisory and related Frequently Asked Questions (FAQs) regarding the reporting of cyber-events, cyber-enabled crime and cyber-related information through Suspicious Activity Reports (SARs).

According to FinCEN, while suspicious transactions may not always involve a cyber-event, relevant cyber-related information should still be included in SARs when available (e.g., Internet Protocol (IP) addresses and accompanying timestamps associated with fraudulent wire transfers being reported). Similarly, the FinCEN guidance provides that when suspicious transactions do involve cyber-events, a financial institution should include in SARs all relevant and available information regarding the suspicious transactions and the cyber-event - including the type, magnitude and methodology of the cyber-event as well as signatures and facts on a network or system that indicate a cyber-event. The advisory also encourages collaboration between in-house BSA/AML and cybersecurity units and sharing information with other financial institutions to the extent permitted under Section 314(b) of the USA PATRIOT Act.

Read more
 

The Financial Action Task Force published Guidance on correspondent banking services, which it has developed in collaboration with the Financial Stability Board. The Guidance is in response to increased concerns about so-called "de-risking", whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The FATF considers that de-risking is inconsistent with FATF Recommendations, that it has negatively impacted correspondent banking and that it may result in financial transactions being directed into less regulated areas which would reduce transparency and increase exposure to money laundering and terrorist financing risks.

Read more.

The Financial Action Task Force published Guidance to assist countries on the content required to comply with the obligation to criminalize terrorist financing. The Guidance builds on FATF Recommendation 5, which provides measures to assist countries in fulfilling their legal requirements under the International Convention for the Suppression of the Financing of Terrorism 1999 and relevant United National Security Council Resolutions. The Guidance outlines various aspects that offenses relating to terrorist financing must cover when implemented by national legal systems. For example, a terrorist financing offense must cover all types of willful terrorist financing activity. The Guidance specifies that the requirement of willful conduct is largely based on the Terrorist Financing Convention and requires a mental element or mens rea, such that the conduct is deliberately committed with an unlawful intention. The Guidance also sets out the bases and rationale of the Convention and Resolutions to assist countries in the implementation of such requirements. The Guidance focuses on the specific elements of the Recommendation that have most commonly been identified as creating particular implementation challenges and provides examples of how such requirements have been implemented by differing legal systems.

View the Guidance.

View the FATF Recommendations.

The European Securities and Markets Authority published updated translations of its final Guidelines on the implementation of the Market Abuse Regulation for persons receiving market soundings and on delayed disclosure of inside information. ESMA had published the translations on October 20, 2016 but due to a linguistic issue with the Polish version had to re-publish all of the translations. The substantive content of the Guidelines is unchanged. The publication of the translations triggers the application of the Guidelines and so the Guidelines will now apply from January 10, 2017 instead of December 20, 2016. ESMA consulted on the draft Guidelines in January 2016 and published final versions of the Guidelines in July 2016.

Read more.

The Financial Action Task Force published a report to the G20 Finance Ministers and Central Bank Governors updating them on the steps being taken by the FATF on implementation of international standards on transparency and beneficial ownership. In April 2016, the G20 Finance Ministers and Central Bank Governors requested the FATF and the Global Forum on Transparency and Exchange of Information for Tax Purposes to make initial recommendations by October 19, 2016 on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information, and its international exchange. The report states that many countries still do not implement the beneficial ownership requirements effectively. Therefore, the FATF has committed to focus on beneficial ownership in the FATF peer review follow-up process, to deliver recommendations on how countries can improve their implementation of beneficial ownership requirements and to improve cooperation between the FATF and the Global Forum to improve transparency on beneficial ownership. The FATF will be considering the initial recommendations further at its meeting on October 19, 2016. The FATF is also calling on the G20 members to issue a public commitment to meet the FATF standards on beneficial ownership because, in the FATF's view, prevention of the abuse of corporate vehicles can only be remedied by individual countries. 

View the report on beneficial ownership. 

The European Securities and Markets Authority published a Final Report and final Guidelines on information expected or required to be disclosed on commodity derivatives markets or related spot markets under the Market Abuse Regulation. This follows the consultation that ESMA undertook in March 2016. MAR replaced the current Market Abuse Directive and its implementing legislation from July 3, 2016. One of the changes that MAR will introduce is the expansion of the definition of inside information relating to commodity derivatives to cover price sensitive information relevant to the related spot commodity contracts as well as the derivative. This means that transactions in commodity derivatives based on inside information relating to underlying spot transactions will be expressly prohibited. In addition, the market manipulation prohibitions will include transactions in derivatives markets that manipulate the related spot commodity transaction and transactions in spot commodity markets that manipulate the related derivative. 

Read more.

The US Comptroller of the Currency, Thomas J. Curry, spoke at a conference of the Association of Certified Anti-Money Laundering Specialists about the OCC’s role in the BSA/AML regulatory regime and the risks the regime is meant to curtail. Curry noted that risks in the BSA and AML space are increasing and that banks must have effective systems for BSA and AML management and timely reporting. He cautioned against overly reactionary “de-risking,” where institutions shrink their exposure to high risk geographies and customers, warning that it can lead to entire regions being excluded from the global financial system.

Curry noted that regulators can work with banks they supervise to help them maintain and enhance risk-management systems by communicating expectations clearly. He highlighted specific actions regulators have recently taken, including the joint fact sheet published by the US Treasury on the BSA and AML examination process regarding foreign correspondent banking. He also highlighted upcoming OCC guidance that will clearly lay out the risk management expectations for banks regarding their foreign correspondent portfolios, including best practices for banks on governance, communications and risk mitigation regarding correspondent accounts. Curry closed by reiterating the key points from the joint fact sheet, namely that the OCC, like its fellow federal regulators does not follow a “zero-tolerance” approach to enforcement, and that a decision to terminate a banking relationship or exit a line of business lies solely with a bank.

View Comptroller Curry's speech.

The G20 published its Anti-Corruption Action Plan for 2017-2018 and called on countries to implement the United Nations Convention against Corruption. The G20 established the Anti-Corruption Working Group in 2010, a body which is guided by rolling two-year action plans. The new Action Plan outlines areas of priority for the G20 and the Working Group, which amongst other things, include seeking to promote concrete and practical action to achieve enforcement of anti-corruption laws by taking steps to improve co-operation between law enforcement and other relevant authorities within and between member countries, implementing the Financial Action Task Force Recommendations on Transparency and Beneficial Ownership of Legal Persons and continuing to focus on combatting bribery and exploring the possible adherence of all G20 countries to the OECD Anti-Bribery Convention. The Working Group has been tasked with preparing a more detailed implementation plan, so that progress with the priorities can be tracked. It will report in 2017, on progress in implementing the commitments.

View the Action Plan.

A Commission Delegated Regulation identifying high-risk third countries with strategic deficiencies under the Fourth Money Laundering Directive was published in the Official Journal of the European Union, based on deficiencies identified by Financial Action Task Force. 

The Regulation lists high-risk third countries which have provided a written high-level political commitment to address identified deficiencies and have developed an action plan with the FATF; countries listed: Afghanistan, Bosnia and Herzegovina, Guyana, Iraq, Lao PDR, Syria, Uganda, Vanuatu and Yemen. The Regulation identifies Iran as a high-risk third country that has provided a written high-level political commitment to address identified deficiencies and has decided to seek technical assistance in the implementation of the FATF action plan. The Regulation also identifies the Democratic People's Republic of Korea (DPRK) as high-risk third country which presents ongoing and substantial money-laundering and terrorist-financing risks, having repeatedly failed to address identified deficiencies.

View the Regulation.

The US Department of Treasury, the US Federal Reserve Board, the US FDIC, the US OCC and the National Credit Union Administration released a joint fact sheet on foreign correspondent banking that sets forth supervisory and enforcement processes with respect to anti-money laundering and sanctions in the area of correspondent banking. Among other things, the fact sheet notes that while US depository institutions that maintain correspondent accounts for foreign financial institutions (FFIs) are not required to conduct due diligence on an FFI’s customers, US depository institutions must establish appropriate, specific and risk-based due diligence policies, procedures and processes that are reasonably designed to assess and manage the risks inherent with these relationships. The release further provides that while the regulators are not adopting a zero tolerance philosophy that mandates the strict imposition of formal enforcement action regardless of the facts and circumstances of the situation, the regulators are taking the threats posed by criminals, money-launderers and terrorist financers very seriously and continue to use their authorities to safeguard the US financial system against abuse.

View fact sheet.

The US Financial Crimes Enforcement Network issued a notice of proposed rulemaking pursuant to Section 326 of the USA PATRIOT Act that would lay out minimum standards for anti-money laundering programs and remove the AML program exemption for banks that lack a Federal functional regulator. The proposed rule would amend 31 CFR Chapter X to broaden the application of the AML requirements, customer identification programs and beneficial ownership requirements to cover all banks, not just those subject to regulation by a Federal functional regulator, including, but not limited to, private banks, non-federally insured credit unions and certain trust companies. Comments must be submitted to FinCEN by October 24, 2016.

View FinCEN’s release.

The European Banking Authority published an Opinion on the Commission’s proposed amendments to the Fourth Anti-Money Laundering Directive and its application to virtual currencies. The Commission is proposing to bring custodian wallet providers (CWPs) and virtual currency exchange platforms (VCEPs) within the scope of the 4MLD so that they would, among other things, have to apply customer due diligence controls when exchanging virtual currencies for real currencies, and put in place policies and procedures to detect, prevent and report money laundering and terrorist financing. 

Read more.

The OCC released a second notice soliciting comments on the expansion of the Bank Secrecy Act/Anti-Money Laundering Risk Assessment System to all OCC-supervised institutions. As noted in the original OCC proposal, published on January 4, 2016, the current information collection system applies only to community banks. Pursuant to the notice, the OCC continues to seek comments on, among other items, the accuracy of the OCC’s estimate of the burden of the collection of information, and ways to enhance the quality and utility of the information to be collected, and ways to minimize the burden of the collection on respondents, including through the use of automated collection technologies. Comments on the MLR System were due by September 7, 2016.

View text of the OCC notice.

The Financial Conduct Authority published final rules on financial crime reporting, which will introduce obligations for banks, large investment firms, building societies, mortgage lenders, large electronic money institutions, certain large consumer credit firms, life insurers and retail investment and mortgage intermediaries. Relevant firms will be required to provide details annually on, among other things, the jurisdictions and types of customers as well as the number of suspicious activity reports to the FCA. The reporting obligation will only apply to a firm's business that is subject to the Money Laundering Regulations 2007. The FCA is introducing the new requirement so that it can adopt a more risk-sensitive supervisory approach. Due to the feedback it received to its consultation on the implementation timeline, the FCA has extended the remittance deadline by 60 days so that firms with an accounting year end of December 31 will need to submit the data by late March the following year. The FCA is also allowing firms to complete the first Financial Crime Report on a best endeavors basis. 

View the FCA's Policy Statement and final Rules.

The European Securities and Markets Association published a final report on draft implementing technical standards concerning the procedures and forms for submitting information regarding administrative and criminal investigations, sanctions and other administrative measures under the Market Abuse Regulation. The technical standards relate to requirements under MAR for national member state regulators to submit two types of information to ESMA: (i) aggregated information on all administrative and criminal sanctions and other administrative measures imposed, and criminal investigations undertaken, under relevant provisions of MAR; and (ii) administrative and criminal sanctions and other administrative procedures that are disclosed to the public by regulators, which must  be simultaneously reported to ESMA.

ESMA submitted the draft technical standards to the European Commission for endorsement on July 26, 2016.

View the final report.

The OCC, Department of the Treasury, Federal Reserve Board and FDIC jointly published a notice proposing to extend, with revision, the Country Exposure Report (FFIEC 009) and the Country Exposure Information Report (FFIEC 009a). The revisions would (i) require that institutions provide their Legal Entity Identifier on both reporting forms, if applicable and (ii) add Intermediate Holding Companies to the Federal Reserve Board’s respondent panel. The agencies had previously requested comments on these changes. The proposed revisions have now been submitted to the Office of Management and Budget for approval. The changes would take effect September 30, 2016.

View notice.

The US Department of the Treasury’s Financial Crimes Enforcement Network issued guidance in respect of its May 2016 final rule governing Customer Due Diligence requirements for financial institutions in the form of responses to frequently asked questions. In particular, FAQ #5 highlights amendments to AML program requirements by clarifying that the CDD rule creates a specific obligation for covered financial institutions to implement and maintain risk-based procedures for conducting ongoing customer due diligence, which procedures should include (i) understanding the nature and purpose of the customer relationship; and (ii) conducting ongoing monitoring to identify and report suspicious transactions, as well as to maintain and update customer information on a risk basis.

View FinCEN FAQs.

A Decision by the European Central Bank on the disclosure of confidential information in the context of a criminal investigation was published in the Official Journal of the European Union. Pursuant to the Single Supervisory Mechanism, the ECB and/or national regulators can receive requests from national criminal investigation authorities for the disclosure of confidential information created or received in the course of their supervisory tasks and responsibilities. EU law has implications for the conditions under which confidential information held by regulators within the SSM, including the ECB, may be disclosed to national criminal investigation authorities. “Confidential information” includes information covered by data protection rules, by the obligation of professional secrecy, including those in the Capital Requirements Directive. The Decision sets out the processes and conditions under which confidential information will be provided to criminal investigation authorities.

The decision entered into force on August 5, 2016.

View the decision.

The European Commission published proposed revisions to the EU Fourth Money Laundering Directive. The Commission is proposing to bring virtual currency exchange platforms and custodian wallet providers within the scope of 4MLD so that they would, among other things, be required to apply customer due diligence and establish place policies and procedures to detect, prevent and report money laundering and terrorist financing. The Commission is also proposing to lower, from EUR 250 to EUR 150, the thresholds for non-reloadable pre-paid payment instruments to qualify for the exemption from customer due diligence requirements. It further proposes to require all EU member states to set up automated centralised mechanisms to enable swift identification of holders of bank and payment accounts and to harmonize the regime on enhanced customer due diligence for countries that have weak AML & CFT regimes. Public access to information on beneficial ownership of companies and trusts engaged in commercial activities is also proposed and Financial Intelligence Units are to be given greater powers to request information from entities that are subject to 4MLD. 
 

A Commission Delegated Regulation in the form of Implementing Technical Standards on the means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information was published in the Official Journal of the European Union. The Market Abuse Regulation requires an issuer to inform the public as soon as possible of information which directly concerns the issuer. An issuer may delay disclosing the information in certain circumstances, for example, if immediate disclosure is likely to prejudice the legitimate interests of the issuer. The ITS set out the technical means for issuers to publicly disclose inside information and the means for delaying the public disclosure of inside information. The ITS also requires an issuer bank or investment firm that wishes to delay disclosure of inside information to notify its regulator in writing to obtain the regulator's consent to the delay. The ITS applied from July 3, 2016.

View the RTS on Disclosing or Delaying Disclosure of Inside Information.

A Commission Delegated Regulation in the form of Implementing Technical Standards on the means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information was published in the Official Journal of the European Union. The Market Abuse Regulation requires an issuer to inform the public as soon as possible of information which directly concerns the issuer. An issuer may delay disclosing the information in certain circumstances, for example, if immediate disclosure is likely to prejudice the legitimate interests of the issuer. The ITS set out the technical means for issuers to publicly disclose inside information and the means for delaying the public disclosure of inside information. The ITS also requires an issuer bank or investment firm that wishes to delay disclosure of inside information to notify its regulator in writing to obtain the regulator's consent to the delay. The ITS applied from July 3, 2016.

View the RTS on Disclosing or Delaying Disclosure of Inside Information.

The New York State Department of Financial Services issued its Transaction Monitoring and Filtering Program Requirements and Certifications final rule, which includes several notable departures from the proposal issued by DFS on December 1, 2015. The issuance of the final rule is another example of DFS enforcing anti-money laundering and sanctions requirements applicable to banks under US federal law. Like the proposed rule, the final rule requires covered institutions to maintain a transaction monitoring program for potential Bank Secrecy Act/anti-money laundering violations and suspicious activity reporting, maintain a filtering program to prevent transactions prohibited by the Office of Foreign Assets Control and submit to the DFS annually a confirmation regarding compliance with the DFS’ transaction monitoring and filtering program requirements.

Perhaps most significantly, and apparently in recognition of serious concerns raised by the industry during the comment period, the final rule does not include the proposed “annual certification” by an institution’s chief compliance officer attesting to a covered institution’s compliance with the rule, nor does it include a reference to criminal penalties for filing an incorrect or false certification. Instead, the final rule requires an annual board resolution or senior officer compliance finding confirming that the covered institution is in compliance with the regulation “to the best of the [individual’s] knowledge.” The final rule also introduced “reasonably designed” standard into the transaction monitoring and filtering programs that institutions must establish.

View DFS final rule.

The European Securities and Markets Authority published its Opinion on the proposed requirements for Emission Allowance Market Participants to disclose inside information under the Market Abuse Regulation. ESMA's Opinion is in response to the European Commission's notification that it intended to endorse, subject to certain amendments, ESMA's Implementing Technical Standards on the public disclosure of inside information by issuers and EAMPs and on the means for delaying public disclosure of inside information. The European Commission is concerned that the ITS will lead to EAMPs being subject to duplicative disclosure requirements under the EU Regulation on wholesale energy market integrity and transparency, known as REMIT. The Commission's view is that the ITS should deem the REMIT disclosure requirements sufficient for the purposes of disclosure requirements under MAR, so as to avoid imposing duplicative requirements on EAMPs.

Read more.

An EU Delegated Regulation containing Regulatory Technical Standards on investment recommendations under the Market Abuse Regulation was published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that will be introduced by the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from 3 January 2018.

The RTS set out the technical arrangements for objective presentation of investment recommendations and for disclosure of particular interests or conflicts of interest.  The RTS require that a firm producing a recommendation must disclose its identity, as well as the names and identities of the individuals involved in preparing a recommendation. Firms that disseminate recommendations will be subject to similar disclosure obligations and must also indicate on a recommendation the date on which it was first disseminated. Firms producing recommendations must also disclose relevant interests or conflicts of interest.

View the RTS on investment recommendations.

An EU Delegated Regulation containing Regulatory Technical Standards on preventing market abuse and reporting suspicious transactions under the Market Abuse Regulation was published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that will be introduced by the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from 3 January 2018.

The RTS impose requirements on operators of trading venues and persons professionally arranging or executing transactions to monitor for and report insider dealing or market manipulation. A template suspicious transaction and order report (known as a STOR) will need to be used for reporting suspicious transactions. The RTS also impose a requirement on operators of trading venues and persons professionally arranging or executing transactions to provide adequate training for their staff involved in monitoring detection and identification of orders and transactions that might be insider dealing or market manipulation, including for staff involved in processing orders and transactions.

View the RTS on preventing market abuse and reporting suspicious transactions.

Two EU Delegated Regulations containing technical standards on the requirements relating to market soundings under the Market Abuse Regulation were published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that depend on the entry into effect of the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from January 3, 2018.

Read more.

A Commission Delegated Regulation supplementing the Market Abuse Regulation was published in the Official Journal of the European Union. The Regulation lays down Regulatory Technical Standards for the content of notifications to be submitted to regulators and the compilation, publication and maintenance of the list of notifications. 

The Markets in Financial Instruments Regulation requires on-going submissions of reference data for financial instruments admitted to trading. By contrast, the MAR requires trading venues to notify regulators only once of details of financial instruments which are the subject of a request for admission to trading, admitted to trading or traded and where a financial instrument ceases to be traded or admitted to trading. The Regulatory Technical Standards require that notifications of financial instruments pursuant to the reporting obligations in MAR include all of the data set out in table 2 annexed to the Regulatory Technical Standards, such as the instrument identification code, instrument full name and trading venue.

Read more.

A Commission Delegated Regulation supplementing the Market Abuse Regulation was published in the Official Journal of the European Union. The Regulation lays down Regulatory Technical Standards on the criteria, procedures and requirements for regulators when establishing an accepted market practice and the requirements for maintaining it, terminating it or modifying the conditions for its acceptance. The RTS are made pursuant to MAR, which exempted the application of the prohibition of market manipulation to certain activities, provided that, amongst other things, the person's behavior confirms with an accepted market practice established by a regulator, in compliance with RTS.

Read more.

The US Financial Crimes Enforcement Network, pursuant to authority contained in the USA PATRIOT ACT, found “reasonable grounds” to conclude that the Democratic People’s Republic of Korea is a jurisdiction of primary money laundering concern. In its notice, FinCEN cited several factors that contributed to this conclusion, including evidence that organized criminal groups, international terrorists or entities involved in the proliferation of weapons of mass destruction have transacted business in North Korea, evidence that North Korea has been found to have repeatedly failed to address the deficiencies in its AML regime and the extent to which North Korea has demonstrated high levels of institutional and official corruption. 

Read more.

The European Commission adopted Regulatory Technical Standards on the arrangements, systems and procedures for market participants disclosing inside information while conducting market soundings. The Market Abuse Regulation, which will apply from July 3, 2016 across the EU, provides that when a disclosing market participant discloses inside information during a market sounding, that disclosure will be deemed to be made in the normal course of the exercise of the person's employment, profession or duty provided that certain conditions are met. Such disclosure would not therefore constitute market abuse. The adopted RTS require disclosing market participants to establish procedures which describe the way in which market soundings are conducted, to provide certain information to the person receiving the market sounding, including, where possible, an estimate as to when the information will cease to be inside information, and to keep records of the persons who have received market soundings. 

As part of his remarks at the Institute of International Bankers Annual Anti-Money Laundering Seminar, US Financial Crimes Enforcement Network Deputy Director Jamal El-Hindi discussed certain US Department of Treasury efforts that have been rolled out in the last several months, including: (i) the final customer due diligence (CDD) rule; (ii) draft legislation requiring legal entities to provide beneficial ownership information at the company formation stage; and (iii) the use of FinCEN’s geographic targeting orders. The CDD final rule amends existing Bank Secrecy Act regulations to clarify and strengthen obligations of covered financial institutions, specifically banks, brokers or dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities. The final rule also adds a new requirement that these financial institutions know and verify the identities of the natural persons who own, control and profit from the legal entities the financial institutions service. Finally, the rule harmonizes BSA program rules and makes explicit several components of customer due diligence that have long been expected under existing regulations. El-Hindi noted how FinCEN relied on significant engagement with industry in finalizing this rule.

Read more.

The US Treasury Department put forth several measures to combat money laundering, corruption and tax evasion, in the wake of the so-called “Panama Papers” document leak. First, the US Treasury issued a final Customer Due Diligence Rule that for the first time requires all financial institutions to collect and verify the personal information of the individuals who own, control, and profit from companies (i.e., the beneficial owners)when those companies open accounts.

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The Financial Conduct Authority published a Policy Statement, including final rules on changes to the FCA Handbook required to implement the Market Abuse Regulation. MAR will apply directly across the EU from July 3, 2016, replacing the current Market Abuse Directive. Some of the changes to the FCA rules reflect MAR’s direct application in the UK. In contrast, the Market Abuse Directive will need to be transposed into national law, including the FCA Handbook. The FCA rules need to be amended to either refer directly to MAR (e.g. for definitions) or to reflect the position under MAR. For example, MAR requires, amongst other things, issuers to provide an explanation for a delay in the disclosure of inside information under certain circumstances. The FCA's rules will require such notification to be made in writing when requested. 

The new FCA rules will apply from July 3, 2016. However, the FCA does note that some changes may be required depending on the final version of the EU technical standards due under MAR.

View the Policy Statement.

The Financial Conduct Authority published its proposed changes to the Decision Procedure and Penalties Manual and the Enforcement Guide for implementation of the Market Abuse Regulation. The MAR will apply directly across the EU from July 3, 2016. The FCA must amend and update its rules and guidance to bring them in line with MAR. The FCA's proposals are based on draft secondary legislation which HM Treasury is expected to lay before Parliament in the coming weeks. The draft secondary legislation will, amongst other things, amend the scope of the FCA's powers to impose financial penalties and public censure as well as giving the FCA additional powers to impose sanctions for breaches of MAR or any of its underlying legislation. The new powers include the power to prohibit an individual from carrying out a management function or dealing in financial instruments on their account. The FCA has already consulted on amendments to its Handbook, including the Market Conduct handbook and the disclosure and transparency rules. Policy statements on those proposals are expected soon. The current consultation closes on May 22, 2016. The FCA intends to publish the policy statement in June 2016. 

View the consultation paper.

The UK Government published an Action Plan for anti-money laundering and counter terrorism financing. The Government is aiming to overhaul the UK approach to AML and CTF by giving new capabilities and legal powers to law enforcement agencies, improving the effectiveness of the supervisory regime and addressing inconsistencies in the regime, improving information sharing between the public and private sectors and increasing the international reach of the UK law enforcement agencies and enhancing international information sharing. The Government published a Call for Information on the system of appointing supervisors for AML and CTF and the powers of supervisors to incentivize compliance and adoption of the risk-based approach. An annex to the Action Plan includes proposed legislative changes. The Action Plan includes a list of deliverables which includes the involvement of the Home Office, the National Crime Agency, HM Treasury and the British Bankers' Association. The shorter term deliverables include running the pilot Joint Money Laundering Intelligence Taskforce, which provides for information sharing between banks and the NCA, on a permanent basis, creating a register of banks' specialisms, exploring new powers to tackle money laundering and completing the review of the supervisory regime. Responses to the Call for Information and the consultation on legislative proposals should be submitted by June 2, 2016.

View the Action Plan.

View the Call for Information on the AML Supervisory Regime.

View the Consultation Paper on Legislative Proposals.

The European Banking Authority published an Opinion on the application of customer due diligence measures to customers who are asylum seekers from higher-risk third countries or territories. The Opinion, addressed to national EU regulators, outlines the EBA’s view on the application of customer due diligence measures by credit and financing institutions when entering into a business relationship with customers who are asylum seekers from higher-risk third countries. Firms are required under the EU's anti money laundering legislation (to be transposed into national law by June 27, 2017) to prevent financial systems being exploited for the purpose of money laundering or terrorist financing. 
 

At the SIFMA Anti-Money Laundering and Financial Crimes Conference, Jennifer Fowler, Deputy Assistant Secretary of the US Treasury, spoke regarding progress that the US has made in strengthening its framework for anti-money laundering and combatting the financing of terrorism. Fowler noted that the Financial Action Task Force is currently undergoing a mandatory assessment of its AML/CFT framework, focusing not only on technical compliance with the FATF standards, but more importantly, how effectively those standards are implemented. Fowler also addressed ways the US can improve in combating illicit finance, specifically, among other things, by: (i) seeking to clarify and strengthen customer due diligence requirements for financial institutions; and (ii) ensuring that companies know and disclose their ultimate, or beneficial, owners to the government at the time of company formation.

View Fowler’s speech. 

A Commission Delegated Regulation and Commission Implementing Regulation supplementing the Market Abuse Regulation were published in the Official Journal of the European Union. The Delegated Regulation extends the exemption to certain public bodies and central banks of third countries from the obligations set out in MAR, including amongst others, the Reserve Bank of Australia, Central Bank of Brazil, Bank of Canada and the People's Bank of China. 
 

US Treasury Secretary Jack Lew addressed the Carnegie Endowment for International Peace, commenting on the evolution of economic sanctions programs as a tool for US foreign policy. He emphasized the importance of using sanctions, but also cautioned against overusing sanctions and using sanctions where they may have a negligible impact. Critically, Lew noted that economic sanctions are meant to be forward-looking and to change future behavior, rather than to be punitive for past bad actions. Focusing on three key lessons that apply to the appropriate use of sanctions, Lew noted the importance of: (i) working with US allies to have broad, international support for economic sanctions; (ii) recognizing the appropriate time to provide relief from sanctions in order to preserve US credibility and the ability to use sanctions programs to motivate behavior changes; and (iii) investing in infrastructure to help implement and support targeted sanctions programs. Secretary Lew remarked on the high costs of sanctions programs, and the potential for overuse to result in negative externalities, including driving business and financial transactions outside of the US.

View Treasury Secretary Lew’s speech.

The European Securities and Markets Authority launched a consultation on proposed guidelines on information expected or required to be disclosed on commodity derivatives markets or related spot markets under the Market Abuse Regulation. MAR will replace the current Market Abuse Directive and its implementing legislation from July 3, 2016. One of the changes that MAR will introduce is the expansion of the definition of inside information relating to commodity derivatives to cover price sensitive information relevant to the related spot commodity contracts as well as the derivative. This means that transactions in commodity derivatives based on inside information relating to underlying spot transactions will be expressly prohibited. In addition, the market manipulation prohibitions will include transactions in derivatives markets that manipulate the related spot commodity transaction and transactions in spot commodity markets that manipulate the related derivative. The definition of inside information for commodity derivatives includes information which is "reasonably expected to be disclosed or is required to be disclosed in accordance with legal or regulatory provisions at the Union or national level, market rules, contract, practice or custom, on the relevant commodity derivatives markets or spot markets". ESMA's proposed guidelines aim to set out the types of information that would be considered inside information for commodity derivatives or spot transactions by establishing a non-exhaustive indicative list of information that would be reasonably expected or required to be so disclosed. The consultation closes on May 20, 2016 and ESMA aims to publish its final report by late Q3 2016. 
  
View the consultation paper.