August 23, 2022

August Industry Update

Stay up to date with the latest KYC/AML news

# Insights

South Africa risks being greylisted by watchdog

The South Africa (SA) cabinet has approved new amendments to prevent being greylisted by the Financial Action Task Force (FATF), the global money-laundering and terrorist financial watchdog. After a previous review by the FATF in October 2021, SA fared very poorly. Specifically, the ‘arrangements around legal persons’ and little prevention and monitoring of terrorism finance resulted in SA receiving the lowest score possible. To align SA with international measures, FATF made forty recommendations to implement. In response to this guidance, the omnibus of bills introduced new amendments to address the deficiencies.

The acting director-general of the Treasury, Ismail Mononiat, believes there is ‘little hope’ of completing the required actions by the October deadline. If greylisted, SA’s risk profile will rise and result in consequences such as corresponding banking relationships being cancelled. However, if SA demonstrates its intentions to comply with the FATF by February 2023, when the final decision is made, it may prevent being greylisted.

UK Gambling Commission issues warning to operators

The UK Gambling Commission (UKGC) has urged operators to be proactive in their compliance processes and implement robust action plans in the wake of increased inspections and fines. Richard Bradley, the gambling compliance expert at Poppleston Allen, mentions that operators are becoming complacent and reactive.

To reduce the chances of regulation breaches, it is expected that operators identify and address their non-compliance concerns if found. If the breaches must be bought forward by the operator to the Commission, they should be completed at the earliest stage. In cases where the Commission has identified concerns, operators should cooperatively resolve breaches. By following these measures, gambling organisations can prevent fines and potential license revocation.

CSOs advised on terrorism financing and money laundering

Civil Society Organisations (CSOs) have recently completed a two-day workshop to increase their awareness of anti-money laundering (AML) and counter-financing terrorism (CFT) regulations, as recommended by the British Council and the European Agents for Citizens-driven Transformation (EU-ACT). Prof. Adedeji Adekunle, the head of Jury’s Trust’s faculty, stated that a 2016 National Risk Assessment found non-government organisations (NGOs) were at risk of money laundering and financing terrorism in Nigeria.

He mentioned that NGOs must utilise processes such as Customer Due Diligence (CDD) and Know Your Customer (KYC) to identify and verify donors and beneficiaries. Following this, NGOs must ensure a donor or beneficiary is not listed on the Consolidated or Nigeria List, as mentioned in Regulation 28 of the Terrorism Prevention.

Idem Udoekong, the Component 2 Manager of the EU-ACT, emphasises that to prevent terrorism financing and money laundering, CSOs must stay informed on legislation and follow regulations.

AUSTRAC revise Anti-Money Laundering and Counter-Terrorism Rules

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has released a revised draft of the current Anti-Money Laundering and Counter-Terrorism Rules Instrument 2017. The amendment is in reference to Chapter 16, reportable details for international funds transfer instructions (items 1 and 2 in section 46). Chapter 16 outlines what is to be included in the report about international funds transfer instructions, both in and out of Australia.

Lloyds Bank fined £500K for regulatory breach

A £500,000 fine has been issued to Lloyds Bank Corporate Markets Jersey (LBCM) for breaching regulations in a correspondent banking relationship. A correspondent banking relationship involves one bank (the correspondent) providing banking services to another financial institution (the respondent). The Jersey Financial Service Commission (JFSC) found that LBCM failed to implement anti-money laundering procedures and the relationship occurred between 2006 to 2021 with an overseas incorporated bank.

According to CEO Alasdair Gardner, the LBCM recognised their wrongdoing and understood it was unacceptable. However, after an internal review, LBCM stated no financial crime had occurred, and there was no loss of customers. The LBCM fully cooperated with the investigation, which allowed for a 50% discount on the fine. LBCM must implement robust procedures across all relationships and activities to prevent future implications and increased risk.

New guidance for Licensed Financial Institutions

The Central Bank of the United Arab Emirates (CBUAE) has issued new guidelines for licensed financial institutions (LFIs). This new guidance aims to assist LFIs in applying effective anti-money laundering and counter-terrorism financing (AML/CTF) regulations toward politically exposed persons (PEPs). To comply with the Financial Action Task Force (FATF) standards, enhanced Customer Due Diligence (CDD) procedures on PEPs must be considered. Due to the increased risk of PEPs exposing LFIs to illicit activity such as money laundering, it is imperative to introduce measures such as conducting ongoing monitoring. By implementing these guidelines, LFIs can ensure legal and regulatory compliance.

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