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Financial Services Law Insights and Observations

FinCEN comments on Russia’s suspended FATF membership; issues statements on jurisdictions with AML/CFT/CPF deficiencies

Financial Crimes Of Interest to Non-US Persons FATF Russia Anti-Money Laundering Combating the Financing of Terrorism FinCEN OFAC

Financial Crimes

On March 9, FinCEN informed U.S. financial institutions that last month the Financial Action Task Force (FATF) suspended the Russian Federation’s membership after determining that the country’s “actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system.” (Covered by InfoBytes here.) FATF also urged jurisdictions to monitor for and mitigate emerging risks resulting “from the circumvention of measures taken in order to protect the international financial system.”

Additionally, FinCEN noted that at the end of February, FATF issued public statements updating its lists of jurisdictions with strategic deficiencies in anti-money laundering (AML), countering the financing of terrorism (CFT), and countering the financing of proliferation of weapons of mass destructions (CPF) regimes. These include (i) Jurisdictions under Increased Monitoring, “which publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline,” and (ii) High-Risk Jurisdictions Subject to a Call for Action, “which publicly identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and calls on all FATF members to apply enhanced due diligence, and, in the most serious cases, apply counter-measures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from the identified countries.”

With respect to jurisdictions under increased monitoring, FinCEN’s announcement reminded U.S. covered financial institutions of their due diligence obligations for foreign financial institutions (including correspondent accounts maintained for foreign banks), and instructed them to ensure that they implement “appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States.” Money services business are reminded of parallel requirements with respect to foreign agents or counterparties. Members were informed that FATF removed Cambodia and Morocco from its list of Jurisdictions under Increased Monitoring but added Nigeria and South Africa to the list.

FinCEN’s announcement also informed members that Burma remains on the list of High-Risk Jurisdictions Subject to a Call for Action, and advised U.S. financial institutions to apply enhanced due diligence. Moreover, U.S. financial institutions should continue to refer to existing FinCEN and OFAC guidance on engaging in financial transactions with Burma. With respect to the Democratic People’s Republic of Korea and Iran, “financial institutions must comply with the extensive U.S. restrictions and prohibitions against opening or maintaining any correspondent accounts, directly or indirectly, for North Korean or Iranian financial institutions,” FinCEN said, adding that “[e]xisting U.S. sanctions and FinCEN regulations already prohibit any such correspondent account relationships.”