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  • FSB highlights crypto threats to global financial system

    Federal Issues

    On July 11, the Financial Stability Board (FSB) outlined challenges and vulnerabilities facing the global financial system in a letter sent to G20 finance ministers and central bank governors. While recognizing that markets have seemingly coped with “evolving economic conditions and high volatility in an orderly manner” and that so far “[n]o major financial institution has shown signs of distress,” the FSB cautioned that vigilance is necessary, as unexpected economic deteriorations may test financial resilience. Among other topics, the FSB discussed targeted approaches for phasing out of Covid-19 measures to mitigate the adverse effects of high debt, and stressed that “[e]xit strategies need to reflect specific domestic economic conditions and avoid excessive financial market reactions, which may limit the scope to engineer a fully synchronized exit across jurisdictions.” Crypto-assets also create vulnerabilities, the FSB added, pointing to a recent FSB communication that clarified that stablecoins and other crypto-assets “do not operate in a regulation-free space” and warned crypto-asset providers that they may not operate in any jurisdiction without meeting applicable regulatory, supervisory, and oversight requirements. The FSB will take enforcement action against members that fail to comply with existing legal obligations, it said, adding that it is currently working to ensure that crypto-assets are subject to regulation and supervision through coordinated regulatory initiatives. Additionally, the FSB noted it is closely collaborating with standard-setting bodies, including the Financial Action Task Force, to regulate and supervise stablecoins and other crypto-assets and understand the implications of decentralized finance on financial stability. Consultative reports discussing recommendations for global regulatory and supervisory approaches to stablecoins and other crypto-assets will be submitted in October to the G20 finance ministers and central bank governors.

    Federal Issues FSB Digital Assets Covid-19 FATF Of Interest to Non-US Persons

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  • FinCEN issues statements on its lists of jurisdictions with AML/CFT/CPF deficiencies

    Financial Crimes

    On June 23, FinCEN announced that the Financial Action Task Force (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). FATF’s statements 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.” FinCEN’s announcement also informs members that FATF removed Malta from its list of Jurisdictions under Increased Monitoring and added Gibraltar, and that its list of High-Risk Jurisdictions Subject to a Call for Action continues to subject Iran and the Democratic People’s Republic of Korea to the FATF’s countermeasures.

    Financial Crimes Anti-Money Laundering Combating the Financing of Terrorism Combating Weapons of Mass Destruction Proliferation Financing FATF FinCEN

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  • FAFT restricts Russia’s membership privileges, takes action against corruption and virtual asset misuse

    Financial Crimes

    On June 17, the U.S. Treasury Department announced that the Financial Action Task Force (FATF) concluded another plenary meeting, in which it, among other things, took steps to restrict Russia’s FATF membership privileges. During the meeting, FATF again criticized Russia’s war against Ukraine and issued a statement, stressing that “Russian actions run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system. They also represent a gross violation of the commitment to international cooperation and mutual respect upon which FATF Members have agreed to implement and support the FATF standards.” Treasury Secretary Janet Yellen also stated that she “welcome[s] the serious steps the FATF took to restrict Russia’s presence in its community.” FATF members agreed that Russia can no longer hold any leadership or advisory roles, nor take part in decision making on any standard-setting, peer-review processes, governance, or membership matters. Russia is also prohibited from providing assessors, reviewers, or other experts for FATF peer-review processes. FATF stated it “will monitor the situation and consider at each of its Plenary meetings whether grounds exist for modifying these restrictions.”

    FATF also produced policy recommendations for combatting corruption and countering corrupt actors or illicit funds. FATF stated it will continue to fight the abuse of shell companies, trusts, or other legal arrangements employed by bad actors, and intends to seek input on guidance to implement recommendations related to the collection and verification of beneficial ownership information for companies or other legal entities. FATF members will release a white paper for public consultation on important issues concerning “the misuse of trusts and other legal arrangements to facilitate illicit finance,” and will published guidance on ways governments and firms can mitigate money laundering risks within the real estate sector.

    Additionally, FATF adopted a report on virtual assets during the meeting, calling “for accelerated compliance by the public and private sectors with the FATF standards, particularly the ‘travel rule,’ for virtual assets and virtual asset service providers.” The travel rule requires virtual asset service providers to collect or send information on the identities of the originator and beneficiary of virtual asset transfers. However, FATF noted that, despite some progress, not all countries have introduced the travel rule, creating significant vulnerabilities for criminal misuse and underscoring the need for universal implementation and enforcement of the travel rule. FATF also approved a new project related to ransomware finance and related money laundering, with an objective of raising global awareness and understanding of how payments for ransomware are made and how these proceeds are often laundered.

    Financial Crimes Digital Assets Of Interest to Non-US Persons Department of Treasury Russia FATF Anti-Money Laundering Combating the Financing of Terrorism Beneficial Ownership Ransomware Virtual Currency Fintech

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  • FATF updates statements concerning jurisdictions with AML/CFT/CPF deficiencies

    Financial Crimes

    On March 10, the Financial Crimes Enforcement Network (FinCEN) announced updates to the Financial Action Task Force (FATF) statements concerning jurisdictions with strategic anti-money laundering, countering the financing of terrorism, and combating weapons of mass destruction proliferation financing (AML/CFT/CPF) deficiencies. Specifically, to ensure compliance with international standards, FAFT updated the following two statements: (i) Jurisdictions under Increased Monitoring, which identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, FATF to address those deficiencies in accordance with an agreed upon timeline and; (ii) High-Risk Jurisdictions subject to a Call for Action, which identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and instructs FATF members to apply enhanced due diligence, and in the most serious cases, apply counter-measures to protect the international financial system from such risks. Among other things, through the announcement, FinCEN reminded covered financial institutions of their obligations to comply with due diligence obligations for foreign financial institutions (in addition to their general obligations) to ensure their due diligence programs “include 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 service businesses are also required to establish appropriate policies to address money laundering and terrorism financing risks posed by their relationships with foreign agents or foreign counterparties. FinCEN further instructed financial institutions to comply with U.S. prohibitions against the opening or maintaining of any correspondent accounts, whether directly or indirectly, for North Korean or Iranian financial institutions, which are already prohibited under existing U.S. sanctions and FinCEN regulations. As previously covered by InfoBytes, FinCEN last announced updates to the FATF statements in October.

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

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  • FATF to strengthen beneficial ownership transparency

    Financial Crimes

    On March 4, the U.S. Treasury Department announced that the Financial Action Task Force (FATF) concluded its sixth plenary meeting, in which it, among other things, “agreed upon a revised standard to combat the misuse of anonymous shell companies and set the stage for its members and the broader global FATF network to be held accountable to more stringent standards.” FATF adopted amendments on beneficial ownership transparency for legal persons, which will “enhance the quality of beneficial ownership information (BOI) collected by governments,” and will “enable efficient access by law enforcement to this information and require improved international cooperation.” FATF also agreed upon a new updated Mutual Evaluation Methodology and an updated Mutual Evaluation Procedures. FATF will publish a report on migrant smuggling, which is intended to “raise awareness to the importance of developing a comprehensive understanding of the financial component of this criminal activity among both the public and private sectors.” Additionally, FATF is planning to launch a public consultation on updated Risk Based Guidance for the real estate sector this spring.

    Financial Crimes Department of Treasury Of Interest to Non-US Persons FATF Beneficial Ownership Risk Management Real Estate

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  • FATF updates virtual assets and service provider guidance

    On October 28, the Financial Action Task Force (FATF) updated pre-existing guidance on its risk-based approach to virtual assets (VAs) and virtual asset service providers (VASPs). The updated guidance revises guidance originally released in 2019. According to FATF standards, countries are required to “assess and mitigate their risks associated with virtual asset financial activities and providers; license or register providers and subject them to supervision or monitoring by competent national authorities.” The guidance includes updates on certain key areas, such as: (i) expanding the definitions of VAs and VASPs; (ii) applying FAFT standards to stablecoins; (iii) adding guidance regarding the risks and the tools available to countries for the purpose of addressing money laundering and terrorist financing risks for peer-to-peer transactions; (iv) revising VASP licensing and registration guidance; (v) adding guidance for the public and private sectors on the implementation of the “travel rule”; and (vi) adding a section for principles of information-sharing and co-operation amongst VASP Supervisors. FATF also noted that the “guidance addresses the areas identified in the FATF’s 12-Month Review of the Revised FATF Standards on virtual assets and VASPs requiring further clarification and also reflects input from a public consultation in March - April 2021.”

    Licensing Fintech Digital Assets Agency Rule-Making & Guidance FATF Virtual Currency Of Interest to Non-US Persons Anti-Money Laundering Financial Crimes Combating the Financing of Terrorism

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  • FATF updates statements concerning jurisdictions with AML/CFT/CPF deficiencies

    Financial Crimes

    On October 26, the Financial Crimes Enforcement Network (FinCEN) announced updates to the Financial Action Task Force (FATF) statements concerning jurisdictions with strategic anti-money laundering, countering the financing of terrorism, and combating weapons of mass destruction proliferation financing (AML/CFT/CPF) deficiencies. Specifically, to ensure compliance with international standards, the FAFT updated the following two statements: (i) Jurisdictions under Increased Monitoring, which 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 identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and instructs FATF members to apply enhanced due diligence, and in the most serious cases, apply counter-measures to protect the international financial system from such risks. Notably, Jordan, Mali, and Turkey have been added to the Jurisdictions under Increased Monitoring, while Botswana and Mauritius have been removed from the list. Among other things, through the announcement, FinCEN further instructed financial institutions to comply with U.S. prohibitions against the opening or maintaining of any correspondent accounts, whether directly or indirectly, for North Korean or Iranian financial institutions, which are already prohibited under existing U.S. sanctions and FinCEN regulations. As previously covered by InfoBytes, FinCEN last announced updates to the FATF statements in July.

    Financial Crimes FATF FinCEN Anti-Money Laundering

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  • FATF advances work on virtual assets, beneficial ownership transparency, and illicit finance risks

    Financial Crimes

    On October 22, the Financial Action Task Force (FATF) announced that it concluded its October plenary, which is the sixth session since the beginning of the Covid-19 pandemic. According to the announcement, utilizing a hybrid approach of both virtually and in-person participation, FATF “advanced its core work on virtual assets, beneficial ownership transparency, and illicit finance risks.” Among other things, the FATF: (i) approved an updated version of its Guidance on a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers for publication; (ii) proposed changes to beneficial ownership standards; (iii) approved the commencement of a study on Illicit Proceeds Generated from the Fentanyl and Related Synthetic Opioids Supply Chain; (iv) adopted an update to its 2016 confidential report on terrorist financing risk indicators; and (v) issued a statement regarding Afghanistan that reaffirmed the “United Nations Security Council Resolutions that Afghanistan should not be used to plan or finance terrorist acts, emphasiz[ing] the importance of supporting the work of non-governmental organizations in the country and maintaining the flow of humanitarian assistance to the Afghan people, and for governments to facilitate information sharing with their financial institutions on any emerging illicit finance risks related to Afghanistan.”

    Financial Crimes Department of Treasury FATF Of Interest to Non-US Persons Anti-Money Laundering Combating the Financing of Terrorism Fintech Virtual Currency Beneficial Ownership Digital Assets

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  • EU and U.S. release statement on Joint Financial Regulatory Forum

    Financial Crimes

    On September 29 and 30, EU and U.S. participants, including officials from the Treasury Department, Federal Reserve Board, CFTC, FDIC, SEC, and OCC, participated in the U.S. – EU Joint Financial Regulatory Forum to continue their ongoing financial regulatory dialogue. Matters discussed focused on six different themes: “(1) market developments and current assessment of financial stability risks, (2) sustainable finance, (3) multilateral and bilateral engagement in banking and insurance, (4) regulatory and supervisory cooperation in capital markets, (5) financial innovation, and (6) anti-money laundering and countering the financing of terrorism (AML/CFT).”

    While acknowledging that both the EU and U.S. are experiencing “robust economic recoveries,” participants cautioned that the uncertainty around the Covid-19 pandemic and the economic outlook has not dissipated. “[C]ooperative international engagement to mitigate financial stability risks remains essential,” participants warned. Participants also explored issues concerning climate-related challenges for the financial sector and mandates for addressing climate-related financial risks, and touched upon the EU’s strategy for financing its transition to a sustainable economy. Regarding financial innovation, participants discussed potential central bank digital currencies and exchanged views on topics such as new types of digital payments, crypto-assets, and stablecoins, with all participants recognizing the “benefits of greater international supervisory cooperation” and “promot[ing] responsible innovation globally.” In addition, participants discussed progress made in strengthening their respective AML/CFT frameworks, “exchanged views on the opportunities and challenges arising from financial innovation in the AML/CFT area and explored potential areas for enhanced cooperation to combat money laundering and terrorist financing bilaterally and in the framework of [the Financial Action Task Force].”

    Financial Crimes Department of Treasury EU OCC Federal Reserve CFTC SEC FDIC Fintech Of Interest to Non-US Persons Supervision Anti-Money Laundering Combating the Financing of Terrorism FATF Climate-Related Financial Risks Bank Regulatory

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  • FATF updates statements concerning jurisdictions with AML/CFT/CPF deficiencies

    Financial Crimes

    On July 1, the Financial Crimes Enforcement Network (FinCEN) announced updates to the Financial Action Task Force (FATF) statements concerning jurisdictions with strategic anti-money laundering, countering the financing of terrorism, and combating weapons of mass destruction proliferation financing (AML/CFT/CPF) deficiencies. Specifically, to ensure compliance with international standards, the FAFT updated the following two statements: (i) High-Risk Jurisdictions Subject to a Call for Action, which identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and instructs FATF members to apply enhanced due diligence, and in the most serious cases, apply counter-measures to protect the international financial system from such risks; and (ii) 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.” Notably, Haiti, Malta, the Philippines, and South Sudan have been added to the Jurisdictions under Increased Monitoring, while Ghana has been removed from the list. Among other things, through the announcement, FinCEN further instructs financial institutions to comply with U.S. prohibitions against the opening or maintaining of any correspondent accounts, whether directly or indirectly, for North Korean or Iranian financial institutions, which are already prohibited under existing U.S. sanctions and FinCEN regulations.

    Financial Crimes FATF FinCEN Of Interest to Non-US Persons Anti-Money Laundering Combating the Financing of Terrorism Combating Weapons of Mass Destruction Proliferation Financing Compliance

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