Global AML watch: Unravelling regulatory developments across borders

In an increasingly interconnected world, the financial services industry faces challenges in combating money laundering and terrorist financing. To overcome these risks, nations are continuously evolving their Anti-Money Laundering (AML) and combatting the financing of terrorism (CFT) regulatory frameworks. This proactive approach ensures that the evolving methods employed to launder illicit funds are effectively countered.

EBA report reveals alarming money laundering risks in payment institutions

The European Banking Authority (EBA) recently published a report expressing concerns about the effectiveness of AML/CFT risk management in payment institutions. According to the report, institutions and their supervisors may not be adequately assessing and addressing the risks.

Key findings of the report include:

• Payment institutions are considered to have high inherent money laundering /terrorist financing (ML/TF) risks, but the systems and controls they have in place to mitigate those risks are often ineffective.
• Not all AML/CFT supervisors align the frequency and intensity of their supervision with the ML/TF risk profiles of individual payment institutions, or the risks associated with the sector.
• The practices for authorising payment institutions and assessing AML/CFT components vary significantly among supervisors, allowing payment institutions with weak controls to operate in the EU and potentially exploit less stringent authorisation processes in some Member States.
• There is a lack of a common approach at the EU level for the AML/CFT supervision of agent networks used by payment institutions, which poses significant ML/TF risks, especially in cross-border contexts.

Australia proposes reforms to AML and CFT regime

The Attorney-General of Australia has initiated a public consultation regarding proposed reforms to the country’s AML/CFT regime.

The reforms aim to achieve several objectives, including ensuring compliance with international standards, enhancing industry understanding of obligations and compliance, strengthening Australian businesses and sectors against criminal exploitation, and reducing regulatory burdens for regulated entities.

How is the art and antiquities market being used for money laundering?

The art and antiquities market lacks regulation, making it an easy avenue for money laundering. Through methods such as overvaluation of the art, anonymous trusts to purchase the items and trade-based laundering, criminals can benefit from this market’s secretive nature and lack of transparency.

The FATF has stated that this market has “attracted criminals, organised crime groups and terrorists to launder proceeds of crime and fund their activities.” It has highlighted the need to identify and trace cultural objects that could be involved in money laundering or terrorist financing.

Qatar’s efforts in AML and CFT measures

On 31 May 2023, after conducting an evaluation, the Financial Action Task Force (FATF) concluded that Qatar has made “substantive improvements to its system to combat money laundering and terrorism financing,” and its overall compliance with FATF technical requirements is strong. Despite this progress, Qatar still needs to make significant enhancements to its criminal justice response to terrorist financing.

Positive developments

• Prioritises international co-operation.
• Good understanding of risks associated with money laundering and terrorist financing.
• Implemented a risk-based AML approach to assessing risks and supervision.
• Positive approach in gathering valuable ownership information for its integrated register – this is close to being completed.
• Its financial intelligence unit is able to access and analyse a wide range of information.
• Effectively confiscating large amounts of funds such as proceeds and instrumentalities of crime and property of equivalent of value.
• Implemented a robust compliance framework to ensure targeted AML sanctions, this has led to the seizure of large numbers of assets.

Improvements needed

• Further cooperation with international regulatory bodies is needed to “improve Qatar’s overall system for mutual legal assistance and extradition.”
• Develop an understanding of complex forms of money laundering and terrorist financing.  
• The risk-based approach is still at an early stage and requires consistent improvements.
• Needs sufficient controls to guarantee that ownership information retrieved is accurate and up to date.  
• Qatar must adopt more sophisticated analysis abilities to effectively identify AML risks to their “fullest extent.”
• AML enforcement actions and investigations are low, Qatar must enhance AML investigations to uncover potential involvement in complex schemes.
• The country needs to bridge the gap between its risk profile and the extent of terrorist financing prosecutions and convictions – only a small number of convictions have been obtained.
• Requires more focus on its “implementation of proliferation financing sanctions.”

Indonesia’s initiatives

On 27 April 2023, the FATF concluded its evaluation of Indonesia’s AML/CFT frameworks.

Key points: The ML risk for the region mainly comes from domestic crimes including corruption, narcotics, tax crimes and forestry crimes. There are high terrorism financing risks because of terrorist organisations and supporters in the country.

Positive developments

• Good understanding of AML risks and has implemented risk-based strategies to overcome these. For example, robust domestic inter-agency coordination.
• Established a robust compliance AML framework, effectively using financial intelligence and engaging in domestic and international cooperation.
• Financial supervisory authorities have proactively developed AML/CFT frameworks.
• The Indonesian Financial Intelligence Unit offers law enforcement agencies with timely and high-quality financial intelligence.
• Effectively identifies and brings legal action against terrorist financing cases in line with its AML/CFT risk profile.

Improvements needed

• Prioritise asset recovery, enhance risk-based supervision and implement sanctions.
• Enhance risk-based supervision, especially for money changers and money or value transfer services.
• Enforce effective sanctions to deter ML/TF across all sectors.
• Ensure that accurate information about the beneficial owners of all companies is readily available to law enforcement.
• Enhance the process of investigating and prosecuting diverse forms of money laundering activities.
• Ensure criminals are permanently deprived of the proceeds of their crimes.
• Improve its understanding of the risk of abuse of the non-profit sector for terrorism financing.

To learn about the most recent AML/CFT updates in the US and UK, click here.

CUBE comment

As countries intensify their efforts to combat money laundering, recent developments such as the UK’s strengthened Post Office AML controls and the US Department of Treasury’s 2023 De-risking strategy highlight the seriousness with which regulators are approaching this issue. To comply with evolving AML regulations, firms must adopt a proactive approach, and that’s where CUBE’s regulatory change management software comes into play.

CUBE offers financial institutions a powerful AI-driven solution to navigate the ever-changing regulatory landscape effectively. With access to CUBE’s golden source of regulatory intelligence, firms can keep up with regulatory demands and ensure total compliance.

Discover how CUBE can assist your firm in staying compliant with AML regulations and maintaining a strong stance against money laundering.