Financial Action Task Force
Transparency and beneficial ownership of legal persons and arrangements - FAFT publishes guidance - 10 March 2023
The Financial Action Task Force (FATF) has published guidance on FATF Recommendation 24 (transparency and beneficial ownership of legal persons) and a revised version of FATF Recommendation 25 (transparency and beneficial ownership of legal arrangements). This follows the FATF’s consultation published in October 2022.
Recommendation 24 requires countries to prevent the misuse of legal persons for money laundering or terrorist financing and to ensure that there is adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons. The guidance will help countries identify, design and implement appropriate measures to ensure that beneficial ownership information is held by a public authority or body functioning as a beneficial ownership registry, or an alternative mechanism that enables efficient access to the information. The guidance will also help countries assess and mitigate the money laundering and terrorist financing risks associated with foreign companies to which their countries are exposed.
Recommendation 25 has been revised to state that countries should assess the risks of the misuse of legal arrangements for money laundering or terrorist financing and take measures to prevent misuse. In particular, countries should ensure that there is adequate, accurate and up-to-date information on express trusts, and other similar legal arrangements, including information on the settlors, trustees and beneficiaries. This information should be accessible for national competent authorities efficiently and in a timely manner.
FAFT Recommendations: International standards on combatting money laundering and the financing of terrorism and proliferation
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Countering ransomware financing - FATF publishes report - 14 March 2023
FATF has published a report on countering ransomware financing (the Report).
The Report is intended to improve global understanding of the financial flows linked to ransomware and to highlight good practices to address this threat. The Report also provides a list of potential risk indicators that will help regulatory authorities, and the private sector, detect such financial flows. The Report finds that payments and subsequent laundering of ransomware proceeds are almost exclusively conducted through virtual assets. Ransomware criminals exploit the international nature of virtual assets to facilitate large-scale, nearly instantaneous cross-border transactions, sometimes without the involvement of traditional finance institutions that have anti-money laundering and counter terrorist finance (AML/CTF) programmes.
The Report also finds that ransomware attacks are generally under-reported, which explains, in part, the lack of experience in investigating money laundering related to ransomware. FATF notes that relevant national authorities need to carry out further work to increase and enhance detection and reporting capabilities and proposes that they take a number of steps, including:
- accelerating compliance with relevant FATF standards applying to virtual asset service providers by implementing Recommendation 15;
- ensuring that ransomware is criminalised and deemed a money laundering offence in accordance with FATF Recommendation 3;
- enhancing the detection of ransomware;
- considering the establishment of communications channels with non-traditional actors which may not be subject to AML/CFT requirements;
- promoting financial investigations and asset recovery efforts;
- adopting a multi-disciplinary approach to tackle ransomware; and
- supporting partnerships with the private sector.
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HM Treasury
Breaches of financial sanctions - OFSI publishes updated guidance on enforcement and monetary penalties - 16 March 2023
The Office of Financial Sanctions Implementation (OFSI), which is part of HM Treasury, has published an updated version of its guidance on enforcement and monetary penalties for breaches of financial sanctions. OFSI has the power to impose monetary penalties for breaches of financial sanctions under the Policing and Crime Act 2017 (the 2017 Act), as amended by the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).
Following the Russian invasion of Ukraine, the government brought forward the Economic Crime (Transparency and Enforcement) Act 2022, which included changes to OFSI’s powers. The new guidance updates the OFSI guidance published on 15 June 2022 and applies from that date retrospectively.
It focuses on details of OFSI’s approach to assessing breaches of financial sanctions where an incorrect assessment of ownership and control of an entity is relevant to the commission of the breach, and sets out the principles-based approach for conducting due diligence and making assessments, with examples.
In particular, where OFSI determines that a breach has occurred, and an incorrect assessment of ownership of control, whether direct or indirect or de facto control, of any entity is relevant to the commission of the breach, OFSI will consider the ‘degree and quality’ of research and due diligence conducted on that entity. Appropriate due diligence conducted on ownership and control may be considered a mitigating factor, provided the determination was made in good faith and was a reasonable determination to make from the due diligence undertaken. Depending on the circumstances, OFSI may consider the following as mitigating factors:
- examination of formal ownership and control mechanisms of an entity to establish whether there is available evidence of ownership and control by a designated person;
- examination of actual, or the potential for, influence or de facto control;
- open-source research on an entity or persons with such ownership or control;
- direct contact with an entity to prove indirect or de facto control; and
- regular checks and/or ongoing monitoring of the above.
OFSI Guidance: OFSI enforcement and monetary penalties for breaches of financial sanctions
