Bank of Spain Issues New Cryptocurrency Regulations

Virtual asset service providers, banks, and other financial institutions are now required to register through the AML registry of the Bank of Spain

The Central Bank of Spain initially announced the registration process back in June, and on October 19, guidelines were published for financial institutions to follow. In August, an initiative to legalize cryptocurrency for insurance and mortgage was backed by Spanish lawmakers. 

The registration process is aimed at preventing money laundering by requiring institutions to report their anti-money laundering measures, as well as reporting illicit activities like terror financing or crimes involving the personal information of their customers. According to the guidelines, all institutions dealing with money or providing assets in any form are obliged to submit registration details.

According to the Bank of Spain, these guidelines apply to “all individuals and institutions providing virtual currency exchange services” including trading and custody. The proposed obligations are applicable even to the banking institutions that have customers located outside Spain.

The Spanish Bank also stated that virtual asset providers are required to register “regardless of whether they are also registered in other administrative records in the Bank of Spain or other related authorities.” Although individuals can request registration via mail, they are advised to follow the electronic registry form.

Based on the statement from the Bank of Spain, institutional data will be analyzed for risk analysis while considering the types of clients and the countries in which their services are being provided. Moreover, the purpose of their corporate relationships must be defined along with products and operating volumes.

Additional requirements include documentation with the identification details of those in charge of the respective institution’s compliance regimes. Penalties of up to $11.6 million will be imposed on the individuals and firms that continue providing services without registration with the Bank of Spain.

Suggested read: AML Program Risks Highlighted by the Pandora Papers Scandal


FATF to Publish Revised Guidelines For Virtual Assets Service Providers

The Financial Action Task Force is all set to publish updated guidelines on virtual assets on October 28, 2021. 

Virtual assets (VAs) are advancing at a bewildering speed, indicating the need for continuous monitoring between the public and private sectors. To address the emerging issues, the FATF published “Guidance for a Risk-Based Approach to VA & VASPs” in 2019, and then FATF revised standards following a year-long review in June 2020. 

After the 2020 review, FATF consulted the public in March-April and finalized the 2021 “Guidance for a Risk-Based Approach to VA & VASPs.” The review will cover areas requiring advanced FATF guidance in order to present a clear perspective on the revised FATF standards. 

Hence, the FATF has amended its 2020 guidance and the updated guidelines will be published on October 28, 2021, which “explains how the FATF recommendations apply to virtual assets and services”. 

 The FATF virtual assets 2021 guidance details will clarify the following aspects:

  1. VA’s travel rule 
  2. Definition of Virtual Assets & VASPs 
  3. The role of VASP supervisors 
  4. VASPs licensing and registration guidelines
  5. Risks associated with peer-to-peer (P2P) transactions 
  6. How countries must apply FATF standards to stable coins
  7. Tools to identify and combat the risks of P2P transactions

The revised update is rolling out tomorrow (28th October 2021) is thought to assist the public and private sector in implementing FATF standards accordingly. Accordingly, the FATF stated, “Keeping in view the updated guidance, FATF expects the public and the private sectors to implement the FATF VA/VASPs standard as soon as possible.”

The Paris-based global watchdog is ought to closely monitor any further revision required to enhance the implementation of the FATF standard on virtual assets and virtual asset service providers. “This includes in relation to areas such as stablecoins, peer-to-peer, non-fungible tokens and decentralized finance.” 

Suggested Read: FATF’s Travel Rule: A New Dawn of Regulations for Virtual Asset Services


Enhanced AML/CFT Framework Pays Off – Mauritius Off FATF’s Grey List

Implementing an enhanced AML/CFT framework brings terrific news for Mauritius as they are off FATF’s grey list. 

The announcement made by Financial Action Task Force after the plenary meeting held between 19 – 21 October 2021 brought good news for Mauritius. The country, which was on the FATF’s grey list since 1st October 2020, has finally made it into the global watchdog’s white list. 

The year-long efforts included the implementation of sustainable AML/CFT reforms, making Mauritius largely compliant with 39 out of 40 indicators. The only indicator yet to be fully complied with is the handling of virtual assets. 

The FATF cumbersomely recognized the remarkable implementation of enhanced actions and preventive measures taken by Mauritian authorities to overcome the Anti-money laundering (AML) and Counter-Terrorist Financing (CFT) deficiencies. The move will allow Mauritius to contribute and facilitate direct foreign investment in Africa. 

Additionally, FATF stated, “The Mauritian authority demonstrated a strong commitment to mitigate ML and TF and hence adopted robust and sustainable techniques.” 

The overwhelmed Country Head and Managing Director of Mauritius announced the news. He said, “Mauritius has newfound confidence of the international community as an international finance center due to the implementation of FATF action plan on overcoming money laundering and terrorist financing in a very rigorous and consistent manner.”    

Following the delisting by the FATF, it is suspected that Mauritius will also be taken off the EU’s black list of ML/TF deficiencies. The move will pave the way for EU investors to invest in Mauritius and create a positive economic impact. 

But for now, the Mauritian government must aim to keep their country off the FATF’s grey list by further implementing digital AML verification services. The incorporation of digital AML/CFT services will allow the government to have safe and secure transactions for effective compliance. 

Furthermore, Botswana is also out of FATF’s “grey list” while Pakistan remains in the global watchdog increased AML monitoring. 

Suggested Read: Mauritius to Step Out of FATF Grey List Following Key Regulatory Changes


Cryptocurrency Fraud Reports to UK Action Fraud More Than Double in 2021

The study advises financial regulators to place more pressure on cryptocurrency institutions to comply with KYC and AML laws.

A recent study has revealed that cases of cryptocurrency fraud rose by 116% in the months leading to June 30th, making 2021 the fourth consecutive year when the numbers breached 100%.  

According to research by law firm Pinsent Masons, cases reported to the UK Action Fraud – the UK’s national reporting centre for fraud and cybercrime – increased from 3,983 in 2020 to 8,614 in 2021. The firm states that with cryptocurrency adoption becoming mainstream among retail and investors, fraudsters too have shown keen interest in exploiting the market, especially through “get-rich-quick” schemes.

The study further cites concern about the “disproportionately large” percentage of vulnerable investors becoming victims of cryptocurrency fraud. “The police are now swamped with reports and cannot place adequate resources on these investigations.” stated a senior financial crime investigator at Pinsent Masons to the Financial Times. 

“There is a misconception that cryptocurrencies cannot be traced but the point of blockchain technology is transparency: transactions on the blockchain are traceable,” he said. “Legitimate crypto institutions that want to stay on the right side of regulators and enforcement agencies will cooperate with a UK court order and freeze the stolen assets,” he added. 

The firm also stated victims of the fraud, who lost smaller amounts, can file lawsuits against the criminals or the financial institution that enabled the fraud as a means of compensation. The study advises financial regulators to place more pressure on cryptocurrency institutions, prompting them to comply with court and asset freezing orders. 

Additionally, the study states that currently, cryptocurrency institutions are failing to comply with the minimum regulations placed on them, including Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements for the timely detection of crypto frauds. 

KYC and AML screening processes have been mandated worldwide on cryptocurrency exchanges to prevent financial and identity crimes such as identity theft, money laundering, and account takeover among others. To fulfil regulatory requirements, secure their platforms, and attract new investors, institutions such as Binance have already implemented KYC processes. 

Suggested Read: Dirty Funds & Tax Evasion – Can the Crypto Sector Be Safeguarded?


Feds Uncover $12M Money Laundering Operation Between U.S. and Dubai

Prosecutors have uncovered a money laundering scheme dubbed “The Shadow Exchange” worth USD 12 million, which was operating between the US and the United Arab Emirates.

According to a forfeiture complaint filed in the state of Detroit, prosecutors have uncovered a money laundering scheme dubbed “The Shadow Exchange” worth USD 12 million, which was operating between the US and the United Arab Emirates.

As reported by the Detroit Free Press, prosecutors suspect that the laundered funds were used to purchase armoured vehicles for an illegal drug trafficking operation located in Michigan. The criminals used fake invoices, shell companies located in Dubai, and other fraudulent methods to disguise the origins of funds, sent to banks — including major U.S. banks — using dozens of wire transfers, the complaint alleges.

“An organized group of individuals operated an unregistered U.S. dollar money transmitting and money laundering business (the ‘Shadow Exchange’) based in Dubai,” the complaint asserts. Furthermore, the operation was launched to assist persons seeking to transfer US dollars abroad without facing anti-money laundering measures and scrutiny from international law enforcement. While no individual has been charged for the operation as yet, involvement of “at least one international criminal organization” has been noted in the complaint. 

The complaint further adds, “the Shadow Exchange responded to bank inquiries for verification of financial transactions with falsified invoices and falsified shipping documents purporting to justify transactions scrutinized by financial institutions.” to effectively combat crimes such as money laundering, banks and other financial institutions employ AI-based AML technologies to detect suspicious transactions and patterns. 

Federal authorities acquired the illegal funds in two separate actions. USD 6.3 million were seized in December 2020 and January 2021 and USD 5.7 million in May 2021. Prosecutors are now asking a judge to give approval for the US Treasury to keep the cash.

Suggested Read: Money Laundering Spikes High in the Gulf Region – What’s Next?


FATF Finalizes Key Working Areas in its Fifth Plenary Meeting

FATF’s fifth plenary meeting consisting of 206 members of the Global Network and Observer organization ended on October 25, 2021.

Dr. Marcus Pleyer, FATF’s President, has finally concluded the fifth plenary meeting consisting of 206 members of the Global Network and Observer organization. The members met in a hybrid format from the 19th to 25th October to discuss key issues of the regulatory landscape. 

The Global Network and Observer organization, which includes the International Monetary Fund (IMF), United Nations (UN), and World Bank (WB), discussed principal factors which included the following: 

  1. Results of the FATF’s survey on cross border payments
  2. Report on the digital transformation of AML/CFT

Update on Jurisdictions Under AML/CFT Monitoring 

The Paris-based global financial watchdog has added Turkey, Jordan, and Mali to its Greylist, while Pakistan is to remain on the monitoring list for money laundering. On the other hand,  Botswana and Mauritius were removed from the list. 

The statement released by FATF pointed out the need to discuss the use of shell companies and all the legal arrangements made by criminals to hide beneficial owners and their illegal profits. 

Virtual Asset Risk-Based Approach

An update was given regarding the risk-based approach on virtual asset service providers that they will be releasing a report on the 28th of October 2021. The update addresses P2P transactional risks and ways to recognize and diminish these risks. 

The FATF also published a declaration on the circumstances of Afghanistan, stressing solicitude about the risk environment for ML/TF in the country. The statement reaffirms the recent UN Security Council Resolution that prohibits the use of the Afghan area to abuse or invades any country, shelter or train terrorists, or plan a terrorist attack. 

The statement further states to call all jurisdictions to protect non-profit organizations from being used to finance terrorism.

Digital Transformation for AML/CFT Regulations

The FATF has concluded a statement for ministry officials that centres on the digital transformation of anti-money laundering and counter-terrorism financing for operational businesses in order to boost their effectiveness and efficiency. 

Additionally, the FATF’s report explores how financial intelligence units can leverage technology to sustain their processes, indicate goals, and surmount functional and operational challenges. 

The report additionally advised  government officials, jurisdictions, and businesses to adopt state-of-the-art digital technologies to counter terrorist financing and adhere to AML regulations. 

The plenary concluded, “There is a dire need to protect the world from financial as well as environmental crimes and it can only be achieved with AI identity verification technologies that adhere to KYC regulations and changing AML sanction lists.” 

Suggested Read: FATF’s June 2021 Plenary – Strategic and Country-specific Initiatives


Toronto: 4 People Charged for Alleged Identity Theft and Fraud Worth Millions

Toronto police seized millions of dollars, Porsche Panamera, and other identity details after a year-long haul. 

A year-long identity theft investigation named “Project Hydra” finally concluded on the arrest of four individuals as stated in the media release issued on Thursday. 

According to Toronto police, the four people have been charged with millions of dollars worth of identity theft and fraud as a part of an “organized hierarchy.” 

A chain of individuals were discovered participating in the alleged conspiracy, including identity thieves, manufacturers, and sellers of counterfeits IDs. 

The defendants are facing over 100 accusations, including fraud under and over USD 5000, identity theft, forgery to obtain property interest, and hoax documents. The Toronto officials began the investigation in September 2020 when various reports of identity fraud and bank account takeovers were reported. 

Individuals allegedly stole vital identity and personal banking information from vulnerable victims even without them noticing it. The defendants are aged between 25-46. 

The police added, “They would construct bogus identities using this information and then hire additional suspects to gain access to financial institutions in order to take over the accounts.” 

On September 2, 2021, the police issued six search warrants after locating the address where the suspects picked up forged identities. Hence, the Toronto police recovered fake IDs, USD 70,000, a Porsche Panamera worth USD 100,000, printers, hard drives, 35,000 gift cards, and telephones in the raid. Additionally, detectives allegedly came upon a company suspected of dealing in fake gift cards. 

According to the police, more arrests and charges are expected as the investigation into the alleged operation proceeds. 

It’s high time that businesses incorporate enhanced AI-driven KYC screening solutions that provide multi-layered security. It is a necessity to protect the sanctity of their workplace while they ensure a better customer experience. 

Suggested Read: AML Program Risks Highlighted by the Pandora Papers Scandal


FATF Issues New BO Requirements to Address Pandora Papers

While addressing the Pandora Papers, the Paris-based global financial watchdog, FATF, has issued new beneficial ownership requirements.

The Financial Actions Task Force (FATF) has issued a statement on the Pandora Papers and pointed out the need to address the use of legal arrangements and shell companies to hide illicit profits and obscure beneficial ownership. 

The watchdog notes that it introduced global standards to prevent the concealment of company information since 2003. More than 200 countries and territories have ensured to acquire information on companies formed or operating in their jurisdictions for identification and verification of beneficial ownership. However, FATF’s mutual evaluation reports indicate a lack of effective action. 

“Out of more than 100 mutual evaluations, only one-third of countries have laws and regulations related to the transparency of legal persons and arrangements that comply with the FATF standard. Just 10 percent take effective measures to ensure the transparency of company and trust ownership,” says FATF.

FATF is now consulting on the amendments proposed on its beneficial ownership of legal persons and transparency standards to combat the illegal use of shell and front companies by perpetrators. 

The amendments seek to reinforce Recommendation 24 and its Interpretive Note to ensure higher transparency regarding beneficial ownership of legal persons. The proposals follow a white paper for consultation published in June amid findings that countries are “still not doing enough” to ensure that updated beneficial ownership information is available. 

The proposed changes include a requirement for organizations to obtain and hold adequate, accurate and updated information on beneficial ownership, cooperate with competent authorities to determine the beneficial owner, and cooperate with FIs and DNFBPs for up-to-date beneficial ownership requirements. 

The FATF has also suggested countries to evaluate money laundering and terrorism financing risks associated with foreign-created legal persons and take all possible steps to mitigate them.

Suggested Read: FATF’s June 2021 Plenary – Strategic and Country-specific Initiatives 


Former NFL Player Guilty of Identity Theft, COVID-19 Relief Fraud

Ex NFL player has been found guilty to one count of unauthorized access device fraud and one count of aggravated identity theft, leading to 12-year imprisonment.

South Florida native and former National Football League (NFL) Player, Kenbrell Armod Thompkins, 33, pleaded guilty this week over charges of identity theft and COVID-19 relief fraud. Thompkins reportedly stole other people’s Personally Identifiable Information (PII) to obtain COVID-19-related unemployment insurance benefits.

The culprit admitted in federal district court that between August 16, 2020, and September 25, 2020, he used stolen social security numbers and confidential PII of Florida residents to acquire unemployment insurance debit cards from California and to withdraw thousands of dollars from such cards. 

The court ruled Thompkins guilty to one count of unauthorized access device fraud and one count of aggravated identity theft, leading to 12-year imprisonment. According to the US Department of Justice, the US District Court Judge Robert N. Scola, Jr. will be sentencing Thompkins on January 6, 2022, at 8:30 a.m. in Miami.  

In 2020, the Covid Aid, Relief, and Economic Security (CARES) Act was passed by Congress to help individuals and business entities financially survive the COVID-19 pandemic through the provision of state unemployment insurance benefit programs. However, the FTC reported that complaints related to identity theft more than doubled between 2019 and 2020, reaching a value of 1.38 million. This tally also includes complaints made related to identity theft that caused unemployment insurance fraud. 

Financial institutions such as banks typically equip themselves with AI-powered KYC verification technologies to detect fraudulent documents such as credit cards during the initial stage of onboarding. Additionally, AI models detect suspicious patterns within seconds, resulting in the timely prevention of identity fraud and resulting financial crimes. 

Suggested Read: AI-based IDV Can Effectively Curb Unemployment Insurance Fraud


Danske Bank Under Fire Over AML Shortcomings

The FSA has reprimanded Sweden’s Danske Bank over ‘shortcomings’ in its anti-money laundering controls. 

According to a Wednesday (Oct. 20) report from the Financial Times, Denmark-based Danske Bank is once again under regulatory scrutiny for lacklustre Anti-Money Laundering controls in place, following a money laundering scandal.

In a 7-page letter, Karin Lundberg, the FSA’s head of banking supervision, highlighted deficiencies in the Danske Bank’s AML protocols and stated it had not adequately measured how financial products and services could be exploited by fraudsters. Danske Bank has been given a deadline of June 22 for fixing the underlying issues, per the report. 


Prior to this, Danske Bank revealed that it was under investigation by regulators in the USA, Denmark, Estonia, and France over suspicious transactions that passed through the bank’s Estonian branch in December 2020.  Following further fraud allegations, the stock prices of Danske Bank dropped by 4.2%. 

According to the Financial Times, the bank is awaiting the outcome from U.S. regulators and criminal investigators, who can levy hefty fines and sanctions on former Danske executives for not complying with AML regulations

AML regulations have been mandated by governments worldwide to curb money laundering and terrorism financing-related activities. Criminals typically exploit loopholes in banks’ AML controls to carry out illicit activities, making the bank subject to heavy fines and penalties on top of reputational damage. 

Regarding the previous USD 235 billion money laundering scandal, Philip Richards, a senior bank analyst at Bloomberg Intelligence in London, said that “regulators are now all over Danske’s operations, checking everything, challenging everything.” The bank was also forced to pull back from overseas operations and other trading areas where the regulator deemed Danske to be taking too much risk. 

Suggested Read: Danske Bank Facing the Long-term Cost of Money Laundering


UAE Adopts Facial Recognition for ID Verification Instead of Emirates ID Card Readers

Facial recognition instead of Emirates ID card readers will now verify identity.

The Federal Authority for Identity and Citizenship (FAIC) today announced the launch of an updated facial recognition system for the digital certification portal. The upgraded system will replace the Emirates ID card reader, which was previously used for the purpose of identity verification. 

According to the FAIC, the new facial recognition system will identify individuals within three seconds. 


The launch of the updated digital certification adds to the ‘Year of the 50’ project and is also in line with the UAE’s ‘Go Digital’ programme that seeks to digitise government service centres. Earlier, the ICA had announced upgrades to the Emirates ID, with new features, including a 3D picture using laser-printing technology to show the date of birth of the cardholder.

The service has been made available for all valid Emirates ID cardholders above the age of fifteen. For verification, the facial print is activated by an individual’s passport number and Unified Identification Number (UID) – a unique nine-digit code automatically assigned to anyone who enters the UAE.

Instead of verifying the identity of individuals through ID cards and passport scans, private and public services will be able to extract Personally Identifiable Information (PII) from the face print. The digital certificate system has been made available for sectors including banking, healthcare, business sectors, government, and public entities. 

The UAE’s consistent digital transformation efforts have led to the adoption of facial recognition systems. The move is set to streamline ID verification processes, customer onboarding, and Customer Due Diligence procedures in retail, finance, security, airport clearance, and public transport among others. 

Suggested Read: Facial Recognition in UAE to Protect Private and Government Sector


Turkey to Face FATF’s Grey List Over Inadequate AML Practices

FATF is set to grey list Turkey over AML shortcomings, a move that is likely to affect the country’s ability to attract foreign financing. 

According to reports from the Financial Times, Turkey is set to face FATF’s grey list of jurisdictions under increased monitoring due to failings in its anti-money laundering and terrorism financing controls. 

The global financial watchdog, Financial Action Task Force, is likely to approve the grey listing decision tomorrow during discussions in Paris. Countries that are placed under the FATF’s grey list are required to swiftly resolve strategic deficiencies within a given timeframe and are subject to increased monitoring. 

According to two sources, a FATF review had advised that Turkey should be subject to increased monitoring by the taskforce’s International Co-operation Review Group, as subjected to 22 other grey listed countries including Albania, Morocco, Syria, South Sudan, and Yemen.

The news will put a dent on foreign investment in Turkey, which has already reached the lowest level under the nearly 20-year leadership of President Recep Tayyip Erdoğan. Political instability and concerns over political involvement in monetary policy and rule of law have pushed away foreign investments, which are vital for financing the country’s persistent trade deficit and fuelling economic growth.

The grey listing of Turkey will also impact the European Union, as the bloc will add the country to its own money-laundering list, which identifies high-risk non-EU jurisdictions that threaten the EU’s financial system. According to a study by the IMF, FATF grey listing has “a large, significant negative effect” on a country’s capital inflows. 

Commenting on Thursday’s vote, a Turkish official has stated “Despite full lockdown measures taken due to the [Covid-19] pandemic, Turkey has achieved significant progress in terms of compliance with FATF standards, and fulfilled its responsibilities regarding legislation.”

The FATF said that its plenary meeting, which began on Tuesday this week, were underway but that the discussions were confidential.

Suggested Read: FATF warns Turkey over Lapses in Money Laundering and Terror Financing


Philippines: Banks Reminded to Closely Monitor and Report Suspicious Transactions

Philippines ramps up efforts to step out of the FATF’s grey list and reminds banks to monitor and report suspicious activities related to financial crimes.  

Philippines is taking more steps to be removed from Financial Action Task Force’s (FATF) grey list and as part of these steps, the Bangko Sentral ng Pilipinas (BSP) has reminded banks to keep a close eye on suspicious activities. 

The Deputy Governor of BSP, Chuchi Fonacier, said that banks must submit proper Suspicious Transaction Reports (STRs) with links to tax crimes, particularly the ones with a tax deficit exceeding P25 million and violating the National Internal Revenue Code of 1997. 

In addition to this, Fonacier said that BSP-supervised financial institutions (BSFIs) must include the suggested tax-related phrases in the narrative STRs with links to financial crimes or predicate offences like fraud, violation, corruption, and intellectual property. 

Chuchi said, “BSFIs are reminded to conduct commensurate measures and consider the results of the above reports in their institutional risk assessment as well as risk profiling of the real estate sector, to improve their overall anti-money laundering/counter- terrorism and proliferation financing framework.” 

Back in April, an analysis of STRs with possible links to tax crimes was released, in which the Anti-Money Laundering Council (AMLC) uncovered P62.5 trillion worth of suspicious activities between January 2018 and November 2020. Based on this analysis, approximately 92% of the STRs filed from January 2018 to November 2020 contain “the amount involved is not commensurate with the business or financial capacity of the client.”

The remaining 8% STRs filed by covered persons pertain to certain suspicious circumstances, for instance, no underlying trade or legal obligation, analogous or identical transactions. 

According to the financial intelligence unit, covered persons including BSFIs must incorporate phrases like taxation, taxable, tax fraud, or tax crime, and may refer to income tax details. 

Based on money laundering investigations, cases and STRs, the AMLC reported that the real estate sector is at a higher risk of corruption, fraud, illegal drugs, including violation of Securities Regulation Code. 

The AMLC said, “Criminals potentially facilitate movement and hide illegal proceeds through the purchase of or investment in real properties. Assets are also used as clandestine hideouts for illegal operations.”

Philippines was added to the FATF’s grey list on June 25 for strategic deficiencies in money laundering, proliferation financing, and terrorism financing regimes. Benjamin Diokno, BSP Governor and AMLC Chairman, is confident that the country will step out of the grey list before or in January 2023 as it has already addressed the action plans indicated in the 2019 Mutual Evaluation Report of the Asia Pacific Group (APG) on Money Laundering. 

Suggested: 40 recommendations of FATF – Shaping the future of your business 


Mauritius to Step Out of FATF Grey List Following Key Regulatory Changes

Mauritius, which was previously known for being a tax haven, might be out of the FATF’s grey list this month, according to industry experts. 

Global investors are predicting that following a week-long plenary meeting by the FATF on the analysis of Mauritius’ AML controls, the country may be out of the global financial watchdog’s grey list by the end of this month, shedding off its “money laundering haven” stigma.  

In February 2020, Mauritius was named in the FATF’s grey list, blacklisted by the European Union soon after and had investment restrictions imposed by the Reserve Bank of India due to numerous AML red flags. Prior to this, international investors were known to opt for the country due to its tax advantage and low operational costs. 

However, following a series of legal, regulatory, and operational changes in the last 20 months to combat money laundering and terrorism financing, the FATF is considering a re-rating of the country, stated Economic Times. According to three sources involved in the case, there is a high possibility that at the end of the week-long FATF plenary session, which began on October 17, Mauritius will be out of the grey list.

Senior bankers, lawyers and officials of market intermediaries and service providers who are in touch with authorities backed this point of view and said that ‘white-listing of Mauritius’ is expected this month.

“The inclusion of Mauritius would be a big plus for India-dedicated funds, especially those investing in Indian NBFCs… It would also help a number of investors who aren’t allowed to invest in a fund domiciled in a ‘FATF Grey List’ country,” said Anand Singh, member of a task force of Financial Services Commission. 

Country’s that fail to have adequate anti-money laundering controls in place are named by the FATF under its grey list of high-risk jurisdictions. Once the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolving swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. 

According to an October 16 note from a senior compliance officer of a bank in Mauritius, the country was believed to be a few steps away from being delisted by the FATF. Once it steps out of the grey list, lesser scrutiny will be directed on the ‘beneficial ownership’ (BO) of Mauritius vehicles coming in as Foreign Portfolio Investor (FPI) and Foreign Direct Investor (FDI). 

Suggested Read: A Brief Overview of 2021 AML Trends


AML Program Risks Highlighted by the Pandora Papers Scandal

Experts have advised compliance officers to divert their focus on EDD, CDD, and UBO verification processes, instead of focusing on individual revelations.

Experts are advising compliance officers in financial institutions to concentrate on strengthening the Anti-Money Laundering (AML) program risks highlighted by the recent Pandora Papers scandal, rather than focusing on individual revelations

Their comments are a response to the ongoing investigation of current and former government officials and high-profile individuals who have been exposed by the Consortium of Investigative Journalists (CIJ) for money laundering, tax evasion, and other crimes.

Instead of fixating on any salacious details, financial institutions should pay heed to the information, and the revelations “need to be taken in stride,” stated Lauren Kohr, a veteran compliance officer who now serves as senior director of AML for the Americas with the Association of Certified Anti-Money Laundering Specialists (ACAMS).

“There is a lot to consider, and we do not want to send our AML officers on an ineffective and inefficient wild goose chase for every data point leaked and how that may impact their AFC [anti-financial crime] compliance program,” Kohr added. “Given that it is so early in the leaks and assuming this will go on for days, weeks, and months, AML officers should not have a knee-jerk reaction.”

Kohr stated that financial institutions should pay heed to evaluate the effectiveness of their overall risk-based Anti-Financial Crime program, with particular focus on Enhanced Due Diligence, Customer Due Diligence, and UBO verification. She also advised financial institutions to closely monitor high-risk customers, products, services, geographies, and transactions to prevent the risk of frauds such as money laundering and terrorism financing. 

To minimize scandals such as the Pandora Papers in the future, FinCEN is currently working towards the creation of a beneficial ownership registry, implementing the Corporate Transparency Act enacted along with the Anti-Money Laundering Act of 2020.

Suggested Read: Creating UBO Registry ‘Biggest Focus’ for US Treasury’s Anti-corruption Push


Chinese Police Seize $124M Money Laundering Scam in Zunyi City

The money laundering gang was able to conceal its fraudulent activities for a while by using 500 bank cards, small amount transactions, and bogus crypto accounts.

Police in China’s Zunyi City today busted a money-laundering ring that was using cryptocurrencies to launder stolen funds. According to local media channels, the money laundering scam involved 800 million Yuan (US$124 million). 

Authorities from China’s Guizhou province were actively investigating the case since July 2021, following a directive from the State Council to implement a nationwide anti-fraud operation dubbed “break card”, according to local reports.  

To defraud customers, the money launderers pretended to be employees of a recruitment firm. After opening bogus accounts and collecting personal information from crypto exchanges Binance, Huobi, and OKEx, the criminals “peddled” crypto by buying low and selling high, ultimately laundering the stolen funds through the scheme. 

The money laundering gang was able to conceal its fraudulent activities for a while by using up to 500 bank cards and only transacting in small amounts. So far, operation break card has led to the arrest of 100 suspects, while 332 cases of telecom fraud have been solved. In the current case of cryptocurrency laundering, 51 mobile phones, 15 computers, and 511 bank cards have also been seized. 

China’s regulators banned cryptocurrency transactions on September 24, owing to rising cases of financial fraud, AML risks, and energy consumption among others. To prevent such threats, anti-money laundering regulations are imposed on cryptocurrencies worldwide, as directed by the global financial watchdog, the FATF. However, China has adopted a strict approach to cryptocurrencies compared to other countries. 

Following this operation, China’s messaging app called WeChat is currently blocking search results for “Binance” and “Huobi,” which adds to the earlier round of censoring on search engine Baidu and Twitter-like Weibo.

Suggested Read: China Strides Forwards with New KYC Rules to Rein Money laundering

More posts