Financial institutions may want to review their enhanced due diligence obligations and risk-based approaches, following a new advisory issued by the Treasury Department’s Financial Crimes Enforcement Network regarding jurisdictions with anti-money laundering deficiencies.
On March 16, the Treasury Department's Financial Crimes Enforcement Network issued guidance in response to the Financial Action Task Force’s (FATF) updated list of jurisdictions with Anti–Money Laundering and Counter–Terrorist Financing (AML/CFT) deficiencies. “Financial institutions should consider these changes when reviewing their enhanced due diligence obligations and risk–based policies, procedures, and practices with respect to the jurisdictions noted below,” FinCEN stated.
Countries identified by FATF as having strategic deficiencies in their AML/CFT regimes that call for countermeasures to protect the international financial system from AML/CFT risks are Iran and Democratic People’s Republic of Korea (DPRK).
Enhanced Due Diligence
The following countries have not made sufficient progress in addressing AML/CFT deficiencies and, thus, call for enhanced due diligence from financial institutions: Algeria, Ecuador, and Myanmar.
Other countries with deficiencies in their AML/CFT regimes that have developed an action plan with FATF are Afghanistan, Angola, Guyuana, Indonesia, Iraq, Lao PDR, Panama, Papua New Guinea, Sudan, Syria, Uganda, and Yemen.
According to FinCEN, financial institutions should ensure that their enhanced due diligence programs include, at a minimum, steps to:
Conduct enhanced scrutiny of correspondent accounts to guard against money laundering and to identify and report any suspicious transactions, in accordance with applicable law and regulation;
Determine whether the foreign bank for which the correspondent account is established or maintained in turn maintains correspondent accounts for other foreign banks that use the foreign correspondent account established or maintained by the covered financial institution and, if so, take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign bank’s correspondent accounts for other foreign banks, including, as appropriate, the identity of those foreign banks; and
Determine, for any correspondent account established or maintained for a foreign bank whose shares are not publicly traded, the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest.
FATF removed eight companies from its listing and monitoring process, due to their “significant progress” in establishing the legal and regulatory framework to addressing all, or nearly all, of their strategic technical AML/CFT deficiencies on a technical level. These countries are Albania, Cambodia, Kuwait, Indonesia, Namibia, Nicaragua, Pakistan, and Zimbabwe.
“For jurisdictions that have been recently removed from the FATF listing and monitoring process, financial institutions should take the FATF’s decisions and the reasons behind the delisting into consideration when assessing risk,” FinCEN stated.
FinCEN further advised that, “If a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation, the financial institution shall then file a Suspicious Activity Report.”