AML enforcement remains high priority worldwide
Three cases of money being potentially laundered through EU banks have recently come to light. One of these cases is the heavily discussed 2018 settlement between ING Bank and the Netherlands’ Public Prosecution Service. The second case involves Danske Bank, which has admitted that major deficiencies in its governance and control systems allowed its Estonian branch to be used for suspicious transactions. Another European case involved the Latvian ABLV Bank, which went into voluntary liquidation after the United States Financial Crimes Enforcement Network proposed banning it from having a correspondent account in the US due to money-laundering concerns.
In the US, 2018 saw significant multi-agency resolutions against U.S. Bancorp and Rabobank N.A., a series of enforcement actions against broker-dealers, and actions by the New York Department of Financial Services against Western Union and Mashreqbank. Regulators are continuously focusing on effective compliance with anti-money laundering legislation.
In the Netherlands, the fight against money laundering and financial crime is one of the seven key objectives of the Dutch Authority for Financial Markets for 2019. In its annual report relating to 2018, the Dutch Central Bank concluded that financial institutions should do more to adequately fulfil their role as gatekeepers. It stipulated that directors, managers and supervisory directors are responsible for effectively securing compliance. DNB considers the tone at the top essential in preventing entities from being involved in money laundering.
Financial institutions are investing in AML safeguards, and are trying to work together in handling the various legal obligations they need to comply with. Banks in the Netherlands are, for example, considering the possible introduction of a common process for accepting new clients and monitoring transactions.
AML legislation is constantly evolving
Governments and regulators seem to be issuing new regulations at breakneck speed. A recent example includes a Dutch bill implementing new European AML rules by requiring legal entities registered with the Dutch Trade Register to register information about their UBO. In another development, the European Commission has opened infringement procedures against member states that have failed to fully or partially transpose the EU Fourth Anti-Money Laundering Directive (AMLD4) into their domestic legislation before the deadline. The EU Fifth Anti-Money Laundering Directive (AMLD5) needs to be implemented by Member States by 10 January 2020 at the latest. AMLD5 will: enhance the powers of EU Financial Intelligence Units; prevent risks associated with the use of virtual currencies; limit the use of pre-paid cards; and improve the safeguards for financial transactions to and from high-risk third countries.
Public scrutiny continues
The European Parliament’s special committee on financial crimes, tax evasion and tax avoidance (TAX3), is calling for the creation of an EU anti-money laundering watchdog and financial police force. TAX3 has also called on the Commission to assess whether an anti-money laundering regulation would be a more appropriate legal instrument than a directive. In its view, the current EU AML legal framework, which has so far consisted of directives, has led to the undesirable situation of different national supervisory and enforcement practices in the member states.
In the Netherlands, the Dutch Minister of Finance recently answered parliamentary questions about AML prevention in a letter to parliament. The minister pointed out that banks have so far taken insufficient responsibility for preventing money laundering. He also said that the Dutch government will announce plans to improve the gatekeeper role of financial institutions.
Impact of development on “non-obliged” entities
Since its introduction, the scope of AML legislation has constantly widened. The implementation of AMLD4 has, like its predecessors, contributed to this process. In 2018, Transparency International called for a further extension of the list of “obliged” parties, to include all parties involved in real estate transactions. In the US, calls for real estate agents to act as anti-corruption gatekeepers are also increasing, since the real estate industry is uniquely placed to flag use of corrupt funds.
Another example of the extended scope of AML legislation is a recent Dutch bill that requires legal entities registered with the Dutch Trade Register to register information about their UBO. This bill has implications for all legal entities registered with Dutch Trade Register.
Multinational “non-obliged” entities are also increasingly working on AML compliance; the financial institutions with which they deal, often require them to have at least some form of “know your customer” procedures in place, and AML compliance is becoming viewed as a good tool to help prevent their involvement in corrupt behaviour.