Welcome to the FinScan’s Regulatory Roundup March 2024. This month spotlights outcomes of FATF’s recent plenary and recommendations for public comment, the latest FinCEN requirements and proposals, and new AML guidance from Guernsey Financial Services Commission, OFSI, and OFAC.
Anti-money laundering
Outcomes of the FATF’s Fifth Plenary, 21-23 February 2024
The fifth Plenary of the Financial Action Task Force (FATF) concluded on February 23rd. Among the key outcomes of the Plenary is a new risk-based guidance for the implementation of Recommendation 25 on the beneficial ownership and transparency of legal arrangements. Guidance includes provisions to assess the risks associated with legal persons and legal arrangements, make legal persons and legal arrangements sufficiently transparent, and ensure that accurate and up-to-date basic and beneficial ownership information is available to competent authorities in a timely fashion.
FATF’s Recommendation 16 up for public comment
The Plenary also agreed to release for public consultation, a range of options for potential changes to Recommendation 16 (R.16) and its Interpretive Note (INR.16) on wire transfers until 3 May 2024. Recommendation 16 represents the understanding of both FATF and the global financial legislation community that the exchange of virtual currencies and assets like cryptocurrency opens new avenues for financial crime and corruption.
Guernsey Financial Services Commission updates AML/CFT/CPF handbook
The Commission issued an updated Handbook on Countering Financial Crime (AML/CFT/CPF) following a consultation on rules and guidance to support the extension of the existing obligations upon specified businesses to countering proliferation financing. Amendments follow the recent publication of the second national risk assessment on the money laundering, terrorist financing and proliferation financing risks to the Bailiwick. Most notably, the handbook includes changes to the rules on pooled bank accounts for local businesses, revisions to UN, UK and Bailiwick sanctions, other minor changes.
FinCEN requires investment advisors to implement AML/CFT programs
Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) to keep criminals and foreign adversaries from exploiting the U.S. financial system and assets through investment advisers. It requires certain investment advisers to apply Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) requirements pursuant to the Bank Secrecy Act (BSA), including implementing risk-based AML/CFT programs, reporting suspicious activity to FinCEN, and fulfilling recordkeeping requirements.
FinCEN proposes AML rules for the real estate sector
FinCEN issued a Notice of Proposed Rulemaking to combat and deter money laundering in the U.S. residential real estate sector by increasing transparency. The proposed rule would require certain professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities or trusts. FinCEN’s proposal is tailored to target residential real estate transfers considered to be high-risk for money laundering, while minimizing potential business burden, and it would not require reporting of transfers made to individuals.
Beneficial ownership
Federal court says US Corporate Transparency Act is unconstitutional
A federal district court in Alabama held that the Corporate Transparency Act (CTA), P.L. 116-283, which requires the reporting of beneficial ownership information (BOI) by businesses, is unconstitutional in a 53-page ruling. In terms of the impact on AML efforts, detractors of the ruling assert that the CTA plays a vital role in bolstering transparency and combating money laundering and terrorist financing. By mandating businesses to disclose their beneficial owners, the CTA aims to thwart malicious entities from exploiting the U.S. financial system anonymously. The U.S. Department of Justice (DOJ) has appealed the ruling.
Sanctions guidance
UK’s OFSI releases multiple guidance on sanctions and ransomware
The UK’s Office of Financial Sanctions Implementation (OFSI) has published new and refreshed guidance on the following:
General financial sanctions guidance: Outlines your obligations under financial sanctions as well as OFSI’s approach to licensing and compliance issues, taking into account relevant case law and guidance.
UK financial sanctions in relation to ransomware: Includes a background on ransomware, current cyber sanctions regulations, His Majesty’s Government approach and what you need to do, and other helpful information.
Refreshed financial sanctions for the maritime sector: Aims to help businesses navigate the complexities of financial sanctions and ensure compliance.
New reporting requirements for Designated Persons under the Russia Regime: Assists with compliance and implementation of The Russia (Sanctions) (EU Exit) Regulations 2019.
OFAC releases new FAQs on Russia sanctions and updates others
New FAQs include:
1164. What prohibitions has OFAC implemented with respect to diamonds and diamond jewelry under the Russian Harmful Foreign Activities Sanctions program?
1165. What does the determination “Prohibitions Related to Imports of Certain Categories of Diamonds” pursuant to Executive Order (E.O.) 14068 (the “Diamonds Determination”), prohibit?
1166. What does the determination “Prohibitions Related to Imports of Diamond Jewelry and Unsorted Diamonds of Russian Federation Origin and Diamond Jewelry and Unsorted Diamonds Exported From the Russian Federation” pursuant to Executive Order (E.O.) 14068 (the “Diamond Jewelry Determination”), prohibit?
Amended FAQs include:
886. What does Executive Order (E.O.) 14024, “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation” do?
1092. Do non-U.S. companies risk exposure to sanctions for providing ammunition or other military goods to Russia or for supporting Russia’s military-industrial complex?
1022. What does Executive Order (E.O.) 14068, “Prohibiting Certain Imports, Exports, and New Investment With Respect to Continued Russian Federation Aggression,” do?
887. Are persons identified pursuant to Executive Order (E.O.) 13662 as subject to Directive 3 for operating in the defense and related materiel sector of the Russian Federation economy blocked pursuant to E.O. 14024?
1019. For the purposes of Executive Order (E.O.) 14066 and 14068, as amended by E.O. 14114, what is meant by the term “Russian Federation origin”?
1027. For the purposes of Executive Order (E.O.) 14068, as amended, “Prohibiting Certain Imports, Exports, and New Investment With Respect to Continued Russian Federation Aggression,” and associated determinations, what is meant by the terms “Russian Federation origin,” “fish, seafood, and preparations thereof,” “alcoholic beverages,” “unsorted diamonds,” and “non-industrial diamonds”?
1154. How does Executive Order (E.O.) 14114 of December 22, 2023 amend E.O. 14068, “Prohibiting Certain Imports, Exports, and New Investment with Respect to Continued Russian Federation Aggression”?
1025. Executive Order (E.O.) 14068, “Prohibiting Certain Imports, Exports, and New Investment With Respect to Continued Russian Federation Aggression” prohibits the importation into the United States of fish, seafood, and preparations thereof of Russian Federation origin. How does this affect Russia-related General License (GL) 6C?