Sanctions and AML Insights

Criminals will often use expensive assets, including cars, boats and even luxury planes, to disguise illegal funds and later convert them into cash. Automotive companies should take note: anyone involved in vehicle sales (including car dealerships, banks and law firms) who fails to identify a money-laundering scheme may risk considerable penalties (and even criminal charges) under stringent AML regulations. Understanding the red flags of money laundering and how dealerships, middlemen and service providers may be implicated is the first step to avoiding becoming an unwilling participant in financial crime.

Anti-Money Laundering broadly refers to the activities that financial institutions perform to ensure they remain compliant with legal requirements to actively monitor and report suspicious activities during the course of their normal business operations. In the last two years, many changes to the UK’s anti-money laundering regulations have come into force, including the incorporation of international standards as set by the Financial Action Task Force as the transposition of the EU’s 5th Money Laundering Directive. Companies have to remain aware of legislative changes in order to avoid hefty fines and penalties from regulators.

The term Metaverse entered the world's collective consciousness in October 2021 when Facebook rebranded as Meta and founder Mark Zuckerberg introduced a virtual replica and announced that human beings might soon migrate to a virtual world governed entirely by its users. According to Gartner, by 2025, 25% of people will spend at least an hour in the metaverse a day, working and transacting in a virtual space. Investors, legislators and employees are still coming to terms with what the metaverse is, what it may mean, and how current regulations will govern the vast number of transactions occurring in virtual environments every day.

Since Brexit, the UK has focused on implementing sanctions regimes that both complement and go even further beyond the EU’s current sanctions regimes. On the 26 of April 2021, the UK Foreign Secretary announced a new global anti-corruption sanctions regime that aims to combat international corruption. The Global Anti-Corruption Sanctions Regulations 2021 is underpinned by the Sanctions and Anti-Money Laundering Act of 2018 (SAMLA) and has introduced asset freezes and travel bans for individuals and organizations who are believed to be involved or have been involved in serious corruption or crimes.

Leasing companies are not financial or banking institutions but provide resources like factoring and financing in the same way these institutions do. Leasing falls within the scope of financial services and is subject to AML regulations and specific regulatory practices, as are any businesses participating in the leasing system.

Green crime, including forestry crime, poaching, illegal mining and waste trafficking, is of growing concern around the world. Proceeds from these activities fuel further serious crime, including tax fraud and drug trafficking. The FATF (Financial Action Task Force) has provided recommendations that both governments and private businesses can follow to disrupt this activity; however, very few countries have prioritized combating environmental crime, leading to an expected increase in green crime of between 5-7% each year as under-resourced bodies attempt to tackle this pressing issue. However, as environmental crime is often closely linked to money laundering, the funding of terrorist organizations, and other financial crimes, it is imperative that firms take action to prevent environmental crime now.

Know Your Customer (or Know Your Client) identification is one of the first and most important components of the ongoing fight against financial crime and money laundering. Global anti-money laundering (AML) and countering financing of terrorism (CFT) directives have placed tremendous pressure on financial institutions to follow stringent verification and onboarding processes in their organizations.

A series of recent money laundering scandals, including the Russian Laundromat and Danske Bank, have sparked international concern and calls for greater due diligence. The European Commission has been conducting risk assessments to identify and address the threat of cross-border money laundering and terrorist funding, and as a result, the European Union has adopted robust legislation to respond to these challenges at an international level, including a new package consisting of 4 pieces of legislation:

US Securities and Exchange Commission Chair Gary Gensler has famously described cryptocurrencies as the "Wild West" of the financial world due to the lack of laws and regulatory frameworks governing the digital currency space. In most instances, cryptocurrencies are subject to anti-money laundering policies and standards, and in 2021 crypto crime accounted for more than £10-billion losses. However, mainly legitimate crypto companies and exchanges are maintaining compliance with evolving regulations to demonstrate their trustworthiness and in anticipation of formal legal and regulatory directives that may be implemented in the future. Regulation is an important factor in building investor confidence, even for digital currencies. This article explores the regulations that have been implemented or are about to be implemented around the world.