Sanctions and AML Insights

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.

The legislation and regulations that pertain to Ultimate Beneficial Ownership (UBO) verification are highly complex and challenging to navigate. The EU’s Fourth Anti-Money Laundering Directive states that holding more than 25% of the shares, interest or being a beneficiary of at least 25% of the legal entity’s capital gains gives individuals UBO status. This status requires verification as per the KYC onboarding and remediation process.

Banks, money transfer and fintech companies, credit and insurance organizations and gambling operators must ensure AML compliance and take every step to avoid money laundering. Playing a part in facilitating money laundering, however unintentionally, is a risk for every financial institution and professional. Most anti-money laundering compliance programs adopt a risk-based approach. They make a risk assessment and create a control program tailored directly to customers' risk levels during the onboarding process. Understanding the red flags associated with transactions and following a concise but thorough Know-Your-Customer Process can help professionals combat and avoid implications in economic crime.

Every business is required to have a sanctions screening strategy in place that is documented and reviewed regularly. The accuracy and depth of internal data is the key to an effective sanctions screening process, while technology remains an important part of identifying financial crime risks accurately and timeously.

Anti-money laundering risk assessments are crucial for preventing financial crimes and remaining compliant with regulations. This comprehensive guide will review the basics of an AML risk assessment by answering the following questions: What is an AML risk assessment? Why should you complete one? What steps are involved?