Compliance and financial regulation: all the latest news!

The first half of the year yielded a wealth of information on compliance and financial regulation. LCFB-FT, Tracfin, PSD2, … Here, Lemonway provides a summary of the main national and international news affecting the payment institutions market.

Anti-money laundering measures: Brussels extends its ‘black list’

The European Union continues to harden its stance in the struggle against money laundering. After heated debates among member countries to protect certain diplomatic interests, and despite a unanimous rejection when put to a vote, on 12 March 2019, the EU expanded its list of non-cooperative tax jurisdictions (aka ‘tax havens’), adding 10 new countries:

• Aruba, Barbados, Bermuda, The Dominican Republic, Trinidad and Tobago (Caribbean), United States Virgin Islands,
• Belize (Central America),
• Oman, United Arab Emirates (Arabian Peninsula),
• American Samoa, Fiji, Guam, Marshall, Samoa and Vanuatu (Oceania).

Banks and bodies subject to EU regulation will have to tighten controls on financial transactions involving those countries listed, making transactions more complex. Lemonway is working to refine its country risk classification, which is updated regularly by the RCCI (Internal Controls Office of the AMF). All instructions relating to this list is strictly followed by Lemonway’s Financial Security Department.

More information at: http://europa.eu/rapid/press-release_MEMO-19-1629_en.htm

AML-CFT: PI vulnerabilities identified by Tracfin

Tracfin dedicated its latest newsletter to the PI segment, and lists the vulnerabilities of payment institutions to risks associated with money laundering and terrorism financing, including emerging risks.

Tracfin warns in particular of the risks involved in the following:

• recourse to agents that reduce the PI’s visibility of operations and customer knowledge and who may, because of the secondary nature of their financial activity, lack a culture of compliance and security. Tracfin recommends that PIs thoroughly vet all such agents, in addition to providing training and conducting on-site inspections to identify shortcomings;
• cross-border transactions via French PIs with a European passport. Malicious parties based abroad may attempt to use these to reduce the traceability of flows and mask the origin and destination of funds. PIs are being asked to exercise greater vigilance about all products that make it possible to conduct cross-border transactions;
• SEPA direct-debit and credit card transactions where bank details may have been fraudulently obtained (theft of bank details or debit card, or credit card numbers purchased on the Darknet).

Committed to continuously strengthening its systems, Lemonway takes into account the regulator’s advice and recommendations.

The complete Tracfin newsletter can be found here (in French): https://www.economie.gouv.fr/files/Lettre_Tracfin_17.pdf

New internal control reports dedicated to AML-CFT

Following close consultation with professionals, the decree of 21 December 2018 clarified the content of annual reports on internal controls, the fight against money laundering and financing for terrorism (AML-CFT) and the freezing of assets. As a payment institution (PI), application of this decree concerns us directly.

Indeed, PIs are accorded a central place, and are asked to use a template established by the Ministry of Economy and Finance, to report the main ML-FT risk factors identified as part of their internal risks and procedures. PIs must also describe the processes and indicate the human resources in charge of permanent controls of AML-CFT activities as well as recurring activities. The same applies to internal controls in terms of asset freezing, which will soon be joined by additional details on the databases filters, especially customer databases and automated or manual flows (coverage, frequency, modality, etc.). If outsourcing occurs, it will henceforth be necessary to provide precise details (name, recruitment and execution process, control mechanisms, etc.)

Internal controls are an essential concern in the implementation of the anti-money laundering and anti-terrorism financing system, and an issue which we at Lemonway take very seriously. All these new provisions are perfectly integrated into our processes, analysed daily and scrupulously applied by our Compliance and Internal Control Department.