“FINMA has repeatedly identified shortcomings in…money laundering risk analysis during on-site supervisory reviews,” the regulator said in its August 24 press release. “This prompted…an in-depth review of the money laundering risk analyses of more than thirty banks in spring 2023. …[M]any of the risk analyses examined did not meet the requirements.”

Requirements for Effective Risk Management

According to FINMA, a firm’s risk control function is responsible for implementing effective risk management. This includes:

• Due diligence processes and systems, such as risk monitoring.
• Risk assessments and analysis.
• Reporting to leadership, as well as to internal and regulatory auditors.
• Oversight to ensure regulatory compliance. 

To adequately assess and manage a firm’s risks, relevant teams must have key information to keep its business practices within responsible limits. This requires a thorough and regularly-updated analysis – which depends on clearly identifying risks and establishing tolerance levels. 

Key AML Deficiencies

The regulator identified several key weaknesses in the firms evaluated:

• Unclear risk tolerances – This included a lack of exclusions for key entities, products, or sectors (such as certain politically exposed persons). It also involved a lack of risk indicators based on defined risk limits, which are an important part of a clearly delineated risk tolerance.
• Inadequate risk analyses – FINMA mentioned overly general descriptions of risk that were hard to understand and didn’t break down the analysis by each area. The assessments often were not updated yearly, and did not include an evaluation of the resources needed to effectively implement AML processes.

Following the report, the Swiss Federal Council announced plans to strengthen Switzerland’s AML/CFT framework. On August 30th, it opened a consultation on a bill drafted to:

• Introduce a federal register of companies and their beneficial owners.
• Broaden due diligence requirements to include legal advisors.
• Implement further measures preventing sanctions evasion, lowering cash payment thresholds for precious metals trading, and requiring due diligence for cash payments in real estate.

The consultation concludes on November 29, 2023.

How Firms Can Respond

Swiss firms regulated by FINMA, particularly in the banking industry, are encouraged to study its full report to understand the sector’s deficiencies in AML risk analyses. It may be advisable for firms to renew their current risk analysis – paying special attention to the weak points outlined in the report. This may include technological upgrades to allow for more robust due diligence, including the use of artificial intelligence to prioritize risks and identify new ones by connecting seemingly unrelated entities in large data sets. 

The post FINMA Review of 30 Swiss Banks Reveals Persistent AML Deficiencies appeared first on ComplyAdvantage.

According to a White House National Security Council source, “Should Venezuela take concrete actions toward restoring democracy, leading to free and fair elections, we are prepared to provide corresponding sanctions relief.”

Venezuelan National Assembly leader Dinorah Figuera rejected an earlier version of the proposal in July, saying the Maduro regime had not responded to calls for a return to democracy. 

The History of US Sanctions against Venezuela

The US first implemented sanctions against Venezuela in 2006, citing then-leader Hugo Chavez’s lack of cooperation on terrorism and drug trafficking, and later expanded its range of concerns to human and civil rights abuses in 2014. These sanctions designated state officials, including Chavez’s successor Maduro and his close associates. It also limited financial transactions and placed controls on the oil and gold trade with Venezuela, two of the country’s major economic sectors. In 2018, after Maduro’s disputed reelection, the US imposed further sanctions.

In 2022, indicators suggested a slight thawing of relations: Maduro was reportedly willing to talk to his domestic opponents in return for some US sanctions relief. The Office of Foreign Assets Control (OFAC) then allowed Chevron, a major US oil firm, to engage with the Venezuelan state-owned oil company, PDVSA, but not to drill or export any petroleum of Venezuelan origin. 

Renewing Oil Trade to Promote Democracy

According to anonymous official sources, the new proposal would entail several measures, including:

• Reframing current sanctions, enabling more countries to import Venezuelan crude.
• Maintaining trade restrictions between Venezuela and Russia, China, and Iran.
• Requiring Venezuela to cooperate with several political stipulations, including a return to democracy.

Despite attempts to motivate political change, Venezuela’s progress toward democracy has been limited. On June 27, it barred opposition presidential candidate Maria Corina Machado from public office – and later announced a planned arrest warrant against exiled political opponent Antonio Ledezma. These are only the most recent of multiple similar acts.

The Importance of Reliable Data: Key Takeaways

If the proposed changes to Venezuelan sanctions are accepted, simpler regulations for firms are not necessarily guaranteed. Effective sanctions risk management may become more complex. More than ever, teams will need to ensure their understanding of sanctions requirements is nuanced and accurate.

Firms can start by reviewing their current sanctions data and the regularity with which its lists are updated – in minutes, hours, or days? Are they sourced directly from regulators? Are updates clear and checked for accuracy by analysts? Rapidly updated, accurate, and clear sanctions data can help firms ensure they stay across the latest measures, minimizing the risk of financial or reputational damage.

The post US to Propose Venezuelan Sanctions Relief in Return for Free Elections appeared first on ComplyAdvantage.

The CEA responded to the raids by reminding real estate firms of their obligations under the Estate Agents Act 2010 (EAA). “Those who fail to comply with the EAA and its subsidiary legislation could be subjected to disciplinary action by CEA’s Disciplinary Committee, such as the imposition of financial penalties…and/or revocation or suspension of…licence and…registration.”

Laundering Investigation Focuses on Non-Financial Sectors

The nationwide raids were initiated after suspicious transaction reports (STRs) from several financial institutions prompted the Monetary Authority of Singapore (MAS) and Commercial Affairs Department (CAD) to facilitate an investigation.

Assets recovered included cash and non-financial assets, including luxury properties. Prohibition of disposal orders – preventing their resale – were issued against at least 105 total properties worth around $831 million.

There has also been a focus on other sectors involved in the laundering scheme, including precious stones and metals traders and the international gambling industry.

Money Laundering Regulations in Singapore Real Estate 

The CEA’s notice to the real estate sector included a reminder of essential anti-money laundering and counter-terrorist financing (AML/CFT) obligations. According to the agency, firms in the industry must:

• Conduct customer due diligence (CDD) before entering into a business relationship. This includes verifying client identity, screening them against regulatory lists and anti-terrorism requirements, and conducting due diligence for individual transactions.
• Report suspicious transactions and activity to the Singapore Police Force.
• Maintain CDD records – including collected documentation – for at least five years.
• For estate agents: Implement internal AML/CFT controls and policies.

Key Takeaways

In its 2016 Mutual Evaluation Report (MER), the Financial Action Task Force (FATF) highlighted room for improvement in Singapore’s designated non-financial businesses and professions (DNFBP) AML framework. Singapore, has made clear that it intends to pursue an increasingly robust AML/CFT framework and continue serving as a global leader in the fight against financial crime. 

As such, firms in the sector should review their obligations under Singapore law, beginning with the CEA’s recent notice. 

They should also familiarize themselves with key red flags outlined in the CEA’s Guide on Estate Agents (Prevention of Money Laundering and Financing of Terrorism) Regulations 2021. Red flags for terrorist financing or money laundering in real estate include:

• Negative news on the client.
• The client does not want to connect their name with the property being sold or purchased.
• The client does not appear interested in the property’s actual value.
• The transaction does not match the client’s known business purpose and activity.
• The client wants to pay mostly in cash or other anonymous payment.

The post Singapore Real Estate Sector Scrutinized for Possible Connections to Money Laundering appeared first on ComplyAdvantage.

“[I]llicit actors within the construction industry are using shell companies and other tactics to commit workers’ compensation fraud and avoid payroll taxes,” explained FinCEN Acting Director Himamauli Das. “Today’s Notice provides information that financial institutions can use to remain vigilant in monitoring, detecting, and reporting suspicious activity.”

The Fight Against Shell Companies and Organized Fraud

According to FinCEN, the notice aligns with its ongoing efforts to curb the use of shell companies to conceal illicit activity, as well as with the Anti-Money Laundering/Countering the Financing of Terrorism National Priorities.

In line with the Corporate Transparency Act, in 2022 FinCEN issued a final rule requiring most corporations, limited liability companies, and entities created or registered for business in the US to report their beneficial owners to the regulator. FinCEN expects this rule – effective January 2024 – to support the current notice’s objectives by discouraging the use of shell companies to conceal illegal activity by actors including:

• Oligarchs
• Kleptocrats
• Drug traffickers
• Human traffickers
• Illicit individuals in the construction sector

Notice Details: Typologies, Red Flags, and Reporting

Although the notice addresses all financial institutions, FinCEN notes that the type of fraud and tax evasion it deals with primarily affects banks and check cashers. The scheme is typically a two-part process involving workers’ compensation fraud followed by tax evasion. 

A criminal entity typically creates a shell company posing as a legitimate subcontracting business with just a few employees. It takes out a workers’ compensation policy for those employees. Meanwhile, the shell company contacts real subcontractors with a much larger number of employees. The subcontractors can give their employees discounted (and fraudulent) access to the shell company’s policy for a fee. 

It also helps the subcontractors avoid paying payroll tax. The subcontractors write checks to the shell company instead of their employees, thus concealing that they’re for payroll. The shell company then either obtains cash at a check casher or deposits the money into its company account before withdrawing it in bulk. It returns this money to the subcontractors, minus a small fee, so they can pay their employees under the table and avoid taxes.

The notice outlines several red flags for this typology, including:

• Construction company customers that are younger than a year, have little to no online presence, and specialize in one type of construction trade.
• A non-US citizen without prior construction history who opens an account in the name of a construction company.
• Despite receiving large volumes of client payments, the customer account shows no evidence of paying payroll taxes.
• The customer receives deposits outside the expected amount for their account type, all from other construction companies and in multiple states.

The notice also reminds firms of their reporting requirements and information-sharing protections under the Bank Secrecy Act (BSA) and the USA Patriot Act section 314(b). Instructions on pages 7-9 of the notice include:

• An overview of suspicious activity reporting (SAR) requirements.
• Other BSA reporting requirements, such as currency transaction reports (CTR) and Form 8300 filing.
• A reminder of the information-sharing safe harbor under the Patriot Act.

Next Steps for Firms

Firms – especially banks and check-cashing institutions – may want to study the notice in greater detail to familiarize themselves with red flags for construction industry tax evasion and workers’ compensation fraud. 

To ensure they remain abreast of FinCEN’s most current guidance and requirements, firms can sign up for updates from the regulator.

The notice asks firms to report current information on payroll fraud-related activity to their local tax authorities or the closest IRS CI field office. For reports of information related to workers’ compensation fraud, wire fraud, or labor exploitation, contact Homeland Security Investigations at 1-866-347-2423.

The post FinCEN Seeks Data from Financial Institutions to Curb Construction Sector Fraud & Tax Evasion appeared first on ComplyAdvantage.

According to Chris Hemsley, Managing Director at the PSR, “The two aspects we’re consulting on now will help to strike the right balance between encouraging people to be careful when making payments, while ensuring they have confidence in knowing they’ll be better protected if they do fall victim to fraud.” The changes also seek to encourage firms to invest in helping customers.

The PSR invites industry professionals to contribute their views by September 12, 2023 on the rule’s provisions for consumer responsibility, as well as reimbursement maximums and claim excess.

Reimbursement Rule Requirements

The reimbursement rule targets APP fraud, which tricks victims into sending funds to a fraudster posing as a legitimate recipient. This can occur through the impersonation of a legitimate financial institution or fraudulent sellers who never deliver purchased goods.

According to PSR, the rule will:

• Require firms to reimburse most customers victimized by APP fraud.
• Split reimbursement costs equally between sending and receiving payment institutions.
• Add more protections for vulnerable customers.

When the rule comes into force in 2024, it will apply to firms including payment service providers (PSPs) and focus additional consumer protections on faster payments. Among other things, the document detailing the rule explains: 

• Which customers qualify for reimbursement. 
• Exceptions when firms don’t have to issue a reimbursement – generally, when the customer has acted fraudulently or negligently.
• Time limits for the requirement. 

Approval of the Financial Services and Markets Bill, expected this year, will provide the PSR with the authority to require firms to reimburse customers.

Industry Views Sought in Consultations

Through the consultations, the PSR seeks industry feedback on: 

• The regulator’s proposed approach to consumer responsibility (the consumer standard of caution).
• Its reimbursement limit proposal.
• The best way to structure claim excess – the amount a victim would have to cover in case of a reimbursement.

Consumer Standard of Caution Consultation

According to the PSR’s proposed standard, customers must meet three basic responsibilities to be eligible for reimbursement in the case of APP fraud:

• Pay attention to warnings – If the PSP gives the customer a specific warning before a transaction occurs that the recipient is probably a fraudster, the customer must take it into account.
• Report the scam promptly – A customer victimized by APP fraud must notify their PSP promptly, and within13 months.
• Share information – The customer must comply with their PSP’s reasonable request for information to allow them to assess the situation accurately and prevent unnecessary losses.

A customer shown to have failed in this standard of care through gross negligence would forfeit their right to reimbursement. However, the burden of proof would remain with the PSP.

Maximum Reimbursement and Claim Excess Consultation

Excluding vulnerable victims, the regulator has acknowledged firms’ right to levy a claim excess as encouragement for customers to conduct responsible transactions. The consultation invites views on the excess – including deciding factors and the most effective value structure, which could be fixed or a percentage.

The PSR also requests industry feedback on the proposed reimbursement limit of £415,000, which would match the current ombudsman service limit.

How Firms Can Respond

Firms in the payments industry – especially banks and PSPs – are encouraged to study the consultations in-depth and contribute their views on the outlined proposals. This will help the PSR ensure its policy reflects industry realities. It will also help firms become familiar with the details of their upcoming reimbursement obligations to customers.

Firms may also want to review their fraud and loss prevention processes to ensure they are taking vulnerable customer groups into account. This should include robust customer education and timely warnings to customers suspected of vulnerability to a scam.

The post UK PSR Invites Industry Feedback on APP Fraud Reimbursement Rule appeared first on ComplyAdvantage.

MAS Deputy Managing Director (Financial Supervision), Ms Ho Hern Shin, acknowledged financial institutions’ (FIs) indispensable role in reporting the suspicious activity leading to the raids. She continued, “Singapore remains vulnerable to transnational ML/TF risks and …MAS and FIs need to continue to work together to strengthen our defences against these risks.”

How STRs Helped Catch a Crime Ring

MAS and CAD facilitated the investigation due to suspicious transaction reports (STRs) filed by firms that had noticed suspicious activity. Thanks to the information, authorities identified a criminal group suspected of laundering the proceeds of foreign illicit activity, including fraud and gambling. 

Multiple red flags led the FIs to report possibly tainted funds, including:

• Suspicious flows of funds.
• Questionable source of wealth documentation.
• Other inconsistent customer information.

The regulator is actively communicating with the reporting FIs regarding the illicit activity. In addition to emphasizing the importance of FI cooperation and reporting of suspicious transactions, MAS has announced that it will crack down on firms discovered to have lax or noncompliant anti-money laundering and counter-terrorist financing (AML/CFT) controls. It reminds firms that it actively works with FIs to curb illicit activity.

Specifically, the authority announced it is conducting AML/CFT inspections of wealth management firms.

Laundering Millions through Luxury Goods

None of the individuals arrested were Singapore nationals or permanent residents. They are suspected of being part of an organized criminal network and came from Cyprus, China, Vanuatu, Turkey, and Cambodia. They face various charges, including:

• Using a forged document under Section 471 of the Penal Code.
• Forgery for the purpose of cheating under Section 468 of the Penal Code.
• Money laundering under Section 54(1)(c) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA).

The police are still looking for eight additional individuals who have evaded arrest. Four more are assisting police with their investigation.

During the raids, Singapore authorities seized goods and cash worth close to S$1 billion. Items seized included:

• Cash worth over S$23 million, and two gold bars.
• Over 270 pieces of jewelry.
• Fifty luxury vehicles and 94 properties estimated at over S$815 million.
• Collectible toys.
• Over 250 luxury watches and bags.

During this ongoing investigation, more assets may be seized or frozen. 

Key Takeaways

MAS has reemphasized its high expectations for firms’ AML/CFT processes. All firms, especially wealth management firms, should ensure their current frameworks align with regulator requirements and their individual risk profiles.

Singapore authorities provide valuable resources to help FIs comply with these standards. The Singapore Police Force has released an in-depth list of key ML red flags firms can consider in their due diligence processes. 

In addition, firms are encouraged to consult the MAS AML resource page, which includes links to the latest guidance, notices, and guidelines, as well as STR forms, the AML/CFT Industry Partnership best practice papers, and details on Collaborative Sharing of ML/TF Information & Cases (COSMIC). 

Still in development, COSMIC will be an information-sharing digital platform allowing FIs to collaborate in tackling financial crime. 

The post Singapore Police Seize Millions, Arresting 10 for Forgery and Money Laundering appeared first on ComplyAdvantage.

The Role of Colleges in Europe’s AML Supervision 

Colleges are important to cross-jurisdictional AML/CFT supervision. They enable supervising authorities in different countries to create a more complete picture of the risks facing firms under their oversight. The colleges facilitate cooperative supervision by:

• Ensuring timely information exchanges between supervisors.
• Enabling cooperation to improve anti-financial crime outcomes.

The colleges operate under the 2019 Joint Committee Guidelines on cooperation and information exchange for AML/CFT supervision purposes. Although 18 existed before its promulgation, the EBA’s recent report says that by 2021, the total number had skyrocketed to 229. This year, an additional 54 colleges were announced, not yet in full operation.

In its report, the EBA explains that as of 2022, it was in charge of monitoring and supporting229 colleges. 2022 was also the year it adapted its monitoring approach in light of the colleges’ increasing maturity. As of 2023, the EBA monitors the AML/CFT colleges in several key ways, including:

• Collecting yearly data from the colleges on their performance.
• Close observation of a select group of colleges for more detailed insights into their activities.
• Conducting thematic reviews of the colleges with the goal of identifying underrepresented sectors.

Key Achievements and Improvement Areas

The EBA’s 2022 report on the colleges’ functioning is the third of its kind. Based on a six action point rubric, it notes the colleges have significantly improved in: 

• The timely sharing of relevant information. 
• The quality of information exchanged in discussions between members.

The report also highlights several areas for growth in the remaining four action points, including:

• Failure to consistently communicate important information regarding their cross-border financial institutions (FIs) outside of regularly scheduled meetings.
• Lack of a strategic approach to shared information for assessing the root cause of issues shared by multiple members.
• Failure to create a tailored meeting schedule depending on the supervised cross-border firm’s level of risk.
• Failure to create strategies for coordinated action between supervisors.

The weaknesses identified were descriptions of broad observed patterns. Some colleges demonstrated above-average progress in the growth areas listed.

The EBA also outlined several good practices AML/CFT colleges can follow to ensure continued growth. These include: 

• Plan at least one in-person meeting per year for high-risk FIs to improve trust and communication.
• Ensure college members and any attending supervised FI prepare their presentation points ahead of the meeting to ensure productive discussion.
• Streamline the presentation of denser information to leave time for member discussions afterward.

Implications for Firms

It’s important for European international firms supervised by an AML/CFT college to understand their relationship to it, and how it impacts their risk management approach. Firms can consult the EBA’s fact sheet on AML/CFT colleges to better understand their function. 

Beyond this, firms should maintain close and constant communication with the college supervising them. This can help ensure relevant authorities are aware of emerging risks or compliance difficulties a firm may be facing. It also can allow a firm to remain more abreast of risks and issues the college may have become aware of. All of this contributes to a sounder AML/CFT risk management approach.

The post EBA: Progress Made on Growth Opportunities for Supranational AML/CFT Supervision appeared first on ComplyAdvantage.

According to MAS, “With the strong growth of SFOs in Singapore, one key risk … is potential money laundering … MAS will take additional measures to strengthen our surveillance and defence against potential ML risks posed by SFOs.” The consultation paper proposing the new framework was released on July 31, 2022. MAS is seeking feedback from interested parties by September 30, 2023, on the potential revision’s benefits and risks.

Why SFO Fund Management Requires AML Safeguards

An SFO is a firm responsible for helping families manage their wealth. Each office serves one family, providing services that include helping members by: 

• Investing money according to their values.
• Creating a succession plan for passing wealth on. 
• Day-to-day management of the family’s wealth.

According to Deloitte, SFOs have become more popular in Asia within the past decade. This is attributed to rising wealth in many countries, particularly in China. 

Because most single-family offices are family-owned or controlled, they don’t usually deal with third-party funds. MAS has not historically subjected these SFOs to the same AML requirements as other financial institutions. Currently, any SFO meeting the requirements of paragraph 5(1)(b) of the Second Schedule of the Securities and Futures (Licensing and Conduct of Business) Regulations is exempted from MAS licensing or AML regulation without having to submit an application – as long as they provide a legal opinion that they qualify for the exemption.

Still, each SFO manages family assets worth millions. Because of the volume of funds that pass through SFOs and the activities they involve – including investment, vehicle purchases, and real estate – MAS wants to ensure adequate AML oversight of the sector despite exemptions.

How MAS Proposes to Bolster SFO Requirements

Since the current law doesn’t define SFOs, the exemption process is undertaken case by case. By defining the features of a qualifying SFO, the proposed frameworks’ standardized criteria would create a class exemption for all firms within their scope. This would ensure a consistent and reliable process.

Under the proposed changes, a qualifying SFO must:

1. Be family-owned – including connected trusts and organizations.
2. Only manage funds for the family and certain key employees.
3. Be incorporated in Singapore. 
4. Designate a Singapore-based employee as the MAS point of contact.
5. Maintain a business relationship with an MAS-regulated firm, bringing the exempted SFO under MAS AML/CFT oversight.

In addition, SFOs would be required to notify MAS of their exemption within seven days of beginning to operate. This would include a legal declaration and signed statements by all family members and owners.

Finally, exempted SFOs would be subject to annual reporting requirements.

Ensuring Compliance: Next Steps for Firms

Singapore-based SFOs should seek legal advice on whether they meet the listed exemption criteria, even if they qualify under current regulations. The consultation process also provides firms an opportunity to voice their opinion on the proposed frameworks’ strengths and drawbacks. Firms may wish to consult the paper and contribute their perspective on the proposed changes by September 30. 

The post MAS to Close AML Loopholes by Revising Requirements for Single Family Offices appeared first on ComplyAdvantage.

The requirement would standardize reporting, creating more consistent anti-money laundering and counter-terrorist financing (AML/CFT) controls for the sector. In March of this year, Treasury Secretary Janet Yellen addressed the problem of an estimated $2.3 billion in illicit funds being laundered through the sector:

“Corrupt actors have for decades anonymously stashed their ill-gotten gains in real estate. Those looking to exploit our system have been able to—with anonymity—store illicit proceeds in an appreciating asset. Buyers can pay in cash. …Treasury is working to remove that anonymity – and capture information about residential and commercial transactions not covered by our Bank Secrecy Act or beneficial ownership regimes.”

Regulators Address Longstanding Money Laundering Trends

The measures continue initiatives begun in 2021, when FinCEN proposed a rule to regulate the sector and address key money laundering risks in the US. Five years earlier, the Financial Action Task Force’s (FATF) 2016 Mutual Evaluation Report had highlighted significant risks in the American real estate sector, including:

• A lack of regulatory AML/CFT oversight for real estate agents.
• Vulnerabilities in high-end real estate.
• An insufficient strategy regulating real estate through the financial sector.

It also emphasized that US real estate agents and residential mortgage loan originators (RMLOs) had a poor understanding of the AML risks related to luxury real estate. 

FinCEN’s 2021 proposal sought to address longstanding money laundering in the sector by creating reporting requirements for non-financed property purchases. Historically, cash real estate transactions have not been subject to reporting regulations. In contrast, financed purchases pass through the financial sector and are therefore subject to AML regulations, including reporting. FinCEN thus proposed to enhance transparency in a historically opaque sector, providing better information to those fighting financial crime, such as law enforcement.

The proposal responded to the White House’s anti-money-laundering strategy, released in the same year. The strategy pointed out several key risks, including in real estate. Specifically, it called for increased transparency in the sector through reporting requirements for real estate transactions. 

It also highlighted the importance of collecting beneficial ownership data. The Treasury rule to be put forth in August will continue the process of implementing this strategy, pushing for transparency in cash real estate transactions by making it harder for illicit actors to hide behind shell companies.

How Should Real Estate Firms Respond?

Firms and professionals in the real estate sector may wish to familiarize themselves with ongoing regulatory discussions of the risks facing real estate in the US. This could include an in-depth study of FinCEN’s 2021 proposal alongside the FATF’s comments on American real estate’s AML gaps, discussed at length in chapter five of the 2016 MER. They may also want to study regulatory guidance on emerging money laundering trends, such as FinCEN’s April 2023 advisory. FinCEN is also driving sweeping reforms to implement the Corporate Transparency Act, including significant beneficial ownership reporting requirements for many small and medium-sized firms effective January 1, 2024. Firms can consult the final rule and related guidance, keeping an eye out for updates leading up to the implementation date.

Firms wishing to contribute feedback regarding the Treasury’s upcoming rule proposal should watch closely for further updates.

The post US Treasury Proposes Beneficial Ownership Rule Tackling Luxury Real Estate Money Laundering appeared first on ComplyAdvantage.

Rising Fraud in the UK Creates Regulatory Challenges

In extending current cold-calling restrictions, HM Treasury seeks to close loopholes that might serve as a foil for fraudsters posing as legitimate firms. The measures aim to respond to rising fraud rates in the UK, particularly investment fraud. According to the proposal, fraud accounts for 41 percent of crime in Wales and England, with nearly 4 million cases occurring in 2022. Between 2018 and 2023, investment fraud multiplied by five – from 4,000 reports to 24,000 and £748 million lost.

The policy’s full scope will not be finalized until the consultation responses have been received. However, the draft impact assessment lists several key objectives, including:

• Enabling enforcement action against firms that do not observe the ban.
• Empowering consumers to disconnect and report unsolicited calls for financial products and services.
• Removing ambiguity in current legislation, which could confuse consumers and empower fraudsters. 

The consultation and impact assessment will determine the proposed measures’ effectiveness and how they might impact legitimate businesses. It offers four options for consideration: 

1. Do nothing. Under this option, no legislative changes would be made, but this doesn’t meet the government’s anti-fraud objectives.
2. Outright ban. This is the option the government currently prefers and is hoping to implement. It would do the most to close loopholes and simplify existing measures.
3. Ban with some exemptions. All financial products and services would still fall under the ban. However, customers that had previously provided contact information and hadn’t opted out could still be contacted.
4. Narrower ban. The measures would only be extended to a specific range of products and services.

In the consultation paper, the Treasury said it also plans to implement campaigns to raise public awareness about the ban. These would inform consumers that unsolicited calls about financial services are against the law and likely to be fraudulent.

What Firms Can Do

According to the consultation paper, the government does not believe the interdiction will negatively impact most legitimate business models that follow good marketing practices.

Still, firms affected by the ban may choose to revise their current marketing policies. Firms may also want to contribute to the consultation before it closes on September 27, 2023. This will help ensure the legislation reflects legitimate industry practices, risks, and needs.

It is also essential for firms to assess the effectiveness of their current fraud prevention programs. Proactive risk management is the best way to stay abreast of regulatory requirements and protect customers. Firms can ask:

• Is fraud risk included in regularly-updated enterprise-wide risk assessments? This is especially important as the UK considers implementing a new “failure to prevent fraud” offense.
• Does the current fraud program respond to the firm’s unique risks, including investment fraud risks?
• What measures are being taken to educate customers to enable them to be proactive in resisting scam attempts? 
• Do current risk prevention measures move beyond siloes to consider the whole financial crime ecosystem? The link between fraud, money laundering, terrorist financing, and predicate offenses such as environmental crime and human trafficking is becoming increasingly apparent. Proactive firms approach financial crime risk holistically rather than segregating risk data and processes.

The post HM Treasury Proposes Cold-Calling Ban to Prevent Investment Scams appeared first on ComplyAdvantage.