Moneyval‘s findings on money laundering and terrorism financing during COVID-19

The Council of Europe’s Moneyval Committee has issued a new report on latest money laundering (ML) and terrorism financing (TF) trends. Report concludes that criminals are exploiting the disruption generated by the crisis and adapting their new modus operandi.

Key findings:

  • The overall level of criminality remained stable or slightly decreased. Nevertheless, the countries reported a surge in certain crimes, such as fraud (through electronic means) and cybercrime, creating new sources of proceeds for ML purposes.
  • Economic relief measures implemented by authorities created opportunities for abuse.
  • Supervisors identified potential risks related to the use of cash for ML purposes.
  • There was a significant increase in non-face-to-face business relationships and remote operations. This raised supervisors’ concerns with regards to the full application of customer due diligence (CDD) measures.
  • To effectively complete the off-site monitoring, supervisors found innovative ways to exchange sensitive information such as client files, by using secure electronic means, or reviewing these documents remotely g. through the shared screen facilities offered by video conferencing.
  • Law enforcement authorities have not encountered significant difficulties in pursuing ML/TF related criminal activities.
  • Domestic information exchange has been minimally disrupted and no difficulties in obtaining financial information were experienced.

Although the overall level of criminality remained stable or slightly decreased, all jurisdictions noted a rapid increase in the number of frauds related to COVID-19. Three main types of fraud related to COVID-19 are the following:

  • fraud with medical equipment;
  • fraud related to economic relief measures;
  • fraud/embezzlement related to public procurement contract.

Other potential ML threats include medicrime, corruption, cybercrime and late demand in moving illicit funds.

Changes were also noticed in terms of financial behaviour. Self-isolation regime was the reason for an increase in the use of non-cash payments, payment cards, electronic and mobile banking. In relation to cash deposits, most jurisdictions reported decreasing numbers during the COVID-19 pandemic. No notable increase in use of virtual assets by the population, nor use of non-traditional or unlicensed lenders were reported.

The supervisory authorities have identified certain risks related to the COVID-19. One of them relates to the increased use of cash, especially cash withdrawals, because of governmental aid, coupled with the natural inclination of the population to retain cash during the lockdown. While these are legitimate operations, the overall trend might be used by criminals as a “cover-up” for ML through cash. Many supervisors have noted risks related to the sharp increase of remote customer services. There has been variable workload in some branches, shortened working hours and systematic teleworking. In these conditions, there was a concern that due to the reduced number of employees in direct contact with the clients, there may be omissions in performing the prescribed CDD actions and measures.

The committee recommended supervisors to take a risk-based approach that ensures private-sector entities place sufficient emphasis on emerging risks and trends, such as new clients accepted during the lockdown, or remote operations.

The article was prepared by ECOVIS ProventusLaw attorney at law Inga Karulaitytė arba legal assistant Vilnius Neverdauskas 

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