ECOVIS ProventusLaw welcomes you to its monthly newsletter on Anti-Money Laundering and Counter-Terrorist Financing. It is dedicated to everyone who wants to understand the latest trends and developments, get tips from our experts and deepen their knowledge.
Improved Customer Experience in AML Compliance in Lithuania
Encouraged by the Bank of Lithuania, banks have significantly improved the customer experience by implementing anti-money laundering measures. Four commercial banks operating in Lithuania have improved their customer experience by implementing AML measures in 2023. The measures and actions taken by these banks to improve the customer experience were based on an agreement reached with the Bank of Lithuania at the beginning of 2023, which identified some uncertainties in the AML requirements for consumers.
Key Enhancements:
- Simplified Updates: Customers can modify previously submitted cognitive questionnaires rather than completing new forms.
- Tailored Questionnaires: Banks provide explanations or customize questionnaires, removing irrelevant questions for specific user groups.
- Extended Deadlines: Customers can request extended deadlines for submitting required information.
- Reduced Data Burden: Banks utilize public systems and registers to gather information, minimizing customer input.
Metro Bank fined £16.7 million for AML failures
The UK’s Financial Conduct Authority (FCA) has fined Metro Bank PLC £16,675,200 for inadequately monitoring more than 60 million transactions totalling £51 billion between June 2016 and December 2020.
Key issues:
Faulty monitoring system: A data error in the bank’s automated transaction monitoring system led to significant failures, including missing transactions when accounts were opened and subsequent activity until account records were updated.
Delayed Action: Despite staff concerns raised in 2017 and 2018, the issue was not resolved until July 2019, and consistent monitoring mechanisms were not put in place until December 2020.
The FCA emphasised the importance of robust systems to detect potential money laundering, noting the risks to financial integrity and compliance posed by such failures.
Financial Fraud in Q3 2024: €4.8 Million in Real Losses Reported
The AML Competence Center has highlighted a worrying increase in financial fraud, with real losses of €4.8 million reported in Q3. Fraudsters targeted €8.9 million, but financial institutions successfully secured 42% of the funds.
Key Fraud Tactics:
- Phone scams: Posing as a trusted entity to extract sensitive information.
- Investment scams: Promising high returns to lure victims into bogus schemes.
- Email interception: Exploiting compromised communications to divert funds.
FATF Publishes Money Laundering National Risk Assessment Guidance
The Financial Action Task Force (FATF) has issued its Money Laundering National Risk Assessment Guidance to assist countries in strengthening their AML frameworks through structured National Risk Assessments (NRAs).
Key Highlights:
- Structured Process: A step-by-step guide for NRAs, covering preparation, data collection, and assessment methods.
- Local and Global ML Risks: Emphasizes analyzing country-specific vulnerabilities alongside global trends.
- Policy Alignment: Advocates for reallocating resources and updating policies to address high-risk areas identified in NRAs.
- Cross-Sector Collaboration: Encourages contributions from financial institutions, regulators, and private sector entities for a comprehensive approach.
- Adaptability: Recommends periodic updates to NRAs to address evolving threats, especially those linked to digital finance.
FATF Recognizes South Africa’s Progress in Combating ML and TF
Since the 2021 evaluation and the 2023 follow-up report, South Africa has made significant progress in strengthening its anti-money laundering (AML) and anti-terrorist financing (ATF) measures, resulting in improved technical compliance ratings from the Financial Action Task Force (FATF).
Key Updates:
1. Upgraded Compliance Ratings:
- Recommendation 2 (National cooperation): Upgraded to largely compliant.
- Recommendation 6 (Targeted financial sanctions for TF): Upgraded to largely compliant.
- Recommendation 15 (New technologies, including virtual assets): Upgraded to largely compliant.
2. Current Status:
- Compliant with 5 Recommendations.
- Largely compliant with 32 Recommendations.
- artially compliant with 2 Recommendations.
3. Next Steps:
- South Africa will address remaining deficiencies and provide updates in the upcoming 5th round of mutual evaluations.
Lithuanian E-Money Institutions to Gain Payment Systems Access; MiCA Licensing Looms for Crypto Providers
From April 2025, Lithuanian e-money and payment institutions will have access to the Eurosystem and EU payment systems, marking a significant shift in their operational scope. At the same time, the Markets in Crypto-Assets Regulation (MiCA) will enforce licensing requirements for cryptocurrency service providers across the EU, forcing them to meet strict financial market standards or cease operations.
Key Updates:
1. High-Risk Designation:
- Both cryptocurrency and e-money/payment institutions have been flagged as high-risk for money laundering and terrorist financing in Lithuania’s 2019–2022 National Risk Assessment Report.
2. Strengthened AML/CFT Frameworks:
- Measures such as enhanced compliance and a minimum equity requirement of EUR 125,000 have led to the deregistration of over 300 non-compliant entities.
3. MiCA Licensing Process:
The Bank of Lithuania is preparing for robust licensing under MiCA, focusing on:
- Submission of comprehensive business plans meeting eligibility criteria.
- Full disclosure of shareholders, managers, and income sources.
- Strict evaluation to prevent licensing of shell companies or entities with incomplete disclosures.
4. Pre-Assessment Option:
Prepared applicants can seek pre-assessment to streamline the licensing process, demonstrating Lithuania’s proactive approach to ensuring compliance with MiCA while reducing regulatory risks.
FinCEN Joins National Task Force on Fraud and Scam Prevention
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has partnered with the Aspen Institute’s Financial Security Program to join the National Task Force on Fraud and Scam Prevention, a collaborative initiative to combat fraud and scams.
– Multi-Sector Collaboration:
- The Task Force unites financial services firms, technology companies, consumer advocates, federal agencies, and information-sharing centers.
– Alignment with AML/CFT Goals:
- The initiative supports FinCEN’s anti-money laundering (AML) and counter-terrorism financing (CFT) priorities by addressing fraud and illicit finance risks.
– FinCEN’s Role:
- Active participation in working groups to develop actionable recommendations.
- Promoting public-private partnerships to strengthen fraud prevention strategies through cross-sector collaboration.
EBA Releases 2024 Update on Third-Country Groups and Branches in the EU/EEA
The European Banking Authority (EBA) has published its 2024 update on third-country groups (TCGs) and third-country branches (TCBs) operating in the EU/EEA, increasing the transparency of foreign-controlled banking institutions.
– 439 TCGs from 50 non-EU/EEA countries are active in the region.
– Eight TCGs have established Intermediate EU Parent Undertakings (IPUs) to comply with EU rules, with two groups maintaining dual IPUs.
– 61 TCGs manage 95 branches across the EU/EEA.
This initiative is in line with the EBA’s mandate to promote market stability and to support national competent authorities (NCAs) in ensuring compliance with EU rules, in particular for large TCGs with more than €40 billion in assets.
Europol Highlights Rise in Organised Crime Networks Recruiting Minors
An increase in the recruitment of minors for serious criminal activities by organized crime networks across Europe has been warned by Europol.
Key findings:
- Digital recruitment: Criminal groups use social media, encrypted messaging, and gamification tactics to lure minors with promises of financial gain or social status.
- Criminal involvement: Minors are increasingly implicated in violent crimes, including extortion and murder.
- Evasion techniques: Networks rely on coded language, slang, and encryption to avoid detection and hinder law enforcement efforts.
UK Government Reaffirms Commitment to Public Beneficial Ownership Registers
The UK government has reaffirmed its commitment to introducing fully public beneficial ownership registers, despite opposition from some of the UK’s overseas territories (OTs). These registers, which are designed to reveal the true owners of companies, are crucial to anti-money laundering (AML) efforts.
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