On November 12, 2019, FinCEN issued its latest Advisory on the Financial Action Task Force-Identified Jurisdictions with Anti-Money Laundering and Combatting the Financing of Terrorism Deficiencies and Relevant Actions by the United States Government. The Financial Action Task Force (FATF) is a 39-member intergovernmental body, including the United States, that establishes international standards to combat money laundering, the financing of terrorism and proliferation of weapons of mass destruction (WMDs). As part of its listing and monitoring process to ensure compliance with its international Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) standards, the FATF identifies certain jurisdictions as having “strategic deficiencies” in their AML/CFT regimes.
In its latest Advisory, FinCEN notes the changes in the FATF-named jurisdictions and directs financial institutions to consider these changes when reviewing their obligations and risk-based policies, procedures and practices relating to the named jurisdictions. We will discuss these changes and suggest some practical takeaways for U.S. financial institutions seeking to ensure compliance with these changes in their AML programs.
The changes in the FATF-named jurisdictions are listed in two documents: (1) the FATF Public Statement, — which includes jurisdictions that are subject to FATF’s call for countermeasures due to their AML/CFT deficiencies, and (2) Improving Global AML/CFT Compliance: On-going Process, — which includes jurisdictions identified by the FATF as having AML/CFT deficiencies for which the jurisdictions have developed corrective actions. North Korea and Iran are the only two jurisdictions identified in the FATF Public Statement.
In order to protect the international financial system from money laundering and terrorist financing risks and threats posed by North Korea’s activities related to the proliferation of WMDs, the FATF continues to (1) call for countermeasures against North Korea; (2) request that jurisdictions give enhanced scrutiny to any business relationships with North Korean companies, or to those acting on their behalf; and (3) terminate correspondent relationships with North Korean banks. Of course, as FinCEN notes in its Advisory, U.S. sanctions already prohibit U.S. persons, including U.S. financial institutions, from engaging in almost any transaction involving North Korea. Further, on November 4, 2016, the U.S. Department of Treasury issued a final rule prohibiting covered financial institutions from opening or maintaining U.S. correspondent accounts for, or on behalf of, North Korean banks.
The FATF also calls for select countermeasures against Iran, because Iran’s plan to address its AML/CFT deficiencies expired in January 2018, even though several items had not been completed. However, as FinCEN notes in its Advisory, U.S. sanctions generally prohibit engaging in transactions with or involving Iran and certain designated persons, and the United States “intends to enforce aggressively the sanctions that are in effect.”
The jurisdictions identified by the FATF in Improving Global AML/CFT Compliance are: (1) The Bahamas; (2) Botswana; (3) Cambodia; (4) Ghana; (5) Iceland; (6) Mongolia; (7) Pakistan; (8) Panama; (9) Syria; (10) Trinidad and Tobago; (11) Yemen; and (12) Zimbabwe. In its Advisory, FinCEN urges U.S. financial institutions to ensure that their due diligence programs include appropriate risk-based controls reasonably designed to detect and report known or suspected money laundering conducted through or involving any correspondent account opened or maintained in the U.S. for banks in these jurisdictions.
Takeaways for U.S. Financial Institutions
- Ensure that your AML programs have the most current information on FATF-identified jurisdictions with AML/CTF deficiencies and revise your AML programs accordingly.
- Closely monitor all correspondent accounts and report any suspicious transactions.
- As part of your enhanced due diligence for correspondent accounts established by foreign banks, you must determine whether the foreign bank at issue itself maintains correspondent accounts for other foreign banks that will be using the correspondent account you maintain. If it does, you must “take reasonable steps to obtain information” sufficient to assess and mitigate money laundering risks posed by the foreign bank’s correspondent accounts for other foreign banks.
- If you open or maintain a correspondent bank account for a non-publicly traded foreign bank, you must conduct enhanced due diligence on that foreign bank. Specifically, you must identify each owner of the foreign bank and the nature and extent of each owner’s ownership interest.
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