As the world continues to fight against the COVID-19 pandemic, there are reports that criminals are taking advantage of the difficult situation. They are seizing the moment to proliferate their criminal activities, earn undue profits and transfer of illegally earned money across borders, according to a report. “Organised crime groups are notoriously flexible and adaptable and their capacity to exploit this crisis means we need to be constantly vigilant and prepared,” says a Europol communique. Crimes such as human trafficking and corruption have a favourable situation to thrive. At the same time, criminals are adapting their most profitable cybercrime tactics to suit the situation, as a great number of working people across the globe are confined to their homes and are using digital means to complete their daily tasks. Phishing, vishing, business email compromise, malware and ransomware attacks, fake charity campaigns and trading in child abuse materials are rampant across the globe.
As the above crimes will undoubtedly increase money laundering activities, these are times for banks, governments, and multilateral institutions to be vigilant and take measures. Many regulators across the globe have realised the challenges that banks and other financial institutions will face in anti-money laundering compliance. Albeit a temporary suspension in the regular supervisory activities, they have instructed financial institutions to stay cautious and suggested certain best practices to counter an expected surge in money laundering operations. This article tries to capture what some of the major money laundering watchdogs have in their minds to address the situation.
The European Banking Authority (EBA)
The banking watchdog in the Euro area expects that “illicit finance will continue to flow” and highly adaptive criminals are likely to emerge with “new techniques and channels of laundering money”. As remedial measures, the EBA asked “competent authorities” that are responsible for the anti-money laundering/ combating financing of terrorism (AML/CFT) supervision to support ongoing AML/CFT efforts by;
- Making clear that financial crime remains unacceptable, even in times of crisis
- Continuing to share information on emerging ML/TF risks and setting clear expectations of the steps credit and financial institutions should take to mitigate those risks; and
- Considering how to adapt the use of their supervisory tools temporarily to ensure ongoing compliance by financial institutions with their AML/CFT obligations.
The US Financial Crimes Enforcement Network (FinCEN)
The US financial crimes watchdog said that it was monitoring the system and found certain emerging crime trends such as imposter scams, investment scams, product scams and insider trading. Given the situation, FinCEN asked financial institutions to remain alert about malicious or fraudulent transactions gave out the below guidelines and measures:
- Financial institutions should continue following a risk-based approach and diligently adhere to the Banking Secrecy Act (BSA) obligations.
- FinCEN suspended implementation of its February 6, 2020, ruling on Currency Transaction Report (CTR) filing obligations when reporting transactions involving sole proprietorships and other entities until further notice.
- FinCEN created a COVID-19-specific online contact mechanism, via a specific drop-down category, for financial institutions to communicate to FinCEN COVID-19-related concerns while adhering to their BSA obligations.
- It also encouraged financial institutions to consider, evaluate, and, responsibly implement “innovative approaches” to meet their compliance obligations, to further strengthen the financial system against illicit financial activity.
The Australian Transaction Reports and Analysis Centre (AUSTRAC)
The Australian watchdog said it along with law enforcement and national intelligence partners is monitoring and “preparing for a shift in the risks that criminals may pose to the financial system and the community”. AUSTRAC found the following areas of criminal exploitation where the financial system may be more vulnerable during the COVID-19.
- Targeting of government assistance programs through fraudulent applications and phishing scams.
- Movement of large amounts of cash following the purchase or sale of illegal or stockpiled goods.
- Out of character purchases of precious metals and gold bullion
- Exploitation of workers or trafficking of vulnerable persons in the community.
- An increase in the risk of online child exploitation following restrictions on travel.
It also encouraged its subjects to monitor for new and emerging threats and submit suspicious matter reports (SMRs) in a high-quality, accurate and timely manner to detect, deter and disrupt criminal activity.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
FINTRAC noted its “reporting entities” may face challenges in meeting AML/CFT-related deadlines due to the COVID-19 situation as some of them are required to reassign and reprioritize their internal resources due to unavailability of regular resources. “During these challenging times, FINTRAC is committed to working constructively with reporting entities to minimize the impact of ongoing regulatory requirements in relation to the prevention, detection and deterrence of money laundering and terrorist activity financing,” it said. The regulator also provided the following guidelines:
- When it comes to reporting, priority should be given to submitting suspicious transaction reports (STRs).
- For the time being, FINTRAC will not be contacting reporting entities to initiate new examinations.
- Other interactions with reporting entities will be limited to situations related to reporting issues, circumstances where reporting entities contact FINTRAC for guidance, and the completion of examinations currently underway.
- If employees responsible for fulfilling certain obligations may be affected by COVID-19, reporting entities should keep a record indicating why this is the case and, where possible, include any measures being taken to mitigate the risk of non-compliance.
The Financial Task Action Force (FATF)
The president of the global standard‑setter for combating money laundering recently provided a statement on the measures to combat illicit financing during COVID-19. “The FATF encourages governments to work with financial institutions and other businesses to use the flexibility built into the FATF’s risk-based approach to address the challenges posed by COVID-19 whilst remaining alert to new and emerging illicit finance risks,” he says, while sharing the following broad guidelines:
- Supervisors, financial intelligence units and law enforcement agencies should continue to share information with the private sector to prioritise and address key ML risks, particularly those related to fraud, and TF risks linked to COVID-19.
- Financial institutions and other businesses should remain vigilant to emerging ML and TF risks and ensure that they continue to effectively mitigate these risks and are able to detect and report suspicious activity.
- When financial institutions or other businesses identify lower ML/TF risks, they may use simplified measures to facilitate the delivery of government benefits in response to the pandemic.
- FATF encourages countries to work with relevant non-profit organisations to ensure that much-needed aid is getting to its intended recipients in a transparent manner.
- The use of financial technology (Fintech) provides significant opportunities to manage some of the issues presented by COVID-19. In line with the FATF Standards, the FATF encourages the use of technology, including Fintech, Regtech and Suptech to the fullest extent possible.
Learn More: Latest AML Fine Figures
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