Financial crime - Q1 2022

Russian Sanctions

• Some firms we have spoken to seem comfortable that their exposure to Russia is low and the impact of the new sanctions does not alter their risk assessment to a great extent, other firms are frantically seeking sanctions professionals to advise or join their in-house compliance team.
• On 22 February 2022, the FCA communicated its expectations of firms and set out the necessary steps to be taken to ensure compliance.
• On 11 March, the EBA called on financial institutions to ensure compliance with sanctions and to facilitate access to basic payment accounts for refugees. It encouraged firms to carefully consider the prudential and business impact of the short and longer-term risks they face in light of these geopolitical developments. It highlighted cyber risks as a particular area requiring continued attention.

UK Update

• On 28 February, the Government published the Economic Crime (Transparency and Enforcement) Bill. The Bill has three key parts 1) introduce the long-awaited beneficial ownership of property register (including requirements on overseas entities in this regard), 2) strengthen the unexplained wealth orders (UWO) regime, and 3) strengthen enforcement actions for breaches of sanctions. The Bill, previously delayed, appears to have been fast-tracked in light of the Russian sanctions and criticism of the UK for being too slow to take action to make life more difficult for people seeking to hide wealth in the UK, particularly those doing so from overseas.
• Also on 28 February 2022, the Government published its position on reforming Companies House ahead of introducing the legislation.
• On 2 February 2022, the House of Commons Treasury Committee published the latest report on economic crime in the UK. The report reviewed and assessed the effectiveness of measures taken by Government to address economic crime in the context of the Government’s Economic Crime Plan 2019 – 2022.
• On 28 January 2022, the FCA published guidance for Firms to consider before seeking regulatory approval for Heads of Compliance and MLRO. The guidance is based on the FCA’s experience in reviewing applications to date.
• On 28 February 2022, the FCA fined Barclays Bank £783,800 for failings in its relationship with collapsed payments firm Premier FX. The FCA found that Barclays failed to make inquiries, as part of its AML Enhanced Due Diligence, to ensure that Premier FX’s actual business activity aligned with expectations.
• Reminder - FCA REP-CRIM.  Expanded to include additional firms including payment institutions, electronic money institutions, multilateral trade facilities (MTFs), organised trading facilities (OTFs), and crypto-asset exchange and custodian wallet providers. The rules will come into force for these additional firms by 30 March 2022.  Each firm must submit its REP-CRIM within 60 days of its first Accounting Referencing Date.
• Reminder - Crypto Temporary Registration. the FCA extended the end date of the Temporary Registrations Regime (TRR) for existing crypto-asset businesses from 9 July 2021 to 31 March 2022.

European Update

• On 31 January 2022, the EBA launched its central database for AML/CTF. This European reporting System for material CFT/AML weaknesses, EuReCA, will be central to coordinating efforts by competent authorities and the EBA to prevent ML/TF in the Union.
• On 22 March, the European Banking Authority published its assessment of competent authorities’ approaches AML/CFT supervision of banks. It said that national supervisors have started to adopt meaningful reforms to improve their AML/CFT supervision, but found that significant challenges remain in important areas such as the identification and assessment of risk.

International Update

In 4 March 2022, FATF published the outcomes of its latest Plenary including the plan for its next round of mutual evaluations and finalised update on Recommendation 24 – to improve the transparency of beneficial ownership of legal persons. It also released a public consultation on FATF Risk Based Guidance to the Real Estate Sector, which is open until 22 April 2022. FATF also published its report on the risks associated with Migrant Smuggling.