On 7 May 2020, the European Commission released its Action Plan to strengthen the EU’s anti-money laundering and counter-terrorist financing (AML/CTF) framework and further strengthen the EU’s fight against financial crimes. The Action Plan outlines the Commission’s proposal to achieve a more harmonised set of EU rules, better supervision, and improved coordination amongst domestic Financial Intelligence Units. In this alert, Guidehouse experts summarise the Commission’s proposed Action Plan and discuss the steps financial institutions need to take to achieve compliance with the new initiative.
The Commission’s Action Plan is based on six key pillars, each of which is aimed at improving the EU’s overall fight against money laundering and terror financing:
The European Commission published a new methodology to identify high-risk third countries with strategic deficiencies in their national AML/CTF regimes. The key new elements concern: (i) the interaction between the EU and Financial Action Task Force (FATF) listing processes; (ii) an enhanced engagement with third countries; and (iii) reinforced consultation of Member States experts.
As of 1 October 2020, the following countries will be included in the Commission’s list of high-risk countries with strategic deficiencies in their AML/CTF regimes: The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama, and Zimbabwe.
The following countries have been delisted, with effect from 20 days after publication in the Official Journal: Bosnia-Herzegovina, Ethiopia, Guyana, Lao People's Democratic Republic, Sri Lanka, and Tunisia.
All obliged entities must apply enhanced due diligence (EDD) on customers operating in countries on the updated list. This means revisiting Know Your Customer (KYC) files and conducting customer due diligence (CDD) or EDD on those customers operating in the newly listed countries. Financial institutions should evaluate the effectiveness of their policies, procedures, and systems responsible for adequately mitigating the risks associated with transacting with these customers.
Guidehouse can rapidly review and assess your financial crime framework to determine whether it is operationally effective and meets the new regulatory expectations. Guidehouse can identify financial crime framework gaps, advise on optimal solutions to weaknesses identified, and identify areas (e.g., products, services, clients, and relationships) that pose a higher degree of risk.
Guidehouse has in-depth knowledge of the regulatory environment, both in the EU and Globally, and financial institution processes. Guidehouse’s relevant expertise includes the following:
Guidehouse’s financial crime consultants work with financial institutions of all sizes to build effective and efficient risk management and compliance frameworks to help clients protect against legal, fiduciary, shareholder, and reputational risk. Guidehouse experts include distinguished former prosecutors, regulators, compliance officers, and consultants, who leverage their combined experience to help clients conquer their compliance challenges.
Special thanks to Sajeev Kanagarajah for contributing to the article.