Last Thursday, six men were sanctioned by the UN for running a prolific human trafficking network in Libya. The sanctions are remarkable because they are the first ever issued by the UN on the grounds of human rights violations. The international community has been under increased pressure to do more to stop human rights abuses connected to human trafficking after CNN broadcast a video last year of migrants being sold at slave auctions. These sanctions, which will freeze the assets of the men and ban them from traveling will hopefully send a strong message to human rights abusers around the world that their violations will no longer be ignored.
The use of sanctions to punish human rights abusers have been increasing for some time. In 2012 the US passed the Magnitsky Act, which initially targeted high ranking Russian officials who violated human rights. In 2016 the act was extended and now allows the US to sanction any government around the world for breaching human rights. Earlier this year, the UK added an amendment to the Sanctions & Anti-Money Laundering Act giving the UK government similar powers. Today, between 400,000-700,000 people are being kept in containment centres across Libya. If these sanctions can be proven effective at crippling trafficking networks, it is a small but positive step towards reducing the vulnerability of migrants to human rights abuses around the world.
The European Union has come a long way in its mission to rid the continent of money laundering and terrorist financing. The implementation of the Fourth Money Laundering Directive (4MLD) last year and the announcement of the Fifth this year have both considerably bolstered the EU’s defenses in the private sector. Last week, the European Council passed another, less publicized directive, the Directive on Countering Money Laundering by Criminal Law (2016/0414). Which will aim to solve foundational problems in the public sector, specifically in money laundering investigations.
The directive will consolidate the definition of money laundering across the Union, removing the opportunity for loopholes to occur in less-compliant states. It will impose a maximum term of imprisonment for offences of a least four years and will also give states the power to impose additional sanctions on perpetrators. Finally, it clarifies which jurisdiction is responsible for investigating and prosecuting a financial crime, making it more difficult for authorities to drag their feet. We can expect to see this directive pass into law in the next 2 years, adding another layer to the EU’s financial crime defenses.
What’s going on where? AML regulations for crypto exchanges
Canada will treat cryptocurrency exchanges as if they were MSBs when the country comes to review its AML/CFT regime over the next few years. Exchanges will have to comply with the standard $10,000 reporting requirement on transactions and will also have to perform KYC on all transactions over $1,000. This action will bring Canada in line with a growing number of countries who view the regulation of exchanges as the best way to control the financial crime risk of this sector.
In the UK, crypto-watchers are eagerly awaiting the release of a joint paper on the approach to virtual currencies from the Bank of England, FCA and HM Treasury, which is rumored to be released this month. In the meantime, the FCA this week released a letter addressed to bank CEOs which sets out how they perceive the risk to banks from crypto assets, which could offer an early indication of what the joint paper will say. In Europe exchanges will have to start preparing for the KYC requirements that will be brought in with the Fifth Money Laundering Directive. The EU continues to push forward with their work in the sector, releasing a paper last week on the specific terrorist financing risk posed by virtual currencies, setting out recommendations for key stakeholders on how to mitigate this risk.
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