AMLAnti-Terrorist Financing

PSD2 – payments of tomorrow, today

By January 17, 2018 No Comments

PSD2 – payments of tomorrow, today  

PSD2 came into force over the weekend, bringing in a whole new era for payments and banking in Europe. The Revised Payments Directive, or PSD2, aims to level the payments playing field and make it more efficient by promoting innovation and the use of mobile technology, as well as making payments more secure and protecting consumers. Like the deadline for MiFiD II the week before, while the date itself passed uneventfully, the long term effects on the EU payments landscape should be significant.  

One of the most important changes to be aware of is how the regulation recognizes and establishes new categories of players in the market. Payment Initiation Service Providers (PISPs) are one such new player. A PISP is any organization that initiates a payment between a merchant and a banking platform. Due to this, some organizations not previously regulated could now come under the remit of anti-money laundering (AML) regulations. Although it is not clear yet how thoroughly they will have to comply with AML requirements, sanctions checks would be recommended as a minimum. We also hope to see PSD2 positively impact the problem of de-risking. As banks will no longer be able to deny banking services without giving a detailed explanation of why they have done so.

Hiring terrorists – what’s the cost?

How much does it cost to recruit a terrorist? Like most expanding businesses, operating a terrorist network comes at a cost. Last Friday, the Financial Action Task Force (FATF) released a report examining this; they investigated cases from across the globe to try and determine the nature of terror financing for recruitment and how best to tackle this problem.

According to the report, terrorist recruiters use money to sustain their own lifestyle, to pay for the logistics of bringing in new people (accommodation and transport), for the production of content and, when necessary, to pay for civil experts or mercenaries. The report explains how terror financing for recruitment varies across different regions. In the West, recruitment through prisons is highlighted as a particular problem, with intermed prisoners being directly paid for their recruitment efforts. Along with this, there has been a considerable shift towards online recruitment via social media platforms. While they may be free to access​,​ producing high quality and engaging content is not. Throughout, this report uses a multitude of case studies, making it an important resource for anyone who is unsure of the warning signs that could indicate the financing of terrorist group recruitment.

Not-so-empty shell – further evidence for ending the use of shell companies

In what seems like a never ending conveyor belt of investigations revealing endemic financial crime in almost every pocket of the world – two new investigations were released last week. The first by Al Jazeera,  exposes previously secret Ukrainian court documents, which show how ex-President Victor Yanukovich siphoned off $1.5bn of state wealth before leaving power. The second, by Buzzfeed, which shows how one in five of Trump’s properties bought since 1980 have been purchased entirely in cash by shell companies – two strong signals of money laundering.

What do both these stories have in common? The systematic use of shell companies to move and clean dirty money. We were all made aware of this problem by the Panama Papers in 2016, and were reminded of its scale with the subsequent publishing of the Paradise Papers late last year. With more and more revelations, has any progress been made in solving this problem? Well, last week saw renewed support in the US for increasing corporate transparency by creating UBO registers. The date for the EU’s vote on 5MLD was finalised for March, which will also increase levels of corporate transparency. Both could go far in turning the tide for the future of shell structures and the shores they reside on.

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