The EU continues to find fault with member states

By November 14, 2018 No Comments

Weak links – the EU continues to find fault with member states  

European member states continued to frustrate regulators last week because of their relaxed approach to anti-money laundering controls. Here’s what you need to know:  

Malta was given 10 working days to submit a plan to the European Banking Authority (EBA) on how it will counter the weaknesses in its AML framework. The EBA found in its evaluation that Malta has failed to supervise its regulated sector properly, to adhere fully to its obligations under the 4th Anti-Money Laundering Directive (4AMLD) and has failed to maintain a robust sanctions regime. These findings will not come as a surprise to the island after the Times of Malta last week revealed that the country’s own risk assessment (which has not been made public) found the country to be at a “high risk” of money laundering.

Luxembourg has been referred by the European Commission to the European Court of Justice for failing to fully transpose 4AMLD into national law. The failure here is twofold. Firstly, Luxembourg should have made changes to their laws by 26th June last year and secondly, now that they have, they have only partially complied with the directive. Luxembourg joins Romania and Ireland who have also been referred to the Court of Justice for failing to implement 4AMLD. All three countries will face the prospect of a fine which will be based on a fixed sum for every day the directive has not been fully transposed into law.

High times for organized crime?

Legalization of Canada’s marijuana industry has not put it at risk of infiltration by organized crime, revealed a government memo this week. The memo states that despite a risk of criminals being able to invest in the industry using anonymous structures – a particular problem in Canada where much of the sector is owned by family trusts – existing controls should be sufficient to protect it from illicit actors. This is a positive finding for the second country to legalize the drug for general use. Canada’s marijuana trade isn’t completely devoid of crime however, as the 8th largest producer in the world, it is a net-exporter to markets where the drug is still criminalized.

Legalization may not have had an impact on domestic organized crime in Canada but it is impacting criminal groups further afield. InsightCrime reported last week that the combination of marijuana legalization in Canada and the move from heroin to Fentanyl in the US is causing Mexican cartels to diversify their revenue streams. Groups like the Cartel Jalisco Nueva Generación, are trying to gain control of the domestic Mexican cigarette market to make up for the shortfall in their profits. A reminder that organized crime is like a balloon, if you squeeze it in one place it will only expand in another.

Rogue agent – MoneyGram fined $125m by the FTC

The US Federal Trade Commission (FTC) fined Moneygram $125 million last week for violating anti-fraud and money laundering rules. MoneyGram, which was already under a Department of Justice (DoJ) Deferred Prosecution Agreement (DPA) for similar misdemeanors dating back to 2012, will now see controls on the transmitter extended until May 2021. In its press release, the FTC stated that MoneyGram and the wider money transmitter sector continue to be an option for fraudsters and criminals to move money easily around the world.

The specific problems at MoneyGram stem from its failure to supervise its agents properly. The transmitter failed to put in place appropriate controls on larger agents despite their reports of high volumes of suspected fraud and suspicious activity. Instead, MoneyGram concentrated more of its compliance efforts on small “mom and pop” agents who, despite also having high levels of fraud, deal in lower volumes of transactions. The FTC also found that the monitoring solution MoneyGram had in place in 2015 malfunctioned for 18 months, meaning that known fraudsters were not blocked from using its services. In its own statement, MoneyGram said that it has taken “significant steps to improve” its compliance program, including spending over $100m on compliance technology since 2012 – but apparently not on their monitoring system.


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