US regulators kicked off 2018 with a bang last Thursday, when $130m worth of AML related fines were announced all in one day. The two offenders were Western Union, who was fined $60m by the New York Department of Financial Services and Citibank, who was fined $70m by the Office of the Comptroller of the Currency. Western Union’s violations are particularly notable because they extend over a ten year period and involve the processing of transactions in excess of $1bn, which can easily be linked to human trafficking networks based in China. Citigroup, on the other hand, failed to comply with a consent order, originating from BSA/AML violations regarding suspicious transactions in 2012.
2018 is set to be an exciting year for AML in the US – with regulators and policy makers really stepping up their game on enforcement and reform. These two fines, as well as various high profile fines from last year (Habib Bank, BTC-e and 1MDB), indicate that regulators are committed to enforcing the rules. A string of Senate hearings last year as well as the Senate Banking Committee hearing yesterday on BSA/AML reform, all suggest that significant modernization of the US anti-money laundering framework could be right around the corner.
On Friday, online casino operators based in the UK received a letter from the Gambling Commision. After completing a thematic review of the industry, the Commission has placed 17 firms under investigation and named 5 operators who are at risk of losing their operating licenses. The industry’s poor implementation of the Money Laundering Regulation 2017 (MLR2017) and the Proceeds of Crime Act (POCA) instigated the letter. It picks out weaknesses in risk assessments, customer due diligence, processes relating to SARs and training, as areas of concern in a sector that now accounts for one third of the UK gambling market.
2017 saw an increase in the level of scrutiny of the gaming industry around the world. In Australia, AUSTRAC fined TapCorp $45m for breaking AML/CTF laws relating to suspicious transactions. The authorities in the gaming haven of Macau brought in a raft of new AML requirements to prevent money laundering, which has so far resulted in a 37% increase in SARs in the first half of 2017. In Canada, law enforcement in British Columbia exposed a huge money laundering scandal involving Chinese high rollers which has resulted in a significant review of the province’s AML rules. As regulators around the world begin to give more attention to the regulation of non-bank financial industries, the industry should expect more knocks at the casino door.
In what may seem like old news, FATF officially released Mexico’s mutual evaluation report last week. The report, which was widely leaked back in November, gives Mexico mixed results for its AML/CTF efforts. On the positive side, Mexico has put in place a national AML/CTF risk assessment and has set about putting in safeguards to minimize identified risks. Major institutions display a good knowledge of some risks faced by the country but an inconsistent knowledge of others. Money laundering and terror financing are recognized but the threat emanating from corruption is poorly understood. Hardly surprising for a country that scores just 30/100 in the Transparency International Corruption Index.
The main deficiency was found in how the country carries out money laundering investigations. It is noted that investigations are neither proactive or systematic, resulting in a very low rate of prosecutions and convictions for money laundering. Another significant concern is Ultimate Beneficial Ownership (UBO) information which is limited across all sectors, with FIs relying on customers to self-declare beneficial ownership.
The report does commend Mexico for making considerable progress since its last evaluation in 2008. However, given the country’s high level of corruption, integral role as a narcotics transit country and increasingly dominant role as a production country – the questions is – will it realistically be able to further improve its AML framework by the time of its next evaluation?
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