The Joint Committee of the European Supervisory Authorities (ESA) issued on February 10, 2017 draft rules regarding certain anti-money laundering (AML) and counter-terrorism steps for Member States of the European Union (EU). The draft rules seek to provide a consistent framework for payment service providers or electronic money issuers which provide cross-border services within the EU, and which execute transactions exceeding three million Euros annually, to appoint and define the responsibilities of a Central Contract Point, or CCP.

Close up of magnifying glass on the flags of the worldA CCP, required to be appointed by some but not all EU Member States, serves as a point of contact between a Member State’s competent authorities and the firm. The basic responsibilities of a CCP include ensuring a firm’s compliance with the host Member State’s AML and counter-terrorism financing requirements, and facilitating the firm’s supervision by the host Member State’s competent authorities, such as by providing documents and information upon request.  According to the ESA Joint Committee, the draft rules “set out the criteria Member States will consider when deciding whether foreign payment service providers and electronic money issuers should appoint a CCP, and list the functions this CCP should perform. The aim is to support the development of a CCP regime that is clear, proportionate and risk-based, and effectively supports the fight against money laundering and terrorist financing.”

These rules should help mitigate AML and terrorist financing risks by addressing the regulatory arbitrage opportunities that allow certain payments industry companies operating in the EU to avoid AML and counter-terrorism program requirements and supervision.

The ESA, which is comprised of the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority, is seeking comments on the proposed rules through May 5, 2017.

Big Stock Photo_805445On August 30, 2016, the U.S. Department of the Treasury and four U.S. federal banking regulators sought to correct a problem—at least in part one of their own creation—by issuing a “Joint Fact Sheet on Foreign Correspondent Banking” to clarify enforcement priorities regarding AML/BSA and countering the financing of terrorism (CFT) regimes. The Fact Sheet highlighted the importance of maintaining correspondent banking relationships with foreign financial institutions and the value of the free flow of monies within and across global economies.

Continue Reading 2016 Year End Review: Banking Regulators Try to Ease Concerns Over Aggressive AML/BSA Enforcement

As part of the U.S. Treasury Department’s ongoing efforts to prevent possible bad actors from using U.S. companies to conceal money laundering, tax evasion, and other illicit financial activities, FinCEN issued, on May 11, 2016, a final rule to strengthen the customer due diligence (CDD) efforts of “covered financial institutions.” This was one of the most important, if not the most important, AML developments in 2016. Covered institutions have until May 11, 2018, to comply with the new CDD rule, which requires covered financial institutions, including banks, federally insured credit unions, broker-dealers, mutual funds, futures commission merchants, and introducing brokers in commodities, to identify the natural persons that own and control legal entity customers—the entities’ “beneficial owners.”

Continue Reading 2016 Year in Review: FinCEN Finalizes Regulations Regarding Customer Due Diligence

The New York State Department of Financial Services (NYDFS) emerged in 2016 as a leader in AML enforcement by issuing new and detailed AML regulations with the unique requirement of an individual certification of compliance.

On June 30, 2016, the NYDFS finalized a new regulation setting forth rigorous standards for monitoring and filtering programs to monitor transactions for potential AML violations and block transactions prohibited by the Office of Foreign Assets Control (OFAC). The regulation, which became effective on January 1, 2017, applies to all banks, trust companies, private bankers, savings banks, and savings and loan associations chartered under the New York Banking Law (NYBL); branches and agencies of foreign banking corporations licensed under the NYBL to conduct banking operations in New York; and check cashers and money transmitters licensed under the NYBL (collectively, the Regulated Institutions). The NYDFS regulation is instructive to all financial institutions as a benchmark for future standards potentially to be issued by other states and/or federal regulators.

Continue Reading 2016 Year in Review: NYDFS Finalizes Broad AML Regulations