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.

The Western Union Company (“Western Union”) entered into a deferred prosecution agreement (“DPA”) on January 19th with the Department of Justice, based on alleged willful failures to maintain an effective AML program and the aiding and abetting of wire fraud.  The DPA involved a combined $586 million monetary penalty and also involved related civil enforcement actions by the Federal Trade Commission and FinCEN.  The agreement has been well-publicized and its details will not be repeated here; very generally, the DPA rests on allegations involving conduct stretching from 2004 through 2012 and an overall failure by Western Union to detect and prevent a kaleidoscope of illicit behavior by customers, from structured transactions to an international consumer fraud scheme to potential drug distribution.  To be sure, this is a significant agreement – but it echoes the same general sort of facts and allegations which have become almost standard in large AML enforcement actions. However, the Western Union action contains at least one interesting wrinkle. Continue Reading The Western Union DPA and the Need to Investigate One’s Own