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EU update – June 2021

The FCA recently sent a strong worded Dear CEO letter in relation to Financial Crime

The letter covers several areas where the FCA are continuing to see firms failing to comply with ML regulations for a number of reasons. 

There is a common theme throughout, naming a failure to identify risks across differing business units and jurisdiction, and a lack of documentation to support the methodology and rational across risk assessments throughout the AML programme, including Customer Risk Assessment and Enhanced Due Diligence.

This letter quite clearly and rightly states that the Business-wide risk assessment (BWRA) should be used as a “powerful tool to help firms understand their risk exposure, set risk appetite, and inform their mitigating controls”.  So, it makes sense that when reading this letter, Financial Crime teams should be clear where they need to start any review.

Read our opinion blog post here.

UK Regulator gives VASPs yet another extension to their registration deadline

The UKs regulator has given virtual asset firms a second extension to the registration deadline in just 6 month.  Originally January 2021, then 9th July 2021, the deadline will now be March 31st 2022.  This extension is due to a significantly high number of applicants failing to meet the required AML standards.

There are a number of reasons Crypto firms are struggling, not least the lack of inhouse experience and expertise in Risk and Compliance.  It has also been said that the FCAs registration process may be too rigorous, that these firms were not expecting to have to produce business plans, transparency around the organisations ownership and risk assessments of there ML/TF expose. 

The FCA announced that crypto firms would need to comply with ML rules in January 2020. They have had 18 months to prepare for their application and yet only 5 have gained full registration. They need to be as accountable as any other FCA registered firm, so why aren’t they be prepared for the same level of scrutiny?

Rather than any further extensions, perhaps the FCA should draw the line and give the Crypto firms the push to put these standards in place, rather than allowing them to continue to operate without the appropriate AML Program and processes in place.

Covid -19 Con that siphoned $12 million of public money in France

And organised crime group who set up call centres and used shell companies to fraudulently claim $12million worth unemployment benefits meant for those struggling during the Covid 19 pandemic have been arrested in France and Israel.  The funds had been paid into French bank accounts before being transferred across Europe and into virtual currencies.

This is a good example of how quickly criminals adapt to take advantage of the current situation, and how regulators and FIs need to be just as quick to evolve their regulation, guidance, and programmes to stay ahead of these financial crimes.  We also yet again see the proceeds from these crimes being channelled into the virtual asset service providers, a sector regulator are struggling to register, let along monitor.

Mark Smitherman
Sales Director – EMEA and AMERICAS

[email protected]
+44 7741 544194

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