This article was written by Sam Aldous.
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. FATF’s members and observers comprise over 200 countries and jurisdictions. As an inter-governmental body, FATF sets international standards and seeks to generate national legislative and regulatory reforms.
FATF acknowledges that the COVID-19 pandemic has led to unprecedented global challenges and economic disruption, and an increase in COVID-19 related crimes. In response, on 4 May FATF issued a paper, which 'identifies challenges, good practices and policy responses to new money laundering and terrorist financing threats and vulnerabilities arising from the COVID-19 crisis'.
The key findings in the paper include that:
- Measures to contain COVID-19 are impacting on the criminal economy and changing criminal behaviour so that profit-driven criminals may move to other forms of illegal conduct.
- The COVID-19 pandemic is impacting government and private sectors’ abilities to implement anti-money laundering and counter terrorist financing (AML/CFT) obligations from supervision, regulation and policy reform to suspicious transaction reporting and international cooperation.
- These threats and vulnerabilities represent emerging money laundering and terrorist financing risks. Such risks could result in:
- Criminals finding ways to bypass customer due diligence measures
- Increased misuse of online financial services and virtual assets to move and conceal illicit funds
- Exploiting economic stimulus measures and insolvency schemes as a means for natural and legal persons to conceal and launder illicit proceeds
- Increased use of the unregulated financial sector, creating additional opportunities for criminals to launder illicit funds
- Misuse and misappropriation of domestic and international financial aid and emergency funding
- Criminals and terrorists exploiting COVID-19 and the associated economic downturn to move into new cash-intensive and high-liquidity lines of business in developing countries.
The paper suggests that AML/CFT policy responses can help support the swift and effective implementation of measures to respond to COVID-19, while managing new risks and vulnerabilities. Example policy responses cited include:
- Domestic coordination to assess the impact of COVID-19 on AML/CFT risks and systems
- Strengthened communication with the private sector
- Encouraging the full use of a risk-based approach to customer due diligence
- Supporting electronic and digital payment options.
If you have any questions about the above, please contact Sam Aldous or your usual Burges Salmon contact.