Welcome to our Q2 AML roundup for 2023. This edition includes updates to EC high-risk third-country jurisdictions, new legislation aimed at modernizing the Luxembourg toolbox for investment funds, enhanced private fund reporting in the US and upcoming regulatory deadlines in Cayman.
New sanctions, and rules enhancing the effectiveness of existing sanctions, continue to be a focus for regulators and international bodies around
the globe. The latest changes to which, as outlined within this update, underline the importance of detailed investor KYC at the onboarding stage and effective, regular ongoing monitoring and screening procedures.
If we can support you with KYC and screening, or if you have any questions regarding these regulations more generally, feel free to reach out for a chat with me, or Askender Ouazzani in Luxembourg.
Europe
May
- European Commission updates list of high-risk third-country jurisdictions – The European Commission has updated the list of high-risk third-country jurisdictions presenting strategic deficiencies in their AML/CFT regimes. Nigeria and South Africa were added to the list. Cambodia and Morocco were removed.
- EU Legislation in progress – The EU has issued a briefing on the proposed establishment of a new EU Authority – the Anti-Money-Laundering Authority (AMLA) – to counter money laundering and the financing of terrorism. The Council achieved a partial political agreement on the proposal in June 2022. Following a plenary session, the mandate to enter trilogue negotiations was granted on 17 April 2023.
June
- 11th Package of Sanctions – The EU has adopted an 11th package of sanctions against Russia which will ensure EU Sanctions are even better enforced and implemented. It includes additional listings of over 100 individuals and entities subject to asset freezes.
- EU Russia sanction regime update –the latest EU Publications include a small update with wide reaching effects on screening procedures. It amends one of the criteria for the listing of natural or legal persons, entities or bodies, to include leading businesspersons operating in Russia and their immediate family members, or other natural persons, benefitting from them, as well as businesspersons, legal persons, entities or bodies involved in economic sectors providing a substantial source of revenue to the Government of the Russian Federation.
Luxembourg
March
- The Chambre des Députés issued a first draft of a new bill with the aim of improving and modernizing the Luxembourg toolbox for investment funds and increasing the attractiveness and competitiveness of Luxembourg as a financial centre. It makes amendments to the five sectoral laws (SIF, RAIF, SICAR, UCI and AIFM Laws) regulating funds in Luxembourg. Read the draft bill here.
June
- CSSF FAQ – The CSSF has issued FAQs regarding the AML/CFT Market Entry Form (Funds and IFMs). This publication refers to a list of questions/answers in relation to the completion of the AML/CFT Market Entry Form (Funds and IFMs) in eDesk.
- FATF Mutual Evaluation of Luxembourg – At its most recent Plenary, the FATF discussed and adopted the mutual evaluation report of Luxembourg which assessed the effectiveness of the jurisdiction’s measures to combat money laundering and terrorist financing, and its compliance with FATF Recommendations. It concluded that Luxembourg has reached a high level of technical compliance with FATF requirements and its AML/CFT regime is delivering good results. The FATF will publish its report by September after the completion of its quality and consistency review. Read full details of the Plenary here.
United Kingdom
March
- A new UK list of high risk third countries for the purposes of enhanced customer due diligence requirements has been published. The Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2021 introduces this list (in Schedule 3ZA) which replaces the previous definition in Regulation 33(3)(a). Any references to high-risk third countries within the Guidance are therefore to be interpreted accordingly.
Jersey
May
- Thematic Review – The Role of the MLCO: During Q3 2022, the JFSC undertook a thematic review which assessed the extent to which supervised persons had complied with their regulatory obligations with respect to the role of the MLCO. In May 2023, the Commission published their key findings which identify a range of deficiencies in systems and controls which could expose supervised persons to a heightened risk of failing to prevent or detect financial crime. Read the full report here.
June
- New Sanctions Compliance Obligations – Effective from 1 July 2023, all Supervised persons are subject to updated mandatory AML/CPF/CFT Handbook Codes of Practice related to sanctions compliance under section 6.22. A supervised person must now:
- Undertake sanctions screening for all business relationships and one off transactions.
- Sign up to receive sanctions e-mail alerts from the JFSC and sanctions notices from the Government of Jersey, which are publicly available on the Jersey Gazette.
- Ensure their sanctions monitoring arrangements include an assessment of the effectiveness of their sanctions controls and their compliance with the Jersey sanctions regime.
- Full details, and how to sign up for sanctions alerts and notices are available here.
Guernsey
- Over the last quarter, the jurisdiction has applied a special focus to sanctions and there are ongoing updates in line with the UK. The GFSC, along with the Policy and Resources Committee held an event during the period to highlight the importance of sanctions and take industry questions on the matter.
Cayman Islands
June
- Annual AML Surveys – The Cayman Islands Monetary Authority is circulating its annual AML surveys in accordance with its duties under the Monetary Authority Act (As Revised) to conduct sectoral money laundering (“ML”) / terrorist financing (“TF”) / proliferation financing (“PF”) and sanctions risk assessments and to ensure a risk-based approach to anti-money laundering (“AML”) / counter financing of terrorism (“CFT”) supervision of regulated financial service providers (“FSPs”) in the Cayman Islands. For Investments: Mutual Fund Administrators the survey is available here and is due for completion by 31 July 2023.
- CRS and FATCA Reporting Deadlines
- The deadline for the submission of 2022 CRS and FATCA reports (including any reportable accounts and / or CRS filing declarations) is 31 July 2023.
- CRS Compliance Form: All FIs, including Trustee Documented Trusts, are required to file a CRS Compliance Form in respect of the 2022 reporting period on or before 15 September 2023.
USA
May
- Amendments to Enhance Private Fund Reporting – The SEC announced changes to the Form PF (reporting form for SEC-registered private funds) to facilitate systemic risk protection by the FSCO. This is due in part to private funds tripling in size and becoming interlaced with capital markets. These amendments will require large hedge fund advisers and all private equity fund advisers to file current reports upon key events that could inflict fund harm. The amendments for current reporting will become effective six months after publication of the adopting release in the Federal Register, and the remaining amendments will become effective one year after publication in the Federal Register.
Canada
April
- The Canadian Securities Administrators (the CSA) and the Canadian Council of Insurance Regulators (the CCIR), are adopting enhanced cost disclosure reporting requirements for Segregated Fund Contracts. The Enhancements for the securities sector are contained in amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations. The new Self Regulatory Organization of Canada (New SRO) will amend its member rules, policies and guidance to be consistent with these amendments.
Singapore
May
- Financial Services and Markets (Amendment) Bill – Second Reading Speech. This Bill includes the proposed establishment of a secure digital platform for financial institutions to share with one another, information on customers who exhibit multiple “red flags” that may indicate potential financial crime concerns, if stipulated thresholds are met. These include those who seek to be or have been a customer of a financial institution. This platform will be named COSMIC, which is short for “Collaborative Sharing of ML/TF Information & Cases”. COSMIC will make it easier for financial institutions to detect and thereby deter criminal activity.
International
June
- The FATF updated the list of jurisdictions under increased monitoring, often referred to as the Grey List. Following this latest review, the new jurisdictions subject to increased monitoring are Cameroon, Croatia and Vietnam.
