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Financial Crime Developments - What to expect in 2017?
9th March 2017
Financial Crime on the Regulatory Horizon for 2017
As we mentioned in one of our previous articles, ‘Lessons from 2016 and Your Compliance Agenda for 2017’, most firms will by now have reviewed any anticipated regulatory changes on the horizon and have planned to address them within their compliance and regulatory agenda for the year.
We have previously noted that one of the biggest areas of regulatory change last year was that in relation to financial crime.
Since the Fourth Money Laundering Directive (4MLD) is set to be implemented in June 2017, it seems that regulatory change in relation to financial crime developments is set to continue and increase over 2017.
Let’s take a quick look at what financial crime developments have taken place so far this year and what we know is on the regulatory horizon.
This year, whilst we are still only at the beginning of March, we have already seen the largest ever penalty issued by the UK regulator for AML failings.
On 30 January 2017 Deutsche Bank was fined £163 Million for serious failings in relation to its anti-money laundering (AML) control framework, with the largest regulatory fine ever for this area issued due to the severity of the Bank’s deficiencies.
We have previously summarised Deutsche Bank’s record AML fine and the significant deficiencies the FCA identified during its review. Deutsche Bank’s fine provides a timely reminder to all firms that they should pay close attention to their AML systems and controls. Firms should look at the reasons behind Deutsche Bank’s fine and then look at their own AML systems and controls to ensure they are proportionate, operate efficiently and are adequate for their business and regulatory requirements.
This summer, one of the biggest areas for regulatory change will be the Fourth Money Laundering Directive (4MLD), a far-reaching piece of legislation which must be adopted in the UK and across the rest of Europe by 26th June 2017.
The Fourth Money Laundering Directive (4MLD) was adopted in May 2015 and is to be implemented in all Member States by 26 June 2017. For the UK to implement this, it means updating the existing Money Laundering Regulations (MLR) and the Proceeds of Crime Act (POCA). In addition we can expect the Joint Money Laundering Steering Group (JMLSG) to issue new guidance.
Key drivers for the new directive included global consistency, including the wish to have a consistent sanctioning of breaches along with a reinforced risk-based approach for the EU’s efforts of anti-money laundering (AML) and counter-terrorist financing (CTF).
With greater emphasis on undertaking a risk-based approach, improvements 4MLD will look to establish are:
Thus the key changes 4MLD will bring are those in relation to Enhanced Due Diligence, where the disapplication of EDD will need to be justified; Politically Exposed Persons will include ‘Local’ individuals; there will be a central register of beneficial ownership and application of the framework will be expand beyond EU borders.
For those in Regulation and Compliance departments that are planning for 4MLD, a high level checklist of what you should be looking to cover is as follows:
Whilst 4MLD is set to be implemented this summer, there is already talk of when the Fifth Money Laundering Directive (5MLD) will be implemented, thus with so much on the financial crime regulatory horizon, firms must ensure careful planning in order to properly focus their efforts and target their resources.
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