Money laundering and the financing of terrorism - European Union Committee Contents


Annex

FATF ADVISORY NOTICE

11 March 2009

HM TREASURY WARNS BUSINESSES OF SERIOUS THREATS POSED TO THE INTERNATIONAL FINANCIAL SYSTEM

Important

  This notice constitutes advice issued by HM Treasury about serious threats posed to the integrity of the international financial system. The Money Laundering Regulations 2007 require firms to put in place policies, procedures or systems in order to prevent money laundering or terrorist financing. Regulated businesses are also required to apply enhanced customer due diligence and enhanced ongoing monitoring on a risk-sensitive basis in certain defined situations and in "any other situation which by its nature can present a higher risk of money laundering or terrorist financing".

On 25 February 2009 the Financial Action Task Force (FATF) issued a statement drawing attention to deficiencies in several jurisdictions of concern. The UK fully supports the work of the FATF on these matters and HM Treasury agrees with the FATF's assessments.

The UK additionally draws attention to, and supports, the public statement of MONEYVAL (a FATF style regional body under the auspices of the Council of Europe) of 12 December 2008 in respect of Azerbaijan.

Iran

  The FATF announced that it remains concerned by Iran's failure to meaningfully address the deficiencies in its anti-money laundering and combating terrorist financing (AML/CTF) regime, particularly in respect of terrorist financing and suspicious activity reporting.

The FATF has called on its members to consider effective countermeasures to protect their financial sectors from risks emanating from Iran, and to protect against the use of correspondent banking relationships to bypass or. evade counter-measures and risk mitigation practices.

  All UK businesses regulated under the Money Laundering Regulations 2007, whether financial institutions or other regulated persons should treat transactions associated with Iran as situations that by their nature can present a higher risk of money laundering or terrorist financing, and which therefore require increased scrutiny, enhanced due diligence, and ongoing monitoring, including in the case of correspondent relationships.

  All other persons authorised by the Financial Services Authority should also take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

  In the light of the call for countermeasures the UK is, in addition, considering what further action is required.

Uzbekistan

  The FATF has also drawn attention to the continuing AML/CTF deficiencies in Uzbekistan.

The attention of UK financial institutions and other persons regulated for money-laundering purposes is therefore drawn to the FATF statement in respect of this jurisdiction, and the risk that it continues to present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

Turkmenistan, Pakistan, and Sao Tome and Principe

  The FATF has also drawn attention to the continuing AML/CTF deficiencies in Turkmenistan, Pakistan, and Sao Tome and Principe,

The attention of UK financial institutions regulated for money laundering purposes is therefore drawn to the FATF statements in respect of those jurisdictions, and the risks that they continue to present. They should take this advice into account in respect of their systems and controls to counter financial crime, and take appropriate actions to minimise the associated risks.

The northern part of Cyprus

  The northern part of Cyprus is no longer highlighted as a jurisdiction of concern, following improvements made to its AML/CTF regime.

Azerbaijan

MONEYVAL drew attention to deficiencies in the AML/CTF regime in Azerbaijan in December 2008.

The attention of UK financial institutions regulated for money laundering purposes is therefore drawn to the MONEYVAL statement in respect of this jurisdiction, and the risks that it continues to present.

  This advice is effective immediately.

HM TREASURY CONTRIBUTION TO Q166-Q169

  Lord Hodgson in Questions 166 to 169 raised the issue of reliance on third parties to carry out customer due diligence and possible sanctions, and relevant guidance.

As was explained in the hearing, the legal provisions relating to reliance are contained in Regulations 17 and 19 of the Money Laundering Regulations 2007. These provisions are intended to provide a basis for reducing the incidence of duplicative or repetitive checks, while ensuring there is continuing clarity that the relevant person remains responsible for any failure to apply the necessary measures.

  The regulations set out the circumstances in which a relevant person can rely upon another, and the nature of the persons who can be relied upon, nationally and internationally.

  It is difficult to comment on the hypothetical possibility of a civil penalty or prosecution where there has been reliance. In a case where a person who has relied on another has acted with appropriate care and in good faith that would be a relevant factor.

  In addition, where a person has acted in accordance with approved guidance that should be taken into account under Regulations 42(3) and 45(2). (Regulations 42(3) and 45(2) require the relevant authority or court respectively to take compliance with approved guidance into account.)

  The Joint Money Laundering Steering Group (JMLSG) has, for example, produced detailed guidance on reliance which can be found in section 5.6 of Part 1 of their December 2007 guidance for the UK financial sector. The JMLSG guidance is available at their website:

  http://www.jmlsg.org.uk/bba/jsp/polopoly.jsp;jsessionid=af7paEXXEUDd?d=749

  In addition to the JMLSG guidance, HM Treasury has approved several other sets of guidance, for Notaries, accountancy bodies and firms supervised by HM Revenue and Customs, and is considering several other sets including one for the legal profession.




 
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