Compliance Resource

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Questions about Anti-Money Laundering

  1. What is money laundering?

    Money laundering is the conversion of the proceeds of criminal activity into apparently clean funds, usually via the financial system. This is done by disguising the sources of the money, changing its form, or moving the funds to a place where they are less likely to attract attention.

    “Criminal activity” includes fraud, corruption, drug dealing and other serious crimes.

  2. What is terrorist financing?

    Terrorist financing is the provision or collection of funds, by any means, directly or indirectly, with the intention or in the knowledge that they would be used in order to carry out terrorist offences.

  3. How the EU directive complies with FATF revised international standards?

    • Consolidating the risk-based approach: The new standards put more focus on the risk-based approach. This means that countries need to clearly understand the money laundering and terrorist financing risks which affect them, and adapt their Anti Money laundering/Counter Financing of Terrorism (AML/CFT) system to the nature of these risks – with enhanced measures where the risks are higher and the option of simplified measures where the risks are lower. Thus, countries will be able to target their resources more effectively and apply preventative measures that correspond to the risks of particular sectors or activities. A well-implemented risk-based approach means that the AML/CFT system will be more effective and less costly.

    • Improving Transparency measures: There is a lack of transparency at the moment around the ownership of companies, making them potentially vulnerable to misuse by criminals and terrorists. The new Recommendations have strengthened transparency requirements. Reliable information available about the ownership and control of companies, trusts, and other legal persons or legal arrangements is required as well as more rigorous requirements on the information which must accompany electronic funds transfers. Measures to improve transparency, implemented on a global basis, will make it harder for criminals and terrorists to conceal their activities.

    • Towards more effective International Cooperation: With the increasing globalisation of money laundering and terrorist financing threats, the FATF has also enhanced the scope of international cooperation between government agencies, and between financial groups (e.g. simplified extradition mechanisms). The revised Recommendations will allow more effective exchanges of information, tracing, freezing, confiscation and repatriation of illegal assets.

    • Identification of clear Operational Standards: The FATF Recommendations concerned with law enforcement and FIUs have been expanded significantly. The revisions clarify the role and functions of the operational agencies responsible for combating money laundering and terrorist financing; and set out the range of investigative techniques and powers which should be available to them.

    • New threats & new priorities to be covered: The FATF has also addressed new and aggravated threats and responded to the priorities set out by the international community, e.g. through the G20, in particular:

    • Corruption & Politically Exposed Persons: The FATF Recommendations tighten the requirements on “politically exposed persons”; i.e. people who may represent a higher risk of corruption by virtue of the positions they hold. The requirement to apply enhanced due diligence to foreign politically exposed persons has been expanded with the new Recommendations also applying to domestic politically exposed persons and international organisations, and to the family and close associates of all politically exposed persons – reflecting the methods used by corrupt officials and kleptocrats to launder the proceeds of corruption.

    • Tax Crimes The list of predicate offences for money laundering has been expanded to include tax crimes which are brought within the scope of the powers and authorities used to combat money laundering. This will contribute to better coordination between AML and Tax authorities, and remove potential obstacles to international cooperation regarding tax crimes.

    • Terrorist Financing The financing of terrorism remains a serious concern for the international community, and a major focus of the FATF. The Recommendations reflect both the fact that terrorist financing is a long-standing concern, and the close connections between anti-money laundering measures and measures to counter the financing of terrorism.

For more information, please check EU’s Website