Guidance to Financial Institutions Based on the Financial Action Task Force Publication on Anti-Money Laundering and Counter-Terrorist Financing Risks

Advisory
FIN-2010-A003
Issued: March 18, 2010
Subject: Guidance to Financial Institutions Based on the Financial Action Task Force Publication on Anti-Money Laundering and Counter-Terrorist Financing Risks posed by Antigua and Barbuda; Azerbaijan; Bolivia; Greece; Indonesia, Kenya; Morocco; Burma; Nepal; Nigeria; Paraguay; Qatar; Sri Lanka; Sudan; Syria; Trinidad and Tobago; Thailand; Turkey; Ukraine; and Yemen. The Financial Crimes Enforcement Network (FinCEN) is issuing this advisory to inform banks and other financial institutions operating in the United States of the risks associated with jurisdictions identified by the Financial Action Task Force (FATF) 1 on February 18, 2010, as having deficiencies in their anti-money laundering and counter-terrorist financing (AML/CFT) regimes. 2

The FATF publication comes in response to the G-20 leaders’ call for the FATF to reinvigorate its process for assessing countries’ compliance with international AML/CFT standards and to publicly identify high risk jurisdictions.3 The text highlights jurisdictions with strategic AML/CFT deficiencies for which each jurisdiction has provided a high-level political commitment to address the specific AML/CFT deficiencies. FATF explains its specific concerns regarding each of the jurisdictions and notes it will continue to monitor the implementation of each jurisdiction’s action plan for addressing the deficiencies. On an ongoing basis, FATF will continue to update information on these and other jurisdictions that pose a risk to the international financial system.

1 The FATF is a 35 member inter-governmental policy-making body whose purpose is to establish international standards and develop and promote policies, both at national and international levels, to combat money laundering and terrorist financing. See www.fatf-gafi.org. The United States is a member of the FATF. See also, previous FATF statements of October 11, 2007, at www.fatf-gafi.org/dataoecd/1/2/39481684.pdf; February 28, 2008, at www.fatf-gafi.org/dataoecd/16/26/40181037.pdf; June 20, 2008, at www.fatf-gafi.org/dataoecd/50/1/40879782.pdf; October 16, 2008, at www.fatf-gafi.org/dataoecd/25/17/41508956.pdf; and February 25, 2009, at www.fatf-gafi.org/dataoecd/18/28/42242615.pdf. 2 The FATF issued two documents: (i) a public statement at http://www.fatf-gafi.org/dataoecd/34/29/44636171.pdf; and (ii) a publication entitled “Improving Global AML/CFT Compliance: Ongoing Process,” at http://www.fatf-gafi.org/dataoecd/34/28/44636196.pdf. 3 See “Declaration on Strengthening the Financial System: London Summit, April 2, 2009,” at http://www.pittsburghsummit.gov/resources/125091.htm and “Leaders' Statement: The Pittsburgh Summit, September 24 – 25, 2009,” at http://www.pittsburghsummit.gov/mediacenter/129639.htm.

Also note that FinCEN is issuing today a complementary advisory, FIN-2010-A002,4 which addresses a separate but related FATF document regarding a different group of jurisdictions. IMPROVING GLOBAL AML/CFT COMPLIANCE:
ON-GOING PROCESS
18 February 20105
As pa rt of i ts ongoing r eview of c ompliance w ith t he A ML/CFT standards, t he F ATF has to d ate id entified th e f ollowing jurisdictions w hich h ave s trategic A ML/CFT deficiencies f or which they have developed an action plan with the FATF. While the situations differ among each jurisdiction, each jurisdiction has provided a written high-level political commitment to address the identified deficiencies. FATF welcomes these commitments. A large number of jurisdictions have not yet been reviewed by the FATF. The FATF will continue to identify additional jurisdictions, on an ongoing basis, that pose a risk in the international financial system. The FATF has already begun an initial review of a number of s uch j urisdictions a s part of t his pr ocess and w ill pr esent i ts findings later this year. The F ATF a nd t he F SRBs w ill c ontinue t o w ork w ith t he jurisdictions not ed be low a nd t o report on t he progress m ade i n addressing t he i dentified d eficiencies. The FATF cal ls o n t hese jurisdictions to c omplete th e imp lementation o f a ction p lans expeditiously and within the proposed timeframes. The FATF will closely m onitor t he i mplementation of t hese a ction pl ans a nd encourages i ts m embers t o c onsider t he i nformation pr esented below. Antigua and Barbuda Antigua and Barbuda ha s demonstrated progress in improving its AML/CFT regime; however, the FATF has determined that certain strategic AML/CFT deficiencies remain. Antigua and Barbuda has made a h igh-level p olitical c ommitment to w ork w ith th e FATF and C FATF t o a ddress t hese de ficiencies, i ncluding b y: ( 1)

4 Website of Advisory at www.fincen.gov/statutes_regs/guidance/html/fin-2010-a002.html 5 The text makes reference to the relevant FATF-style regional bodies (FSRBs) with whom FATF will continue to work to address the deficiencies identified. These FSRBs include: Caribbean Financial Action Task Force (CFATF); the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL); Financial Action Task Force of South America Against Money Laundering (GAFISUD); Asia/Pacific Group on Money Laundering (APG); Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG); Middle East & North Africa Financial Action Task Force (MENAFATF); and Intergovernmental Anti-Money Laundering Group in Africa (GIABA).

establishing a nd i mplementing an a dequate l egal f ramework fo r identifying and freezing terrorist assets (Special Recommendation III); ( 2) i mproving t he ove rall s upervisory f ramework (Recommendation 23) ; a nd ( 3) e nhancing f inancial t ransparency (Recommendation 4). Azerbaijan Azerbaijan has demonstrated progress in improving its AML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT deficiencies remain. Azerbaijan has made a high-level political commitment to work with the FATF and MONEYVAL to address t hese d eficiencies, i ncluding b y: ( 1) a dequately criminalising m oney l aundering and t errorist f inancing (Recommendation 1 a nd S pecial R ecommendation II); ( 2) amending r elevant l aws or regulations t o address de ficiencies i n customer d ue d iligence r equirements ( Recommendation 5) ; ( 3) establishing and implementing adequate procedures to identify and freeze t errorist as sets (Special R ecommendation III); an d ( 4) ensuring a f ully operational a nd e ffectively functioning FIU (Recommendation 26). Bolivia The F ATF h as d etermined th at B olivia’s A ML/CFT r egime contains ce rtain s trategic d eficiencies. B olivia has ex pressed a high-level p olitical c ommitment to a ddress th ese d eficiencies. Bolivia s hould w ork w ith t he F ATF a nd G AFISUD t o a ddress these deficiencies, including by: (1) adequately criminalise money laundering and the financing of terrorism (Recommendation 1 and Special Recommendation II); (2) establishing and implementing an adequate l egal f ramework f or i dentifying an d f reezing t errorist assets ( Special R ecommendation III); ( 3) e stablishing a f ully operational an d e ffective F inancial Intelligence U nit (Recommendation 26). Greece Greece h as de monstrated pr ogress, i ncluding as i ndicated i n t he most recent F ATF en hanced F ollow-Up R eport on G reece, i n improving its A ML/CFT r egime; h owever, t he F ATF h as determined t hat c ertain strategic A ML/CFT d eficiencies r emain. Greece has made a h igh-level political commitment to work with the F ATF a nd ha s p rovided a s hort t erm a ction pl an t o address these d eficiencies, i ncluding b y: (1) ad dressing r emaining i ssues regarding a dequately c riminalising te rrorist f inancing ( Special

Recommendation II); ( 2) i mproving m echanisms a nd pr ocedures for freezing terrorist assets (Special Recommendation III); and (3) enhancing the effectiveness of the FIU (Recommendation 26). Indonesia Indonesia ha s de monstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. Indonesia h as made a h igh-level political commitment to work with the FATF and APG to address these d eficiencies, i ncluding b y: ( 1) ad equately criminalising money laundering and terrorist financing (Recommendation 1 a nd Special R ecommendation II); ( 2) e stablishing a nd i mplementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); and (3) amending and implementing laws or other i nstruments t o f ully i mplementing t he 19 99 International Convention for the Suppression of the [sic] Financing of Terrorism (Special Recommendation I).

Kenya
Kenya has d emonstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. K enya h as m ade a h igh-level political commitment to work with the FATF and ESAAMLG to address t hese d eficiencies, i ncluding b y: 1) a dequately criminalising m oney l aundering and t errorist f inancing (Recommendation 1 and Special Recommendation II); 2) ensuring a f ully o perational and ef fectively f unctioning F inancial Intelligence U nit ( Recommendation 2 6); 3 ) establishing a nd implementing an ad equate l egal f ramework f or i dentifying an d freezing te rrorist a ssets (Special R ecommendation III); 4 ) raising awareness o f AML/CFT i ssues w ithin t he l aw en forcement community (Recommendation 27); and (5) implementing effective, proportionate and dissuasive sanctions in order to deal with natural or l egal p ersons t hat do not c omply w ith t he na tional A ML/CFT requirements (Recommendation 17). Morocco Morocco ha s de monstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, t he FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. M orocco h as m ade a h igh-level political commitment to work with the FATF and MENAFATF to address t hese de ficiencies, i ncluding b y: (1) a mending t he pe nal code t o e xtend t he scope of t he M L an d F T o ffences (Recommendation 1 a nd S pecial R ecommendation II); ( 2) amending r elevant l aws or regulations t o address de ficiencies i n customer due diligence requirements (Recommendation 5); and (3) ensuring a fully op erational a nd e ffectively f unctioning F inancial Intelligence Unit (Recommendation 26).

Myanmar
Myanmar has de monstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. M yanmar h as made a h igh-level political commitment to work with the FATF and APG to address these d eficiencies, including b y: ( 1) a dequately criminalising money laundering and terrorist financing (Recommendation 1 a nd Special R ecommendation II); ( 2) e stablishing a nd i mplementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) strengthening the extradition framework in relation to terrorist financing (Recommendation 35 a nd Special Recommendation I); ( 4) e nsuring a fully operational and effectively f unctioning Financial Intelligence U nit (Recommendation 26) ; ( 5) enhancing financial t ransparency (Recommendation 4) ; a nd ( 6) s trengthening c ustomer due diligence measures (Recommendations 5). Nepal Nepal ha s d emonstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT deficiencies r emain. N epal h as m ade a h igh-level political commitment to work with the FATF and APG to address these d eficiencies, i ncluding b y: ( 1) ad equately criminalising money laundering and terrorist financing (Recommendation 1 a nd Special R ecommendation II); ( 2) e stablishing a nd i mplementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); ( 3) i mplementing a dequate pr ocedures f or the c onfiscation of funds r elated t o m oney l aundering (Recommendation 3) ; a nd ( 4) enacting a nd imp lementing appropriate mu tual le gal a ssistance le gislation ( Recommendation 36). Nigeria Nigeria h as d emonstrated p rogress in imp roving its AML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies remain. N igeria ha s m ade a hi gh-level political c ommitment to w ork w ith th e F ATF a nd G IABA to address t hese de ficiencies, i ncluding b y: ( 1) a dequately criminalising m oney l aundering and t errorist f inancing (Recommendation 1 a nd S pecial R ecommendation II); ( 2) implementing adequate procedures to identify a nd freeze terrorist assets ( Special R ecommendation III); ( 3) en suring t hat r elevant laws or regulations address deficiencies in customer due diligence

requirements a nd th at th ey a pply to a ll f inancial in stitutions (Recommendation 5) ; and ( 5) de monstrating t hat A ML/CFT supervision i s unde rtaken e ffectively a cross t he f inancial s ector (Recommendation 23). Paraguay Paraguay h as de monstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, t he FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies remain. P araguay h as m ade a h igh-level political c ommitment to w ork w ith th e F ATF a nd G AFISUD to address t hese de ficiencies, i ncluding b y: ( 1) a dequately criminalising terrorist financing (Special Recommendation II); (2) establishing and i mplementing adequate pr ocedures t o i dentify, freeze an d confiscate t errorist as sets ( Special R ecommendation III); (3) improving financial transparency (Recommendation 4); (4) improving a nd br oadening c ustomer due di ligence m easures (Recommendation 5) , a nd ( 5) de veloping a nd i mplementing effective c ontrols for c ross-border cash t ransactions ( Special Recommendation IX). Qatar Qatar h as d emonstrated p rogress in imp roving its A ML/CFT regime; h owever, t he FATF h as d etermined t hat c ertain s trategic AML/CFT d eficiencies r emain. Qatar h as m ade a h igh-level political commitment to work with the FATF and MENAFATF to address t hese de ficiencies, i ncluding b y: ( 1) a dequately criminalising m oney l aundering and t errorist f inancing (Recommendation 1 a nd S pecial R ecommendation II); ( 2) implementing adequate procedures to identify a nd freeze terrorist assets ( Special R ecommendation III); ( 3) in stituting a dequate regulatory in structions f or A ML/CFT, p articularly w ith regard to customer due diligence (Recommendation 5); and (4) ensuring that financial in stitutions a re p roperly f ulfilling th eir o bligations to report s uspicious t ransactions a nd a re receiving a ppropriate guidance (Recommendation 13 and Special Recommendation IV). Sri Lanka Sri Lanka ha s de monstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies remain. S ri Lanka h as made a h igh-level political commitment to work with the FATF and APG to address these d eficiencies, in cluding b y: ( 1) a dequately criminalising money laundering and terrorist financing (Recommendation 1 a nd

Special R ecommendation II); a nd ( 2) establishing a nd implementing adequate procedures to identify a nd freeze terrorist assets (Special Recommendation III). Sudan Sudan has de monstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. S udan h as m ade a h igh-level political commitment to work with the FATF and MENAFATF to address t hese d eficiencies, in cluding b y: ( 1) imp lementing adequate p rocedures f or i dentifying an d f reezing t errorist as sets (Special Recommendation III); (2) ensuring a fully operational and effectively f unctioning Financial Intelligence U nit (Recommendation 26); (3) ensuring financial institutions are aware of and comply with their obligations to file suspicious transaction reports in relation to ML and FT (Recommendation 13 and Special Recommendation IV) and ( 4) i mplementing a s upervisory programme f or t he r egulators t o e nsure compliance w ith th e provisions of the new law and regulations (Recommendation 23). Syria Syria h as d emonstrated p rogress in imp roving its A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. S yria h as m ade a h igh-level political commitment to work with the FATF and MENAFATF to address t hese de ficiencies, i ncluding b y: (1) a dopting a dequate measures t o i mplement a nd e nforce t he 19 99 International Convention for the Suppression of Financing of Terrorism (Special Recommendation I ); ( 2) adequately c riminalising terrorist financing ( Special R ecommendation II); ( 3) imp lementing adequate p rocedures f or i dentifying an d f reezing t errorist as sets (Special R ecommendation III); ( 4) e nsuring f inancial in stitutions are aware of a nd c omply with t heir obl igations t o f ile s uspicious transaction reports in relation to ML and FT (Recommendation 13 and S pecial R ecommendation IV) a nd ( 5) adopting a ppropriate laws a nd pr ocedures t o pr ovide m utual l egal assistance (Recommendations 36-38, Special Recommendation V). Trinidad and Tobago Trinidad a nd T obago ha s de monstrated p rogress i n i mproving i ts AML/CFT regime; however, the FATF has determined that certain strategic AML/CFT deficiencies remain. Trinidad and Tobago has made a h igh-level p olitical c ommitment to w ork w ith th e FATF

and t he C FATF t o a ddress t hese de ficiencies, i ncluding b y: ( 1) implementing adequate procedures to identify a nd freeze terrorist assets w ithout d elay ( Special R ecommendation III); ( 2) implementing a dequate procedures f or t he c onfiscation of funds related to money laundering (Recommendation 3); (3) ensuring a fully op erational a nd effectively f unctioning F IU, i ncluding supervisory powers (Recommendation 26). Thailand Thailand ha s de monstrated pr ogress i n imp roving its AML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies remain. T hailand h as m ade a h igh-level political commitment to work with the FATF and APG to address these d eficiencies, i ncluding b y: ( 1) ad equately c riminalising terrorist f inancing ( Special R ecommendation II); ( 2) e stablishing and i mplementing adequate pr ocedures t o i dentify and f reeze terrorist a ssets ( Special R ecommendation III); a nd (3) further strengthening AML/CFT supervision (Recommendation 23). Turkey Turkey ha s d emonstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies r emain. T urkey h as made a h igh-level political c ommitment to w ork w ith th e F ATF to a ddress th ese deficiencies, in cluding by: ( 1) a dequately c riminalising te rrorist financing (Special Recommendation II); and (2) implementing an adequate l egal f ramework f or i dentifying an d f reezing t errorist assets (Special Recommendation III). Ukraine Ukraine h as d emonstrated p rogress in imp roving its A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic AML/CFT d eficiencies remain. U kraine h as m ade a h igh-level political commitment to work with the FATF and MONEYVAL to address t hese d eficiencies, including b y: ( 1) a dequately criminalising m oney l aundering and t errorist f inancing (Recommendation 1 a nd S pecial R ecommendation II), ( 2) enhancing f inancial t ransparency (Recommendation 4) ; a nd ( 3) establishing a nd imp lementing an a dequate le gal f ramework for identifying and freezing terrorist assets (Special Recommendation III).

Yemen
Yemen has d emonstrated pr ogress i n i mproving i ts A ML/CFT regime; h owever, th e FATF h as d etermined th at c ertain s trategic deficiencies r emain. Y emen h as m ade a h igh-level p olitical commitment to work with the FATF and MENAFATF to address these d eficiencies, i ncluding b y: ( 1) a dequately criminalising money l aundering ( Recommendation 1) ; ( 2) e stablishing a nd implementing adequate procedures to identify a nd freeze terrorist assets ( Special R ecommendation III); ( 3) i ssuing s ubstantive guidance/instructions to reporting institutions with respect to their ML/FT obl igations ( Recommendation 25) ; ( 4) de veloping t he monitoring a nd s upervisory c apacity of t he f inancial s ector supervisory a uthorities and t he F IU, t o e nsuring c ompliance b y financial in stitutions w ith th eir S TR obligations, e specially in relation t o F T ( Recommendation 23) ; a nd ( 5) e nsuring a f ully operational and effectively functioning Financial Intelligence Unit (Recommendation 26). FinCEN Guidance U.S. financial institutions should consider the risks associated with the AML/CFT deficiencies of jurisdictions in the FATF publication entitled, “Improving Global AML/CFT Compliance:
Ongoing Process:” Antigua and Barbuda; Azerbaijan; Bolivia; Greece; Indonesia; Kenya; Morocco; Burma (Myanmar); Nepal; Nigeria; Paraguay; Qatar; Sri Lanka; Sudan; Syria; Trinidad and Tobago; Thailand; Turkey; Ukraine; and Yemen. With respect to these jurisdictions, U.S. financial institutions are reminded of their obligations to comply with the general due diligence obligations under 31 CFR § 103.176(a). As required under 31 CFR § 103.176(a), covered financial institutions should ensure that their due diligence programs, which address correspondent accounts maintained for foreign financial institutions, include appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States. Additionally, as required under 31 CFR §§ 103.15 – 103.21, if a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that a customer has otherwise engaged in activities indicative of money laundering, terrorist financing, or other violation of federal law or regulation, the financial institution shall then file a Suspicious Activity Report.