BaFin Circular 10/2011 (GW) on FATF Updated Public Statement and Information Report

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On 24 June 2011, during its Plenary Meeting held in Mexico City from 22 to 24 June 2011, the Financial Action Task Force on Money Laundering (FATF ) released an updated Public Statement and an updated Information Report, both in a slightly revised format. This is in line with the action agreed in the Plenary Meeting in February 2011 (see Circular 3/2011 (GW) of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin ) dated 8 April 2011).

Business sign: GW 1-GW 2001-2008/0003

28.06.2011

I. a)
FATF public statement dated 24 June 2011 regarding Iran, the Democratic People's Republic of Korea (North Korea) and other countries

The
FATF updated Public Statement dated 24 June 2011 (
Annex 1
) concerns jurisdictions for which key deficiencies have been identified regarding measures to combat money laundering and terrorist financing. The affected countries are divided into two categories, but the definition of category 2 has been partly extended (see the Public Statement dated 22 October 2010 and BaFin

Circular 10/2010
); the only difference is that it includes not only jurisdictions that have not made a commitment to an action plan drawn up in cooperation with FATF to combat substantial deficiencies, but also jurisdictions that have not been able to demonstrate sufficient progress in addressing identified deficiencies (within the scope of an action plan agreed with the FATF ).

1) Jurisdictions subject to a
FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing ( ML/TF ) risks emanating from the jurisdictions.

This category still includes Iran and the Democratic People's Republic of Korea (North Korea). The FATF 's Public Statement dated 25 February 2011 and BaFin Circular 3/2011 ( GW ) continue to apply to both countries. Please refer to BaFin Circular 2/2010 (GW) for information on the measures that must continue to be taken.

2) Jurisdictions with strategic
AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies. The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction, as described below.

This category now includes Bolivia, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria and Turkey (first alternative; the seven countries specified were all expressly warned of this categorisation in February 2011; see the end of the Information Report dated 25 February 2011, Circular 3/2011,
Annex 2
), and Cuba (second alternative).

Business relationships with these countries or with business partners who reside in these countries or transactions from or to these countries require enhanced due diligence and organisational obligations in order to combat the increased risks identified by FATF . The results of the implemented safeguarding and review measures are to be reasonably documented for the internal audit function, the audit of annual financial statements and any special audits. Please refer to BaFin Circular 2/2010 (GW) in this respect.

I. b)
FATF information report dated 24 June 2011 regarding countries under supervision

In the ongoing review of countries by the
FATF and the
FATF
-style regional bodies (
FSRBs
), certain jurisdictions have continued to show deficiencies with regard to the FATF ’s key recommendations.

For details, please refer to the translated FATF Information Report dated 24 June 2011 (Annex 2). Those countries for which the FATF had not seen sufficient progress during the period it had specified, but for which it does not wish to take any further action at this time, are listed separately at the end.

Although there is no direct obligation to take action and no requirement to apply enhanced due diligence and organisational obligations with respect to these countries, the situation in these countries must be taken into consideration when assessing the risks of these countries or persons from these countries in the context of preventing money laundering and terrorist financing.

Argentina is a special case. Argentina is also mentioned in the Information Report, and the President again expressed his deep concern about the situation in Argentina in his report to the Plenary Meeting of 22 to 24 June 2011. In light of this, I expressly refer to BaFin Circular 10/2010 dated 12 November 2010. With the risk having increased significantly, however, consideration should be paid even at the present stage to applying enhanced due diligence to business relationships with Argentina, or with business partners who reside in Argentina, as well as to transactions from or to this country. The results of the implemented safeguarding and review measures are to be reasonably documented for the internal audit function, the audit of annual financial statements and any special audits.

II. Countries and jurisdictions with similar requirements for the prevention of money laundering and terrorist financing

Different provisions of the 3rd EU Anti-Money Laundering Directive (Directive ( EC ) No. 60/2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing) allow for privileged relations with 3rd countries, provided that these 3rd countries offer prevention obligations equivalent to the 3rd Anti-Money Laundering Directive; correspondingly, various provisions of the Act Amending the Combating of Money Laundering (Geldwäschebekämpfungsergänzungsgesetz – GwBekErgG ) also make reference to such 3rd countries.

As the Commission of the European Union (
EU
) has no mandate to draw up an official
EU list of 3rd countries with similar standards, member states of the EU meeting in Brussels as the Committee on the Prevention of Money Laundering and Terrorist Financing ( CPMLTF ) have used stipulated fixed criteria to draw up a list of 3rd countries presumed to be equivalent to the respective prevention standards.

Germany has adopted this evaluation of the
CPMLTF and
BaFin published the list in 2008 for the institutions and companies under its supervision (see BaFin Circular 7/2008 and the BaFin website).

The list initially published in 2008 was revised in February/June 2011. Argentina and New Zealand were removed from the list due to inadequate results in the FATF country-audit reports, and India and the Republic of Korea (South Korea) were added to the list; Aruba was also added to the list of equivalent 3rd countries as an autonomous region of the Netherlands (see footnote 4).

The list agreed by the Member States now includes the following countries and one special administrative zone:

• Australia
• Brazil
• The Hong Kong Special administrative zone of the People’s Republic of China
• India
• Japan
• Canada
• Republic of Korea (South Korea)
• Mexico
• Russian Federation
• Switzerland
• Singapore
• South Africa
• United States of America

The Member States of the
EU and of the European Economic Area (
EEA
) are not required to demonstrate equivalence as they have implemented the 3rd Anti-Money Laundering Directive. Requirements of French overseas territories (Mayotte, New Caledonia, French Polynesia, Saint Pierre and Miquelon, and Wallis and Futuna) and Aruba, Curacao, Saint Maarten, Bonaire, Saint Eustatius, and Saba are also deemed equivalent. These overseas territories and countries are not members of the EU or EEA , but are deemed part of France respectively the Kingdom of the Netherlands for the purposes of the FATF .

In addition and unlike in 2008, due to their positive country-audit reports Germany decided to recognise the United Kingdom crown dependencies (Jersey, Guernsey, Isle of Man) as equivalent, thereby making use of the option granted in the CPMLTF list to recognise these territories as equivalent.

If the list is amended at a future date, BaFin will publish the amended list on its website.

In this respect, please pay express attention to section I of BaFin Circular 14/2009 dated 29 July 2009, which states that the 3rd country equivalence list is merely an indicator of whether or not a financial sector institution or company from that specified country is applying due diligence that meets the obligations of the European Union (for details, please refer to BaFin Circular 14/2009). The current details of each individual circumstance are decisive.

Additional information

FATF
Public Statement

Improving Global
AML

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