Circular Letter No. CC/2020/00000023: Measures to Adopt Regarding AML/CFT Prevention in the Context of the COVID-19 Pandemic

Circular Letter No. CC/2020/00000023 Sent to: Credit Institutions; Financial Companies; Payment Institutions and Electronic Money Institutions. Mod. 40000375/T – 01/14 Subject: Measures to adopt regarding AML/CFT prevention, in the context of the COVID-19 pandemic

The Banco de Portugal has been adopting a set of measures related to its supervisory competences with a view to ensuring that financial institutions continue to perform their role in financing the real economy in the face of the impact generated by the pandemic caused by the new Coronavirus (SARS-CoV-2), also known as COVID-19.

Nevertheless, the prevention of money laundering and terrorist financing (AML/CFT) is an essential condition for safeguarding the integrity, stability and effectiveness of financial markets.

In this regard, the Banco de Portugal, under the provisions of Article 120 of Law No. 83/2017 of August 18, reminds financial institutions that, without prejudice to the extraordinary circumstances of the present moment, they must continue to implement effective systems and controls that ensure that the financial system is not instrumentalized for AML/CFT purposes.

More specifically:

• It warns that, although most economies are currently facing adverse circumstances, and their financial flows are likely to decrease, experience from past crises suggests that, in many cases, illicit financing will continue to flow. In line with this premise, there has been an increase in the incidence of cybercrimes and frauds related to the COVID-19 pandemic (especially directed at vulnerable groups), as well as resale by criminal networks of products with reduced availability at speculative prices.

• It reminds that financial institutions must remain attentive to emerging AML/CFT risks and the characteristics of this phenomenon, adapting their risk assessments as necessary in consonance with any new realities, and in any case ensuring their capacity to detect and report suspicious transactions. Financial institutions must be aware that the current circumstances are appealing to persons or criminal organizations, mainly considering the probability that, in view of the current scenario, they may assume that there will be a reallocation of resources usually focused on AML/CFT prevention.

• It reminds that financial institutions must continue to monitor transactions, paying particular attention to unusual or suspicious patterns, both in the behavior of their clients and in their financial flows. In particular, based on a risk analysis, they must implement adequate measures to establish the origin of unexpected financial flows from clients in sectors that have suffered or will suffer impacts caused by economic slowdown and mitigation measures applied in response to COVID-19.

• It encourages that, without neglecting the legal and regulatory requirements applicable to them, the use of digital/contactless payments and digital onboarding is prioritized, and simplified measures are applied in the distribution of government aid related to the response to the pandemic.

• It encourages that, based on a risk-based approach and without neglecting the applicable legal and regulatory requirements, financial institutions ensure that the activity of non-profit organizations is not unnecessarily delayed, interrupted or discouraged.

Mod. 40000375/T – 01/14

• It informs that, whenever justified, it will continue to disseminate information on new typologies and emerging AML/CFT risks associated with the current adverse context.

• It reminds that measures for the relaxation of regulatory and supervisory requirements have been determined, namely through Circular Letter of the Banco de Portugal No. CC/2020/00000017 of March 16, 2020.

These measures are in line with the guidelines issued by the European Banking Authority (EBA) in its Statement on actions to mitigate financial crime risks in the COVID-19 pandemic (of March 31, 2020) and by the Financial Action Task Force (FATF) in its Statement by the FATF President: COVID-19 and measures to combat illicit financing (of April 1, 2020), the content of which financial institutions must consider together with the content of this Circular Letter, for the purposes of Article 6 of Notice of the Banco de Portugal No. 2/2018 of September 26.