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26/09

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 25th 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.

The substance of the FATF statement is attached as an Annex.

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 São Tomé and Príncipe

The FATF has also drawn attention to the continuing AML/CTF deficiencies in Turkmenistan, Pakistan, and São Tomé and Príncipe.

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.

Notes for editors

1. The Financial Action Task Force is an inter-governmental body established by the G7 in 1989 and today includes as members 32 countries and territories and two regional organisations. 

2. The Government’s strategy is to use financial tools to deter crime and terrorism; detect it when it happens; and disrupt those responsible and hold them to account for their actions. The FATF is central to the UK's international objectives within this strategy.

3. 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”.

4. The FSA requires firms to take reasonable care to establish and maintain systems and controls for countering the risk that the firm might be used to further financial crime.

5. For further information about what the Treasury is doing to combat financial crime, and how to subscribe to financial crime alerts, visit: Financial crime and terrorist financing.

Annex

This reproduces all the relevant material of the FATF statement dated 25 February 2009.

Iran

The FATF welcomes Iran’s initial engagement with the international community on money laundering. However, the FATF remains concerned by Iran’s failure to meaningfully address the ongoing and substantial deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime. The FATF remains particularly concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system. The FATF urges Iran to immediately and meaningfully address its AML/CFT deficiencies, in particular by criminalising terrorist financing and effectively implementing suspicious transaction reporting (STR) requirements.

The FATF reaffirms its call on members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from Iran. Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and take into account ML/FT risks when considering requests by Iranian financial institutions to open branches and subsidiaries in their jurisdiction.

The FATF remains prepared to engage directly in assisting Iran to address its AML/CFT deficiencies, including through the FATF Secretariat.

Uzbekistan

The FATF welcomes the process undertaken by Uzbekistan to adopt comprehensive AML/CFT measures within a specific timeframe. Nevertheless, given that concrete measures to address the identified deficiencies have not yet been implemented, the FATF reiterates its statement of 16 October 2008, calling on its members and urging all jurisdictions to strengthen preventive measures to protect their financial sectors from the ML/FT risk emanating from Uzbekistan.

Turkmenistan

Despite a prolonged dialogue with the FATF and other international institutions, Turkmenistan has not yet made progress in adopting AML legislation. Financial institutions should remain aware that the lack of an AML/CFT regime in Turkmenistan constitutes an ML/FT vulnerability in the international financial system and should take appropriate measures to address this risk. Turkmenistan is urged to adopt without further delay a comprehensive AML/CFT regime that meets international AML/CFT standards. Turkmenistan is encouraged to continue to work closely with the Eurasian Group and the International Monetary Fund to achieve this.

Pakistan

The FATF reaffirms its public statement of 28 February 2008 regarding the ML/FT risks posed by Pakistan. The FATF welcomes the process underway in Pakistan to improve its AML/CFT regime. The FATF encourages Pakistan to continue to fully co-operate with the World Bank and the Asia Pacific Group on Money Laundering (APG) on its mutual evaluation process.

São Tomé and Príncipe

The FATF welcomes São Tomé and Príncipe’s recent steps toward addressing identified AML deficiencies, in particular, through the adoption of an AML law in November 2008. The FATF urges São Tomé and Príncipe to address the remaining AML/CFT deficiencies, particularly relating to terrorist financing.

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