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103/09

10 November 2009

Statement on money laundering controls in overseas jurisdictions

This notice constitutes advice issued by HM Treasury about risks posed by unsatisfactory money laundering controls in a number of jurisdictions. 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 16th October 2009 the Financial Action Task Force (FATF) issued a further 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 assessments.

The UK additionally draws attention to, and supports, the public statements of MONEYVAL (a FATF style regional body under the auspices of the Council of Europe) in respect of Azerbaijan in December 2008, March 2009 and September 2009.

This advice is effective immediately.

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

Iran

The FATF is concerned about Iran’s lack of engagement with the FATF and its failure to meaningfully address the ongoing and substantial deficiencies in its AML/CFT regime. 

The FATF has called on its members to apply 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.  The FATF has further warned that it will call upon its members and other jurisdictions to strengthen counter-measures at it’s next meeting in February 2010 if Iran fails to take concrete steps to improve the deficiencies in its AML/CFT regime. 

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, particularly where correspondent relationships are involved, which have been highlighted as a particular risk. 

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.

Further to the call for countermeasures by the FATF, on the 12 October 2009, HM Treasury issued a direction under the Counter Terrorism Act to the UK financial sector to cease all business relationships and transactions with Bank Mellat and Islamic Republic of Iran Shipping Lines (IRISL).  For further information on these directions, please see the HM Treasury website.

Pakistan

The FATF has expressed its concern at the approaching expiry of Pakistan’s Anti-Money Laundering Ordinance, and has urged Pakistan to implement a permanent AML/CFT framework before the Ordinance expires.  The FATF also noted that it would consider taking action to protect the financial system from money laundering and terrorist financing risk emanating from Pakistan in February 2010 if concrete progress has not been made by that date. 

UK financial institutions regulated for money laundering purposes should pay attention to the latest FATF statement in respect of Pakistan and the risks it presents.   Financial institutions 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.

Uzbekistan, Turkmenistan and São Tomé and Príncipe

The FATF has also drawn attention to the continuing AML/CTF deficiencies in Uzbekistan, Turkmenistan, 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.

Azerbaijan

MONEYVAL drew attention to deficiencies in the AML/CTF regime in Azerbaijan through statements in December 2008, March 2009 and September 2009.

The attention of UK financial institutions regulated for money laundering purposes is therefore drawn to the latest MONEYVAL statement in respect of this jurisdiction, and the risks that it continues to present.

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 16 October 2009.

Iran

The FATF is concerned by Iran’s lack of engagement with the FATF and its 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 reaffirms its 25 February 2009 call 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.  FATF continues to urge jurisdictions to protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and to take into account ML/FT risks when considering requests by Iranian financial institutions to open branches and subsidiaries in their jurisdiction.  If Iran fails to take concrete steps to improve its AML/CFT regime, the FATF will consider calling on its members and urging all jurisdictions to strengthen counter-measures in February 2010.

Uzbekistan

The FATF welcomes the significant steps that Uzbekistan has taken to establish the necessary AML/CFT framework and urges Uzbekistan to continue its progress towards implementing effective AML/CFT measures.  The FATF welcomes Uzbekistan’s upcoming mutual evaluation by the EAG that will be finalized in spring 2010.  The FATF will continue to monitor the progress being made in Uzbekistan and will reconsider in February 2010 the measures that are currently in place to protect jurisdictions’ financial sectors from ML/FT risks emanating from Uzbekistan.

Turkmenistan

The FATF welcomes Turkmenistan’s progress in adopting AML/CFT legislation and secondary legislation that aims to implement the AML/CFT law.  However, deficiencies remain in Turkmenistan’s AML/CFT regime, including the absence of a Financial Intelligence Unit (FIU).  Consequently, the FATF reiterates its 25 February 2009 statement informing financial institutions that these deficiencies constitute an ML/FT vulnerability in the international financial system and that they should take appropriate measures to address this risk. Turkmenistan is urged to continue to take steps to implement an 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 welcomes the close co-operation between Pakistan and the Asia/Pacific Group on Money Laundering (APG), but remains concerned regarding the ML/FT risks posed by Pakistan and reaffirms its public statement of 28 February 2008 regarding these risks.  In particular, the FATF expresses concern that Pakistan’s Anti-Money Laundering Ordinance (AMLO) will expire on 28 November 2009. The FATF notes that Pakistan has initiated a legislative process to address this. The FATF strongly urges Pakistan to implement a permanent AML/CFT framework before the expiration of the AMLO and strongly encourages Pakistan to establish a comprehensive AML/CFT framework.  Failing concrete progress, the FATF will consider taking action in February 2010 to protect the financial system from the ML/FT risks emanating from Pakistan.

São Tomé and Príncipe

The FATF welcomes São Tomé and Príncipe’s continuing efforts to implement its AML law, including the development of an action plan with the Inter Governmental Action Group against Money Laundering in West Africa (GIABA). However, the FATF remains concerned about the deficiencies in São Tomé and Príncipe’s AML/CFT regime, particularly relating to terrorist financing.  The FATF urges São Tomé and Príncipe to work with GIABA to address the remaining AML/CFT deficiencies.

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