DFSA Latest Developments

Includes:

  • First Equity Crowdfunding Platform Receives DFSA Licence
First Equity Crowdfunding Platform Receives DFSA Licence

The Dubai Financial Services Authority (DFSA) has licenced its first equity crowdfunding platform. Eureeca – which has other regulated entities in the UK, Malaysia and the Netherlands – will be operating as a Representative Office from the Dubai International Financial Centre. The platform raises capital for small and medium-sized enterprises by combining modest and institutional investors.


Further information

If you would like further information about the DFSA’s Representative Office regime, please contact:
Carwyn Evans (CEvans@cclcompliance.com)

ADGM FSRA Latest Developments

Includes:

  • ADGM Launch RegLab
ADGM Launch RegLab

A universal consensus has been reached, concluding that financial technology (FinTech) will play a significant role in the future of regulation. The prospect of saving manpower, time and ultimately money when meeting compliance obligations is going to attract a lot of attention and investment.

Wise to this, the Abu Dhabi Global Market (ADGM) launched its Regulatory Laboratory (RegLab) last month. The initiative benefits from a tailored legislative framework to allow businesses to test, develop and provide innovative FinTech products and services without immediately being subject to all the usual regulatory requirements.


Further information
If you would like further information about establishing a regulated FinTech company in the UAE, please contact
Carwyn Evans (CEvans@cclcompliance.com)

Middle East Regulatory Updates

Includes:

  • GCC Regulators Sign MoU
  • De-Risking Issues for GCC
  • UAE Central Bank and Bank of Algeria Sign MoU
GCC Regulators Sign MoU

The Qatar Financial Centre Regulatory Authority has signed a Memorandum of Understanding (MoU) with the Kuwait Capital Markets Authority. The regulators have agreed on provisions to cooperate on information sharing and mutual development, harnessing each of their abilities and increasing investor protection and interests.

De-Risking Issues for GCC

Increasing uncertainty and wariness with regards to correspondent banking relationships could leave GCC banks without access to dollar clearing facilities. As foreign regulators continue to demand more due diligence be undertaken by their institutions, and US authorities, in particular, remain unconvinced of the GCC’s compliance with anti-money laundering and counter-terrorism rules, correspondent banks find themselves having to cope with tighter risk controls and increased regulatory costs. This growing burden sees correspondent banks becoming reluctant to do business with the GCC. The result could leave clearing transactions to be processed by Central Banks, a task that they may have neither the resources nor the infrastructure to handle and which would actually increase risk levels as it introduces an additional party to the transaction.

UAE Central Bank and Bank of Algeria Sign MoU

The UAE Central Bank signed a Memorandum of Understanding (MoU) with the Bank of Algeria last month. The agreement promotes the establishment of a framework to enable financial institutions in both countries to cooperate and develop their financial sectors. The MoU requires each party to provide funding lines and to reinforce letters of credits for banks. It also seeks to boost co-operation in the areas of training and information/expertise sharing.


Further information
If you would like to discuss these updates in more detail, please contact:
Christopher Hobbs (CHobbs@cclcompliance.com)

International Developments

Includes:

  • AUSTRAC and CAMLMAC Sign MoU
  • Central Banks Adopt SWIFT Service to Stopper De-Risking Trend
  • FinCEN Further Sanction DPRK
  • EC Issue BO Information Sharing Directive
  • SFC to Focus on Corporate Financial Misconduct
  • Effects of India’s De-Monetisation Drive
  • Nigerian CTF Bill Gains Traction
  • Haiti Progress Commended by CFATF
  • ESA Issue Guidance on Risk-Based Approach
  • TI Appeal to GIFCS to Address Weaknesses
  • Bosnia Banking Sector Reeling from EU Designation
  • Basel Committee Issue Consultation Paper
  • EC Amend List of High-Risk Countries Under 4AMLD
AUSTRAC and CAMLMAC Sign MoU

A Memorandum of Understanding (MoU) has been signed between the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the China Anti-Money Laundering Monitoring Analysis Centre (CAMLMAC). The agencies have agreed to share intelligence about potential financial crime in order to improve preventative cross-border money laundering and terrorist financing activity. The MoU will also allow the bodies to target organised criminal networks and corrupt officials.

Central Banks Adopt SWIFT Service to Stopper De-Risking Trend

The Society for Worldwide Interbank Financial Telecommunication’s (SWIFT’s) know-your-customer registry – as well as its screening service – is to be adopted by the 8 central banks of Belize, Bolivia, Costa Rica, Curacao, Dominican Republic, Ecuador, Haiti and Paraguay.

By signing up to the credited financial crime compliance tools, the banks hope that they can dissuade the damaging on-going trend of de-risking the Caribbean and Latin America (closing correspondent banking relationships with organisations in ‘deemed’ higher-risk jurisdictions).

FinCEN Further Sanction DPRK

The US Treasury Department’s Financial Crime Enforcement Network (FinCEN) has imposed crippling sanctions on the Democratic People’s Republic of Korea (DPRK). Following growing concerns of the Asian country’s lax anti-money laundering and counter-terrorism financing efforts, financial institutions (FIs) in the US are now prohibited from opening or maintaining accounts for North Korean banks. This is a step-up from the sanctions that are already in place against North Korea, preventing FIs only from conducting transactions with their eastern counterparts.

EC Issue BO Information Sharing Directive

A new directive has been issued by the European Council (EC) which requires member states to grant tax authorities access, on an on-going basis, to the beneficial ownership (BO) information that they have been obliged to obtain since directive 2014/107/EU. This regulation is expected to yield results in anti-money laundering efforts (which has been linked to tax evasion) and better enable tax authorities to meet their monitoring requirements.

SFC to Focus on Corporate Financial Misconduct

The Hong Kong Securities and Futures Commission (SFC) plans to – at the corporate level – refocus its attention on misconduct and fraud, stating that this prohibited activity has lost the country’s stock exchange HKD 100 billion. The SFC will be requiring support from mainland China where it claims a significant portion of malpracticing companies have operations and where evidence of the activity can be found.

Speaking at the 7th Pan-Asian Regulatory Summit in Hong Kong, the SFC Executive Director of Enforcement went on to say that it will be driving down and holding the individuals accountable themselves, where applicable.

Effects of India’s De-Monetisation Drive

Last month, Indian Prime Minister Modi made the decision to – seemingly overnight – demonetise the 500 and 1,000 rupee notes. The order was a drastic attempt by the government to counter widespread corruption, tax evasion and other illicit financial activity like terrorism financing and fake currency production. India is still a predominantly cash incentive nation and there has been an uncharacteristic rise in recent years of these high denomination notes.

Whilst this may not have been a popular decision at the local level, with millions of nationals finding their tender was now valueless, the Financial Action Task Force has praised the radical move of its member state to clean the country’s currency. In fact, the decision follows a recent tax amnesty that was extended by the Indian government and raised USD 10 billion (it was reported in 2013 that only 2.89% of individuals pay income tax).

Although replacement notes are already in circulation (for 500 and 2,000 rupees), India will have to improve its enforcement action if it wants to capitalise on the demonetisation drive as reports reveal that the country has failed to make any criminal convictions for money laundering at all.

Nigerian CTF Bill Gains Traction

Amendments to counter-terrorism financing (CTF) legislation was positively considered at a recent reading at the Nigerian House of Representatives.

The new statute imposes stricter penalties on criminals, provides a broader definition of terrorism and designates additional activities as acts of terrorism – including kidnapping and pipeline vandalism – for which perpetrators, or financiers, can now be incriminated for.

Haiti Progress Commended by CFATF

Although it is still deemed as a jurisdiction with strategic anti-money laundering (AML) and counter-terrorism financing (CTF) deficiencies, Haiti’s progress was recognised by the Caribbean Financial Action Task Force (CFATF) at the intra-national body’s plenary meeting last month.

CFATF deemed that the jurisdiction had made sufficient progress by recently publishing two new laws (amending existing AML/CFT legislation and establishing a Financial Intelligence Unit) and has therefore, for now, avoided having sanctions imposed upon it. Haiti is advised to continue to implement its CFATF Action Plan and the agency will review the country’s status again in 2017.

ESA Issue Guidance on Risk-Based Approach

The Joint Committee of the three European Supervisory Authorities (ESA) – made up of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority – has released its final guidelines based on the mandate of the European Union Directive 2015/849 a.k.a. the Fourth Anti-Money Laundering Directive. The guidelines characterise the risk-based approach to anti-money laundering and counter-terrorism financing, as well as detailing how Competent Authorities (CAs) can effectively allocate supervisory resources to mitigate money laundering (ML) and terrorist financing (TF) risks in their financial institutions.

The publication describes the need for CAs, in line with a risk-based approach, to:

  • Identify and assess ML and TF risks in their sector;
  • Take supervisory action accordingly;
  • Have qualified staff to implement supervision; and
  • Not forget that small firms, who may be systematically unimportant, can still pose a high ML/TF threat.
TI Appeal to GIFCS to Address Weaknesses

Transparency International (TI) has called on the Group of International Finance Centre Supervisors (GIFCS) – regulators of twenty of the world’s secrecy havens – to fulfil the promise it made in April of this year concerning strengthening the oversight of its members. Ahead of a GIFCS meeting which took place at the end of the month, TI had requested each jurisdiction to:

Publish their action plans that tackle abuses of corporate secrecy;
Publish how they plan to monitor their commitments; and
Commit to introducing a central register of the real owners of companies registered in their regions.

Bosnia Banking Sector Reeling from EU Designation

Further to the July edition of our Middle East Regulatory Update, where it was reported that the European Union (EU) had identified Bosnia as the only European high-risk jurisdiction for money laundering and terrorism financing, it would seem that the country’s banking sector has started to feel the strain. Banks in the region are claiming that transactions initiated by them are being rejected, Bosnian bank accounts are being closed and business operations with them being cancelled. The country will need to significantly address the anti-money laundering and counter-terrorism financing deficiencies in its legislation to be viewed more favourably by sanctioning bodies worldwide and reverse the reaction being experienced by its banking sector.

Basel Committee Issue Consultation Paper

The Basel Committee on Banking Supervision has issued a consultation paper for which parties have until the 22nd of February 2017 to provide comment. The publication looks to make amendments to Annexes 2 and 4 of the guidelines on the ‘Sound management of risks related to money laundering and financing of terrorism’, specifically addressing recent de-risking concerns relating to correspondent banking and account opening.

EC Amend List of High-Risk Countries Under 4AMLD

Following the most recent Financial Action Task Force public statements, the European Council has released a supplement to the Fourth Anti-Money Laundering Directive (4AMLD) and advised that Guyana should no longer be considered a high-risk third country with strategic deficiencies.


Further information
If you would like to discuss these updates in more detail, please contact:
Nigel Pasea (NPasea@cclcompliance.com)

Financial Crime

Includes:

  • RCBC Saga Continues
RCBC Saga Continues

In the latest developments from the RCBC scandal – which has been previously reported on in a number of our Middle East Regulatory Updates in 2016 – the Philippines Anti-Money Laundering Council (AMLC) has filed criminal charges against the former treasurer of the bank, as well as five other officials including the retail banking group’s national sales director, regional sales director, district sales director, the local branch’s customer service head and its senior customer relations officer. The AMLC has stated in the filings that the failures of these individuals facilitated the act of money laundering,


Further information
If you would like a more detailed discussion on these or other enforcement actions, please contact:
Carwyn Evans (CEvans@cclcompliance.com)

Enforcement Action

Includes:

  • Agricultural Bank of China Fined by NYSDFS
  • QFC Judgement Enforced
  • Jordan Kuwait Bank Fined by Central Bank of Cyprus
Agricultural Bank of China Fined by NYSDFS

The Agricultural Bank of China’s New York branch has been fined USD 215,000,000 by the New York State Department of Financial Services (NYSDFS). This is following an investigation which found that the bank had been masking possibly suspicious transactions during dollar-clearing transactions.

When concerns were raised about this activity, the Chief Compliance Officer was pressed not to communicate with the regulators. After the Compliance Officer left the company in June 2015, the NYSDFS identified a backlog of 700 suspicious activity reports. The bank has consented to have an independent monitor join them to address the deficiencies.

QFC Judgement Enforced

The Qatar International Court and Dispute Resolution Centre has ordered the Qatar Central Bank to freeze the assets of a defendant who failed to comply with the court’s ruling. This noteworthy enforcement action is a reminder of the power of the Qatar Financial Centre’s (GFC’s) legal arm.

Jordan Kuwait Bank Fined by Central Bank of Cyprus

The Cypriot branch of Jordan Kuwait Bank has been fined EUR 1,205,000 by the Central Bank of Cyprus for failing to adhere to anti-money laundering and counter-terrorism financing regulations. These were identified following an on-site examination in January 2015.


Further information
If you would like a more detailed discussion on these or other enforcement actions, please contact:
Carwyn Evans (CEvans@cclcompliance.com)

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