The main difference between the DTA and the CDSA is that the CDSA regime adopts a “predicate offense approach,” which specifies that the laundering of proceeds from all drug trafficking offenses and 182 other serious crimes constitutes a money laundering offense. By contrast, according to the CDSA, laundering proceeds from criminal activities outside these categories is not considered “money laundering,” although it is still punishable under other laws.

This article provides financial institutions (FIs) with an overview of the CDSA to help ensure compliance with its regulations.

What is the Corruption, Drug Trafficking and Other Serious Crimes Act (CDSA) in Singapore?

The CDSA is a crucial piece of legislation in Singapore’s ongoing efforts to combat financial crime. The act provides a comprehensive legislative framework to combat corruption, drug trafficking, and other serious criminal activities in Singapore. It empowers authorized officers to confiscate benefits derived from illicit activities, enforce reporting obligations, and collaborate with international agencies for investigations and asset recovery. Key entities subject to compliance include:

• Financial institutions (FIs.)
• Legal counsels.
• Individuals involved in asset management or transactions.
• Law enforcement agencies and authorized officers.

Key requirements of the CDSA

While the CDSA contains anti-money laundering (AML) rules, its primary objective is not focused on money laundering. Instead, the it aims to deprive criminals of any financial gains obtained through criminal activities by establishing a confiscation regime. The CDSA’s AML rules support this confiscation regime by preventing illegally acquired assets from being laundered into other property to evade detection and confiscation by law enforcement agencies.

Key AML requirements set out by the CDSA include:

• Developing comprehensive internal policies: Covered entities must create detailed policies and procedures to ensure compliance and effective AML monitoring. These should be based on a risk-based approach (RBA), considering the specific risks faced by the organization.
• Ensuring effective communication and regular updates: Senior compliance staff are required to ensure that all policies are clearly communicated to new employees at onboarding. Additionally, regular updates must be provided at least annually to keep them informed of any changes or updates in AML policies and procedures.
• Providing staff training: Firms must implement a robust training program for all staff members to equip them with the necessary skills to identify and handle suspicious activities effectively. This program should also emphasize the importance of AML compliance and the potential consequences of failing to adhere to regulations or adequately monitor risks.
• Conducting a comprehensive enterprise-wide risk assessment (EWRA): FIs are required to organize a thorough business assessment to identify their exposure to money laundering and terrorist financing risks. This assessment should consider various risk factors relevant to the business’ operations and market context.
• Appointing a compliance officer: The CDSA requires the designation of a compliance officer, and their specific roles and responsibilities within the AML compliance program must be clearly outlined. This individual should be empowered to oversee the establishment, implementation, and ongoing management of the AML framework.
• Reporting: Establish protocols for promptly reporting suspicious transactions to regulatory authorities. This includes identifying the types of transactions that should be considered suspicious and the process for reporting them in compliance with legal and regulatory requirements.

Who enforces the CDSA?

The CDSA is enforced throughout Singapore by a network of agencies. These include:

• Central Narcotics Bureau (CNB): Responsible for combating drug-related crimes and enforcing laws related to drug trafficking and abuse.
• Corrupt Practices Investigation Bureau (CPIB): Tasked with investigating and prosecuting corruption offenses involving public officials and bribery.
• Commercial Affairs Department (CAD): Oversees investigations into financial crimes, such as money laundering and fraud, including those related to the proceeds of drug trafficking and other serious crimes.
• Singapore Police Force (SPF): The SPF plays a crucial role in investigating a wide range of criminal offenses, including drug trafficking, corruption, and other serious crimes covered under the CDSA.

Penalties for non-compliance with the CDSA

Non-compliance with the CDSA can result in severe penalties, including fines and imprisonment. Some of the key penalties outlined in the CDSA include:

• Rash money laundering: Introduced as a new offense in February 2024, entities that proceed with transactions despite having some suspicion while also failing to make further inquiries may be charged with rash money laundering. The maximum penalty is a fine of up to $250,000, imprisonment of up to five years, or both.
• Negligent money laundering: Individuals who continue with a transaction despite the presence of red flags that would be noticeable to a reasonable person may be charged with negligent money laundering. The maximum penalty is a fine of up to $150,000, a prison sentence of up to three years, or both.
• Disclosing Singpass credentials to facilitate an offense: A Singpass credential refers to the login credentials used for accessing various digital services the Singaporean government provides. Individuals who disclose their Singpass passwords or access codes, knowing or having reasonable grounds to believe that the purpose is to commit or facilitate the commission of an offense, may be charged. The maximum penalty is a fine of up to $10,000 or imprisonment of up to three years, or both.

How can firms comply with the CDSA?

As Singapore continues strengthening its regulatory framework to combat financial crimes and uphold its economic system, compliance professionals face increasingly complex challenges in meeting their obligations under the CDSA. Luckily, advanced AML software options are available to help address these challenges effectively.

Sophisticated transaction monitoring software can help detect and flag suspicious activities that may indicate money laundering or other illicit financial behaviors as defined under the CDSA. With advanced machine learning algorithms, transaction monitoring platforms can analyze vast amounts of transactional data in real-time to identify patterns, anomalies, and red flags indicative of potential illicit activities. Furthermore, with the right solution, compliance teams can create transaction thresholds and rule sets based on their firm’s risk exposure by choosing from a library of red flags and suspicious activity scenarios.

Award-winning FinTech BigPay, which operates out of Singapore and Malaysia, experienced the benefits of these capabilities when it needed to quickly implement a more efficient screening process to meet its regulatory obligations. With ComplyAdvantage, BigPay could custom-build a single proprietary interface connecting multiple tools, trackers, and databases via a single API. The financial services firm also set up unique screening profiles for its markets, providing proportional controls for different products and transaction types – such as remittance and e-money. Accessible search profile configuration and fuzziness fine-tuning streamlined the process of aligning with new regulations, like updates to the CDSA and PSN02.

The post The CDSA in Singapore: Everything you need to know appeared first on ComplyAdvantage.

We’ve summarized the key developments:

• Changes to the grey list.
• Increasing beneficial ownership transparency globally.
• Leveraging digital transformation: Virtual assets.
• Payment transparency.
• Protecting non-profit organizations from abuse for terrorist financing.
• New FATF presidency.
• Expanded statement on the Russian Federation.

#1: Kenya and Namibia added to the grey list

Kenya

Despite making progress on some recommended actions since September 2022, the FATF has added Kenya to the grey list in light of the country’s need to improve supervision, enhance preventive measures, designate an authority for regulation, and improve the use of financial intelligence.

Since being subject to increased monitoring, Kenya’s national treasury has stated it is fully committed to implementing the action plan of the FATF, stating the move will have only minimal effects on its financial stability. According to a FATF report published in 2022, Kenya is primarily at risk of terrorism financing through money flows from both within and outside its borders. Additionally, the report highlights that cryptocurrencies introduce further risks to the country.

Namibia

Namibia also committed to strengthening its AML/CFT regime with the help of the FATF and Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). Since September 2022, the FATF noted Namibia’s progress in ensuring a common understanding of money laundering, terrorist financing, and proliferation financing risks among key stakeholders. However, the watchdog noted several key areas that required improvement, including: 

• Risk-based supervision.
• Preventive measures.
• Beneficial ownership information filing.
• Financial intelligence unit (FIU) resources.
• Operational capabilities of authorities involved in money laundering and terrorist financing investigations and prosecutions.

In contrast with Kenya’s addition to the grey list, Namibia’s Financial Intelligence Centre said that putting Namibia on the grey list could negatively impact the country’s foreign direct investment.

#2: Barbados, Gibraltar, Uganda, and the United Arab Emirates removed from the grey list

Barbados

In 2020, Barbados was added to the grey list due to a series of weak AML/CFT measures it had in place, including a lack of risk-based supervision for financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs). After being satisfied with the country’s progress alongside its agreed strategic plan, the FATF removed it from the grey list in February 2024. In particular, the FATF noted Barbados’ improved measures to prevent legal persons and arrangements from being misused for criminal purposes.

Gibraltar

The FATF also welcomed Gibraltar’s significant progress in improving its AML/CFT regime, ultimately removing the country from the grey list. While Gibraltar should continue to work with MONEYVAL to sustain its improvements in its AML/CFT system, the FATF specifically highlighted two improvements:

• The country’s application of effective, proportionate, and dissuasive sanctions for AML/CFT breaches in non-bank FIs and DNFBPs sectors. 
• Pursuing final confiscation judgments commensurate with the risk and context of Gibraltar. 

Uganda

In February 2020, the FATF placed Uganda on its increased monitoring list, which prompted a series of AML reforms, including:

• The adoption of a national AML/CFT and countering the proliferation financing (CPF) strategy.
• Enhancing the use of mutual legal assistance.
• Maintaining robust reporting methods and statistics.
• Implementing risk-based supervision of the financial and DNFBP sectors and establishing procedures to trace and seize proceeds of crime. 

As a result of these reforms, the FATF removed Uganda from the grey list.

The United Arab Emirates (UAE)

Kumar also acknowledged the UAE’s significant progress in enhancing its AML/CFT regime to meet the commitments in its action plan to address the strategic deficiencies identified by the FATF in February 2022. 

The UAE achieved this by:

• Increasing outbound mutual legal assistance (MLA) requests.
• Enhancing its understanding of money laundering and terrorist financing risks.
• Developing a better understanding of the risk of legal persons being abused.
• Providing additional resources to its FIU.
• Increasing investigations and prosecution of money laundering
• Ensuring effective implementation of targeted financial sanctions (TFS).

As a result of these improvements, the UAE is no longer subject to the FATF’s increased monitoring process. However, the FATF noted that the UAE should continue to collaborate with the Middle East and North Africa Financial Action Task Force (MENAFATF) to maintain its progress in its AML/CFT system.

#3: Strategic initiatives

Echoing Kumar’s objectives presented at the first plenary under his presidency in June 2022, the FATF discussed multiple strategic initiatives, including improving beneficial ownership transparency and countering illicit finance related to cyber-enabled crime. 

Increasing beneficial ownership transparency globally

The FATF has updated its guidelines on beneficial ownership and transparency of legal arrangements following revisions to recommendation 25, which were adopted in February 2023. The updated guidance aims to help stakeholders assess and mitigate money laundering and terrorist financing risks and complements existing guidance on legal persons. 

The FATF’s strengthened standards will aid in identifying corrupt individuals, sanctions evaders, money launderers, and tax evaders who conceal their criminal activities. The guidance will be published at the end of February 2024.

Leveraging digital transformation: Virtual assets

Closing the plenary, Kumar highlighted that many countries have not fully implemented the FATF’s revised recommendation 15. As a result, there are significant loopholes that are being exploited by criminals and terrorists due to the borderless nature of virtual asset activity. 

In February 2023, the FATF agreed on a roadmap to strengthen the implementation of the FATF standards on virtual assets and virtual asset service providers. The FATF conducted a stocktake of current implementation levels across the global network and agreed to publish an overview of the steps taken by FATF and FATF-style regional bodies (FSRB) member jurisdictions. 

This overview will include the most significant virtual asset activity regarding trading volume and user base, as well as the regulatory and supervisory measures taken to address AML/CFT concerns for virtual asset service providers (VASPs). Kumar explained that this exercise aims to help the FATF network regulate and supervise VASPs for AML/CFT purposes and encourage jurisdictions to implement recommendation 15 fully.

Payment transparency

The FATF also proposed amendments to recommendation 16 – which aims to improve the transparency and traceability of transactions – to keep up with the fast development of cross-border payment systems and changing industry standards. These revisions aim to make cross-border payments quicker, cheaper, transparent, and inclusive while ensuring AML/CFT compliance. 

Kumar noted that the revisions, which will be released for public consultation, will also ensure that FATF recommendation 16 remains technology-neutral. 

Protecting non-profit organizations from abuse for terrorist financing

In October 2023, the FATF changed recommendation eight to safeguard non-profit organizations (NPOs) from potential terrorist financing abuse. The revisions clarified that the recommendation only applies to NPOs that fall within the FATF definition. At the same time, the FATF updated its best practices to help countries, FIs, and the non-profit sector understand how to protect vulnerable NPOs from abuse for terrorist financing while still allowing legitimate NPO activities to continue.

Following this plenary session, the FATF has agreed to update its assessment methodology for the upcoming round of mutual evaluations. This update will further clarify the obligations to apply risk-based measures to protect NPOs most vulnerable to potential terrorist financing abuse. 

#4: New FATF presidency

Ms. Elisa de Anda Madrazo of Mexico was also appointed as the next President of the FATF for a two-year term. Ms de Anda Madrazo, who served as FATF Vice President from July 2020 to June 2023, will assume her duties on July 1, 2024, a day after the two-year Presidency of Mr. T. Raja Kumar ends.

#5: Expanded statement on the Russian Federation 

Following Russia’s invasion of Ukraine in 2022, the FATF issued a statement expanding their previous statement from February 2023. The watchdog noted continued concern over the risks posed by the Russian Federation, including growing economic connectivity with countries subject to FATF countermeasures, proliferation financing, and malicious cyber activities. Due to the severity of these risks, the FATF urged members to continue taking proactive measures to safeguard themselves and the global financial system. 

Next Steps

Compliance staff should ensure they are familiar with the outcomes of the February plenary – particularly relating to any upcoming MERs in countries they operate in. Regarding the changes to the grey list, firms must update the risk scores of relevant countries, with appropriate levels of due diligence being administered as required going forward. 

Dates related to forthcoming guidance issued by the FATF should also be noted. Such guidance will help shape and inform the future regulatory approach national bodies take.

The next FATF plenary is due to take place in June 2024.

Previous plenary coverage from ComplyAdvantage can be found here:

• FATF plenary October 2023
• FATF plenary June 2023
• FATF plenary February 2023
• FATF plenary October 2022
• FATF plenary June 2022
• FATF plenary March 2022

The post FATF plenary February 2024: Key takeaways and initiatives appeared first on ComplyAdvantage.

To deter such activity, Congress deemed federal legislation necessary to collect beneficial ownership information (BOI) for entities formed under US state laws. Known as the Corporate Transparency Act, this legislation was passed by Congress in January 2021 and came into effect on January 1, 2024.

What is the Corporate Transparency Act?

The Corporate Transparency Act (CTA) is a US federal law aimed at increasing transparency in corporate ownership. The regulation requires certain individuals who establish a company in the United States to provide the Financial Crimes Enforcement Network (FinCEN) with specific information relating to the company’s beneficial owner(s), including:

• Full name.
• Date of birth.
• Current address.
• A distinctive identification number, such as from a passport or driver’s license.

Those subject to the law, known as “reporting companies”, must also update FinCEN with any changes to previously reported information. 

The CTA falls under the scope of the Anti-Money Laundering Act of 2020 (AMLA) and is part of the National Defense Authorization Act 2021 (NDAA), which required FinCEN to create a beneficial ownership registry that would oblige over 32 million businesses to file details of their beneficial owner with the US government.

How did the CTA come about?

Prior to the CTA, multiple legislative proposals were introduced to Congress to address the lack of transparency in corporate ownership. These proposals, including the 2008 Incorporation Transparency and Law Enforcement Assistance Act (ITLEA), aimed to require companies to disclose information about their beneficial owners to government agencies. However, ITLEA and the similar bills that followed were not passed into law as some argued that regulation of business entity formation within the US should remain a state matter. 

To help close the gap in US AML legislation that remained, FinCEN introduced the Customer Due Diligence (CDD) Final Rule in 2016 as an amendment to the Bank Secrecy Act. This set out an extended range of CDD obligations for certain financial institutions (FIs), including a new requirement of establishing ultimate beneficial ownership. 

However, since the CDD Final Rule did not require the establishment of a centralized corporate registry, the US Congress began holding more hearings to address the persisting corporate transparency issue. Combined, these hearings helped provide the necessary momentum for the CTA’s passage. 

What are the objectives of the CTA?

The CTA aims to enhance AML efforts by improving transparency and accountability in corporate ownership structures. Its primary objectives include:

• Beneficial ownership disclosure: Require reporting companies to report information about their beneficial owners to FinCEN.
• Prevent illicit activities: Combat money laundering, terrorist financing, tax evasion, and other financial crimes by providing law enforcement with access to BOI.
• Enhanced data collection: Improve the accessibility and accuracy of BOI to facilitate investigations and enforcement efforts.
• Streamlined compliance: Simplify the process for firms to comply with their reporting requirements while maintaining data security and privacy.
• National security: Enhance national security by identifying and tracking entities with opaque ownership structures that may pose a risk. 

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Who needs to comply with the Corporate Transparency Act?

Reporting companies must comply with the CTA, which, according to the AMLA, refers to any corporation, limited liability company (LLC), or other similar entity that is:

1. Created by filing a document with the secretary of state or similar office in a state or Indian tribe under their respective laws, or;
2. Formed under the law of a foreign country and registered to do business in the US by filing a document with the secretary of state or similar office under the laws of a state or Indian tribe.  

This includes C-corporations, S-corporations, domestic and foreign LLCs, general partnerships, limited partnerships, and business trusts. 

Who is exempt from complying with the CTA?

The CTA outlines 23 exemptions and exceptions to some of these legal entities, including:

• Securities reporting issuers.
• Governmental authorities.
• Banks.
• Credit unions.
• Depository institution holding companies.
• Money services businesses.
• Brokers or dealers in securities.
• Securities exchanges or clearing agencies.
• Other Exchange Act registered entities.
• Investment companies or investment advisers.
• Venture capital fund advisers.
• Insurance companies.
• State-licensed insurance producers.
• Commodity Exchange Act registered entities.
• Accounting firms.
• Public utilities.
• Financial market utilities.
• Pooled investment vehicles.
• Tax-exempt entities.
• Entities assisting tax-exempt entities.
• Large operating companies.
• Subsidiaries of certain exempt entities.
• Inactive entities.
  

What are the benefits and challenges of the Corporate Transparency Act?

Beyond being a moral obligation, there are compelling business reasons to prioritize transparency, particularly with regard to governance and anti-corruption measures. When it comes to the CTA, firms and authorities may experience the following benefits:

• Ease of access to information: Creating a national beneficial ownership database will make it easier for authorities to access and cross-reference corporate ownership information and enhance accountability among US companies.
• Reduced risk of fraudulent activity: The CTA plays an important role in the Biden administration’s strategies for countering corruption and combating terrorist and other illicit financing by making it harder for individuals to use shell companies and anonymous corporations to hide their income and assets. 
• Aiding law enforcement: The CTA helps national security agencies assess potential threats and vulnerabilities by identifying who controls and benefits from corporations.
• Investor confidence: In light of enhanced BOI disclosures, improved due diligence, and additional legal protections – such as penalties for non-compliance – the CTA is expected to boost investor confidence by reducing risks associated with hidden ownership and illicit financial activities. 

However, the CTA can create challenges for some firms, particularly smaller businesses that may not have an existing infrastructure in place to meet the new reporting requirements. Specific challenges may include:

• Data collection: Gathering accurate and up-to-date information about beneficial owners can be challenging, especially when dealing with complex corporate structures or multinational companies.
• Data privacy: Balancing the need for transparency with privacy concerns of beneficial owners can be delicate. Some entities may resist disclosing their ownership stakes for personal or security reasons. 
• Administrative requirements: Compliance with the CTA can impose an administrative burden on firms, particularly smaller businesses or start-ups without dedicated compliance departments.

To address these challenges, firms should seek legal counsel, invest in Know Your Business (KYB) compliance tools and training, and stay informed about updates to the CTA and related regulations. For challenges specific to the US real estate industry, compliance professionals can consult our Guide to AML/CFT Reforms, which discusses the implications of the CTA on the sector in detail. 

How can companies comply with the Corporate Transparency Act?

While the new reporting requirements will come into effect in early 2024, new and existing entities will have different reporting deadlines. Companies that are already established had to submit their initial report to FinCEN by January 1, 2025, whereas companies formed after January 1, 2024, have only 30 days to file. 

For those who fail to comply with the reporting requirements or knowingly provide false or fraudulent information, the regulation establishes criminal and civil penalties of $500 per day (up to $10,000) and imprisonment for up to two years.

For additional guidance on how to comply with the CTA, smaller entities can also review FinCEN’s BOI compliance guide.

Maintaining corporate transparency through comprehensive due diligence

In addition to reporting BOI information to FinCEN, firms can help establish their corporate customers’ ownership structure by deploying suitable know your customer (KYC) measures as part of their anti-money laundering and combatting the financing of terrorism (AML/CFT) solutions. In practice, this should include:

• Customer due diligence (CDD): Firms should collect identifying information about their customers, including the names and addresses of company directors and company incorporation details.
• Transaction monitoring: By monitoring transactions, firms can identify shell companies and be vigilant for unusual transaction patterns or transactions involving high-risk countries.
• Adverse media: News stories may indicate that customers are involved in UBO-related money laundering offenses before official sources reveal the same information. Firms should implement negative news screening on an ongoing basis for adverse news stories that involve their customers.
• Sanctions screening: Customers who are subject to international sanctions may use shell companies to access financial services. Therefore, firms should screen high-risk customers against the relevant sanctions lists.
• PEP screening: Politically exposed persons (PEP), such as government officials or politicians, pose an elevated AML risk and may attempt to use shell companies to conceal their identities. Firms should screen their customers to establish their PEP status.
• Corporate screening: Firms must confirm the legitimacy of a company before entering into a business relationship with them. Once the business has been onboarded, ongoing KYB verification checks are performed periodically to ensure any changes in the entity’s risk profile are captured. 

The post What is the Corporate Transparency Act (CTA)? appeared first on ComplyAdvantage.

“[I]llicit actors within the construction industry are using shell companies and other tactics to commit workers’ compensation fraud and avoid payroll taxes,” explained FinCEN Acting Director Himamauli Das. “Today’s Notice provides information that financial institutions can use to remain vigilant in monitoring, detecting, and reporting suspicious activity.”

The Fight Against Shell Companies and Organized Fraud

According to FinCEN, the notice aligns with its ongoing efforts to curb the use of shell companies to conceal illicit activity, as well as with the Anti-Money Laundering/Countering the Financing of Terrorism National Priorities.

In line with the Corporate Transparency Act, in 2022 FinCEN issued a final rule requiring most corporations, limited liability companies, and entities created or registered for business in the US to report their beneficial owners to the regulator. FinCEN expects this rule – effective January 2024 – to support the current notice’s objectives by discouraging the use of shell companies to conceal illegal activity by actors including:

• Oligarchs
• Kleptocrats
• Drug traffickers
• Human traffickers
• Illicit individuals in the construction sector

Notice Details: Typologies, Red Flags, and Reporting

Although the notice addresses all financial institutions, FinCEN notes that the type of fraud and tax evasion it deals with primarily affects banks and check cashers. The scheme is typically a two-part process involving workers’ compensation fraud followed by tax evasion. 

A criminal entity typically creates a shell company posing as a legitimate subcontracting business with just a few employees. It takes out a workers’ compensation policy for those employees. Meanwhile, the shell company contacts real subcontractors with a much larger number of employees. The subcontractors can give their employees discounted (and fraudulent) access to the shell company’s policy for a fee. 

It also helps the subcontractors avoid paying payroll tax. The subcontractors write checks to the shell company instead of their employees, thus concealing that they’re for payroll. The shell company then either obtains cash at a check casher or deposits the money into its company account before withdrawing it in bulk. It returns this money to the subcontractors, minus a small fee, so they can pay their employees under the table and avoid taxes.

The notice outlines several red flags for this typology, including:

• Construction company customers that are younger than a year, have little to no online presence, and specialize in one type of construction trade.
• A non-US citizen without prior construction history who opens an account in the name of a construction company.
• Despite receiving large volumes of client payments, the customer account shows no evidence of paying payroll taxes.
• The customer receives deposits outside the expected amount for their account type, all from other construction companies and in multiple states.

The notice also reminds firms of their reporting requirements and information-sharing protections under the Bank Secrecy Act (BSA) and the USA Patriot Act section 314(b). Instructions on pages 7-9 of the notice include:

• An overview of suspicious activity reporting (SAR) requirements.
• Other BSA reporting requirements, such as currency transaction reports (CTR) and Form 8300 filing.
• A reminder of the information-sharing safe harbor under the Patriot Act.

Next Steps for Firms

Firms – especially banks and check-cashing institutions – may want to study the notice in greater detail to familiarize themselves with red flags for construction industry tax evasion and workers’ compensation fraud. 

To ensure they remain abreast of FinCEN’s most current guidance and requirements, firms can sign up for updates from the regulator.

The notice asks firms to report current information on payroll fraud-related activity to their local tax authorities or the closest IRS CI field office. For reports of information related to workers’ compensation fraud, wire fraud, or labor exploitation, contact Homeland Security Investigations at 1-866-347-2423.

The post FinCEN Seeks Data from Financial Institutions to Curb Construction Sector Fraud & Tax Evasion appeared first on ComplyAdvantage.

Ebury’s previous TM setup had become outdated, resulting in a large backlog of alerts and operational inefficiencies. As a result, Ebury’s compliance team sought a new long-term partnership for transaction monitoring to enable the company to scale while managing its financial crime risks.

A personalized approach

Ebury’s objectives for the partnership centered around creating a non-generic TM rule library configured to mitigate the specific money laundering and terrorist financing threats the business faces. Ebury’s ambition was to reduce the monthly false positive alerts it received to free up operational resources, delivering a laser focus on genuine threats. 

“We wanted a vendor that would give us the possibility of customizing our rules in line with our segmentation and provide us with the necessary information to understand the effectiveness and the efficiency of the platform. That’s something ComplyAdvantage allows us to do.”

Miriam Crespillo, Global Head of Sanctions and Transaction Monitoring, Ebury

ComplyAdvantage helped Ebury achieve its strategic objectives by implementing a TM rule library aligned with industry risk typologies that reflect Ebury’s different customer base. ComplyAdvantage ensured that each customer type was accounted for in its rule set throughout the scoping and build period. 

To support Ebury in its ambitions, ComplyAdvantage took a deep dive into what rules were currently working well for Ebury and which were no longer fit for purpose based on the company’s growth. 

Proactive collaboration

Particular attention was given to understanding Ebury’s risk-based approach to ensure the new TM rule set satisfied their needs and aligned with its risk appetite. Ebury collaborated with ComplyAdvantage implementation consultants to define their data model and scope out the bespoke rules they wanted to build. ComplyAdvantage’s solution engineers built these rules in a secure QA environment for Ebury to test, change, and refine. 

“The collaboration between ComplyAdvantage and Ebury during the testing and implementation of the new transaction monitoring framework has been key to ensuring its successful release in a timely manner, which has resulted in a clear increase of effectiveness and efficiency.”

Miriam Crespillo, Global Head of Sanctions and Transaction Monitoring, Ebury

Bespoke TM rule sets

Deploying ComplyAdvantage’s TM solution has allowed Ebury to build rules and configure thresholds tuned to its risk assessment. This means its analysts can focus on the alerts that matter and identify real risks. By adopting a risk-based approach and tailoring the rule set to its customers, Ebury worked with the implementation team at ComplyAdvantage to configure appropriate rules, mitigate risk, and reduce false positive rates by 60 percent.  

One such rule was built when new sanctions were being imposed on Russia at an unprecedented rate from February 2022. According to Ebury’s Screening and Transaction Monitoring Manager Ignaat van der Meulen, “Every transaction sent to Russia had to be reviewed in real-time. ComplyAdvantage helped us quickly implement a custom rule that stopped anything going to Russia in real-time.”  

Another bespoke rule set involved splitting the annual estimation rule to allow Ebury to track new, higher-risk customers. In splitting the rule, ComplyAdvantage also implemented different thresholds for new and existing clients in light of Ebury’s risk appetite. This change enhanced Ebury’s risk-based approach by allowing their compliance teams to prioritize and monitor the activity of new customers with the highest risk levels.  

ComplyAdvantage’s TM solution has allowed Ebury to uncover new insights into customer activity, enabling the financial services company to detect new or emerging typologies and build rules to mitigate them.

A longstanding partnership

Going forward, Ebury is working with its dedicated customer success manager who understands the compliance team’s objectives and plans to drive success. 

“Our customer success manager plays a key role. They are very easy to approach and act as a filter between the vendor’s technical teams and us when we want to tweak something from an operational perspective.”

Ignaat van der Meulen, Screening and Transaction Monitoring Manager, Ebury

Through a collaborative success plan, clearly defined goals, quarterly business reviews (QBRs), and continuous dialogue, Ebury and ComplyAdvantage have a partnership to track and measure successful business outcomes.

The post Ebury reduces false positive rates by 60% through bespoke transaction monitoring rule sets appeared first on ComplyAdvantage.

The Law on Transparency

The legislation regarding anti-money laundering (AML) in France, as in much of Europe, is meticulously structured to encompass various forms of illicit activities. This includes the law no. 2013-907 of October 11, 2013, commonly known as the “Law on Transparency,” which aims to promote transparency and combat corruption in public life in France. 

The law covers a wide range of elements from asset and interest declarations to whistleblower protection and transparency in the lobbying industry. By upholding ethical standards and ensuring the integrity of public officials, the Law on Transparency reflects France’s commitment to fostering an open and accountable public administration.

The impact on PEP definitions

In March 2023, the law was updated through the Order of March 17, 2023, which established the list of national functions. While the changes were minor, they directly impacted the definition of PEPs. To fully comprehend these alterations and their importance for financial institutions (FIs) complying with AML regulations, it is essential to examine the previous legislation and its functioning. 

The previous version of the Law of Transparency provided a limited list of public functions subject to its regulation. This list included:

• High-level state executives.
• Political party leaders.
• Members of parliament.

The law’s scope was extended in its third section to include individuals responsible for State-Owned Enterprises (SOEs). 

Nonetheless, acknowledging the varying AML risks associated with different institutions, the French lawmakers imposed certain limitations. For example, only local SOEs directly or indirectly owned by the French government with annual revenue of at least €10 million fell under the purview of the Law of Transparency. This recognition illustrated that not all SOEs posed a risk to the state and, thus, required less stringent controls and regulations. This remained the case until March 2023.

The changes introduced by the Order of March 17, 2023, further relaxed these regulations by increasing the annual revenue cap to €50 million. This demonstrates a lower risk appetite of French regulators and a greater willingness to extend trust to local businesses with state involvement. 

Additionally, the decree expanded the Law on Transparency to include other political parties operating in France but without a strong presence in the French parliament. This move was aimed at preventing illicit funding for political parties with representative bodies in regions like French Guiana or Martinque, where transparency and oversight may be lacking. 

Next steps

While the decree primarily affects the definition of PEPs in relation to local SOEs and foreign political parties, other aspects of the legislation remain unchanged. To allow companies sufficient time to adapt to the new regulations concerning local SOEs, the French government will enact these amendments starting November 1, 2023. 

Businesses that engage in screening processes need not worry if they have a reliable partner that can thoroughly examine the fine print and ensure compliance with the updated AML regulations. To learn more about ComplyAdvantage’s PEP data collection process and how quality data is secured, read some of the related content below:

• The Lifecycle of a PEP: From Identification to Removal
• How ComplyAdvantage Defines and Classifies a PEP
• PEP Data Quality: The 12-Eye Review Process

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