global AML shifts for 2021

The anti-money laundering (AML) regulatory landscape continues to evolve. New regulations are being enacted or coming down the road, regulators are engaging the private sector more frequently, and innovation is being embraced like never before to fight financial crime. The scope of these changes will impact how financial institutions (FIs) worldwide meet their AML compliance obligations.  Here is a look at key anti-money laundering activity by region for 2021.

North America

The National Defense Authorization Act for the Fiscal Year 2021 was recently enacted into law. So what? Attached to it are the Anti-Money Laundering Act of 2020 (AML Act) and, within the AML Act, the Corporate Transparency Act. These are supposed to be the biggest thing since sliced bread (and the USA PATRIOT Act of 2001) in combating financial crime, stopping terrorism and corruption, and preventing money laundering activities. 

While this makes for good headlines, the reality is studies, reports, and reviews will take years.  Regulatory updates are required and exam processes will need to be revised. Guidance will be asked for from institutions. In short, expect much smoke in 2021 but we won’t see the fire right away. You don’t have to blow up your current AML programs just yet. But fortune favors the prepared, so start planning.

Oh, and if you haven’t heard of the FinCEN files, have a read here. We should expect some formulated proposals of actions to address the glaring process inadequacies with how suspicious activity reports (SARs) are handled.

Latin America

The Latin America region continues to push forward with individual country efforts to combat money laundering, corruption, and organized crime. A combination of shrinking budgets, understaffed agencies, and the economic impact of the coronavirus pandemic foster an environment ripe for financial criminal activity.

U.S. and Latin American joint efforts are likely to continue the status quo into 2021. We may see some change as a result of corporate transparency laws within the aforementioned AML Act. However, these are unlikely to come about (with any pressure that is) until at least 2022. We should expect targeted US sanctions to continue in the region to fulfill the U.S. Treasury’s 2020 National Strategy for Combating Terrorist and Other Illicit Financing commitments. The desired effect is to combat terrorist financing, illegal drug activities, and human trafficking, among other serious crimes.

EMEA

As the U.K. goes back to the future with its exit from the European Union, Sanctions and Anti-Money Laundering Act 2018 goes into effect. If you’re managing screening processes at your institution, be prepared to add another list to the mix. Expect the OFSI’s already busy workload to increase. Your org is likely in for an uptick in alerts as you screen and re-screen listed parties. Revisit your risk appetite and tune accordingly. Automation is key here and will help your institution manage the heavier flow of activity.

The EU’s Sixth Anti-Money Laundering Directive (6AMLD) has come into effect. Members have until June 3, 2021, to transpose the new directive into national law. If we pay attention to our history, it’s unlikely most member nations will meet that date. Glass half full – predicate offenses, “aiding and abetting,” some criminal liability, and stricter punishments are inbound. Ensure your org’s AML program is meeting its new obligations or you could be in for some very uncomfortable conversations with law enforcement and regulatory agencies.

And for fans of the, “if at first, you don’t succeed, bury them in more paperwork and regulatory bodies” mantra, the European Union is creating a bloc-wide “regulator of regulators” to oversee a purported “stronger,” “harmonized,” and “integrated” EU AML/CFT system. In short, the EU wants a “supervisor” that works with national FIUs and authorities but can supersede their authority if it deems necessary. If this sounds too amazing to be true, read the Action Plan.

In the Middle East expect the United Arab Emirates (UAE) to continue revamping its AML/CTF framework to address the Financial Action Task Force (FATF) identified gaps. The UAE continues to open its markets and implement new regulations to support the development of digital payments and oversight of stored value facilities. Other regional players like Saudi Arabia are exploring digital payments and, taking it a step further, a central bank digital currency to facilitate payment settlements. Expect the nascent regulatory reforms and digital frameworks to evolve in 2021.

APAC

The ink is barely dry on the Payment Services Act and the Singapore government has introduced a bill to amend it. The proposed changes are intended to align existing payment service regulations with recent AML guidance – particularly virtual asset service providers (VASPs) and digital payment tokens (DPTs) – and regulate additional cross-border money transfer services. Remitters, VASPs, and DPT service providers would do well to watch this development. 

We expect the Monetary Authority of Singapore (MAS) to continue establishing itself as a world leader in FinTech innovation and regulatory collaboration. They just wrapped up their 2020 Global FinTech Innovation Challenge and are strengthening collaboration with the private sector and other nations. Expect MAS’ embrace of digitization and the digital economy to continue. Their recent digital bank license distribution, coupled with a willingness to innovate and engage the public, will invite additional applicants and a continued discussion on risk and control frameworks at these institutions. Expect a further discussion on how technology can be deployed in the 2nd and 3rd lines of defense more effectively soon.

To the southeast, the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Act 2020 (the Act) received royal assent in mid-December. This incremental reform to Australia’s AML/CTF framework was a response to the FATF critical report. The provisions resulting from the Act commence in a staggered fashion throughout 2021 and 2022, with focal areas on customer due diligence, correspondent banking, information secrecy, and cross-border money movements.  

Now is the time to review your AML programs and take the necessary steps to address these slight, but important changes in expectations. Financial service organizations worldwide need to ensure their anti-money laundering program is current and compliant with the latest regulations and laws.

What lessons from fighting COVID-19 can be applied How lo global AML efforts? Watch our on-demand webinar AML: Time for Innovation to learn new ways of thinking about AML.