Worldwide: Financial Regulatory Developments Focus - August 01, 2018 Issue 30/2018

AML/CTF, Sanctions and Insider Trading

UK Proposals for a Register of Beneficial Ownership for Foreign Entities

On July 23, 2018, the U.K.'s Government Department for Business, Energy & Industrial Strategy launched a consultation on a draft Bill that would introduce a register of beneficial owners for overseas legal entities that own U.K. property. Since April 6, 2016, the U.K. has required U.K. companies, limited liability partnerships and societates europaeae to establish and maintain a register of persons with significant control over them and since June 30, 2016 and those entities have been required to file such information with Companies House where it is publicly available on the People with Significant Control register.

Currently, information about overseas owners of land or property is often limited to the entity's name and territory of incorporation and it is unclear who ultimately owns and/or controls the entity. The aim of the draft Bill is to prevent and combat the use of land in the U.K. by overseas entities for the purposes of laundering money or investing illicit funds.

The draft Bill will require overseas entities—which are broadly defined to encompass any legal entity, regardless of the form they take, that are governed by the law of a country or territory outside the U.K.—to take steps to identify their beneficial owners and to register them with Companies House. Registered entities will be required to update this information annually. An overseas entity that registers with Companies House will: (i) not be able to register as an owner of the land and will therefore not obtain full legal title; and (ii) will not be able to register certain dispositions through the U.K. land registries. Failure to provide the annual updated information or delivering (or causing to be delivered) misleading, false or deceptive information will be offenses.

Alongside the draft Bill, the BEIS has also published an impact assessment, a document providing an overview of the proposals and a research paper on the proposed expansion of the transparency obligations. The consultation closes on September 17, 2018.

The consultation page can be viewed at: https://www.gov.uk/government/consultations/draft-registration-of-overseas-entities-bill, the draft Bill can be viewed at: https://www.gov.uk/government/consultations/draft-registration-of-overseas-entities-bill, the overview and questions can be viewed at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/727901/2.
_FINAL_Overview_document__1___1_.pdf, the impact assessment can be viewed at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/727827/3.
_ROEBO_final_stage_impact_assessment.pdf and the research paper can be viewed at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/727828/4.
_ROEBO_Research_Report_FINAL.pdf.

Financial Action Task Force Publishes Report on Professional Money Laundering

On July 26, 2018, the Financial Action Task Force published a report on professional money laundering. The report is intended to assist authorities to target professional money launderers and the structures that they set up and use to launder money and to disrupt the organizations of their criminal clients. PMLs are referred to by the FATF as "individuals, organisations and networks that are involved in third-party laundering for a fee or commission." PMLs specialize in providing professional money laundering services, such as locating investments or purchasing assets, establishing companies or legal arrangements, acting as nominees, recruiting and managing networks of cash couriers or money mules, providing account management services and creating and registering financial accounts. By providing detailed explanations of the roles performed by PMLs, the FATF aims to facilitate the identification and understanding of how PMLs operate. The report provides recent examples of financial organizations acquired by criminal operations or co-opted to aid money laundering and focuses on some of the common methods used to launder funds, such as trade-based money laundering and underground banking.

According to the FATF, a non-public version of the report examines the successful investigative tools and techniques for detecting and disrupting PMLs and makes several practical recommendations to assist authorities in countries that wish to address this issue. The report also highlights the need for coordination and information-sharing between authorities at national and international levels.

The report is available at: http://www.fatf-gafi.org/media/fatf/documents/Professional-Money-Laundering.pdf?_sm_au_=iVV7VQSSL75L26R7.

G20 Sets October 2018 Deadline for Financial Action Task Force to Clarify AML/CTF Standards for Crypto Assets

On July 23, 2018, the G20 Finance Ministers & Central Bank Governors issued a communiqué following their meeting in Buenos Aires on July 21–22, 2018. Among other things, the communiqué requests that the FATF clarify, by October 2018, how its global anti-money laundering and counter-terrorist financing standards apply to crypto assets.

The FATF's global standards (also known as the 40 Recommendations) promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. However, the FATF standards do not refer explicitly to crypto assets or the associated service providers and intermediaries, which creates uncertainty as to the scope of AML/CTF obligations that may apply to them.

The FATF has undertaken a stock-take of the different regulatory approaches that have been taken to crypto assets and began work in June 2018 on review of its standards. The FATF reported to the G20 in July on how it planned to take forward its work on crypto assets and its plan to consider, in October 2018, whether it needs to update its 40 Recommendations to reflect the technical aspects of crypto assets. The FATF has identified an immediate need to clarify how FATF definitions and recommendations on customer due diligence, money or value transfer services, wire transfers, supervision and enforcement apply to crypto assets providers and related businesses. In addition to this, the FATF plans to update its 2015 Risk-Based Approach Guidance on Virtual Currencies.

The new October 2018 deadline set by the G20 will necessitate the FATF completing its review within a tighter timeframe and may even require it to re-prioritize some of the planned workstreams for the U.S. presidency of the FATF, which runs from July 2018 to June 2019.

The G20 Communiqué is available at: http://www.g20.utoronto.ca/2018/2018-07-22-finance-en.pdf, details of the FATF's July 2018 report to the G20 are available at: https://finreg.shearman.com/financial-action-task-force-reports-to-g20-and-fi and the current FATF standards are available at: http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html.

To view the full article, please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.