he “three lines of defense” against Money Laundering and Terrorism Financing.
The principal responsibility for a bank’s Money Laundering risk management lies with the board of directors.
It is responsible for defining and overseeing a bank’s Anti Money Laundering/Combatting Financing Terrorism policy and allocating operational responsibilities and resources under the “three lines of defense”:
-The “first line of defense” lies with a bank’s business units, such as private banking or asset management divisions. These units are responsible for identifying, assessing and controlling ML/TF through the use of customer due diligence practices.
-The “second line of defense” refers to the compliance department, as well as human resources and technology. These entities should be independent of business units, give independent advice to management and act as main contact point for the relevant authorities.
-The “third line of defense” refers to the independent internal audit function.
TO KEEP IT SIMPLE: BUSINESS PEOPLE WHO ONLY CARE ABOUT GROWING THEIR PORTFOLIO, BE AWARE THAT YOU ARE FIRST IN LINE. IN CASE OF ANY DIFFERENT WITH YOUR CLIENT, YOUR JOB AND CAREER WILL BE ON THE LINE.
SO NEVER HIDE ANYTHING FROM THE COMPLIANCE DEPARTMENT, BECAUSE THEY WORK WITH YOU, NOT AGAINST YOU.
Three tips to be a great Compliance Officer: – Always be up to date on the regulations, and understand them well. – Understand your Bank, its products and risks. – Disseminate the information within the teams, and explain the “whys beneath the surface” to help them better digest new rules. It is pointless to impose new rules without explaining why. People respond better when they understand the whys and the purpose.
Terrorism Financing red flags. In this post I share few red flags for terrorism financing, compliance officers must be aware of. They are the most basic and obvious ones.
The Financial Action Task Force (FATF) has the right to place a jurisdiction under increased monitoring. This list of jurisdictions is generally referred to as the “Grey List”.
The FATF takes such decision if it considers that the jurisdiction is lacking strategic deficiencies to counter money laundering, and terrorism financing.
These jurisdictions must work closely with the FATF to improve their situation, and ultimately get removed from the Grey List.
Please check this list shared from the FATF on October 2021.
FIUs are the national center for the receipt and analysis of: a- suspicious transaction reports; and b- other information relevant to money laundering.
All FIUs of the world are connected. Lebanon’s FIU is called the “Special Investigation Commission” or هيئة التحقيق الخاصة
Why Turkey was put on the grey list of the Financial Action Task Force (FATF)?
The FATF, which is the global financial watchdog considered Turkey a facilitator of money laundering and terrorism financing, and put it on notice in December 2019.
FATF’s assessment on Turkey showed the below four concerns: 1- Turkish prosecutors give low priority to charges related to ML and TF 2- No national strategy to deprive criminals the proceeds of their crimes 3- Turkey’s ability to freeze assets linked to TF and ML is weak 4- The Turkish banking sector has less understanding of their exposure to TF.
Turkey was given almost two years to fix these problem, but failed.
Therefore it was put on the grey list by the FATF in 2021, accelerating the crisis it is witnessing today.
Not only this… This decision taken by the FATF will eventually push countries such as the EU to take similar decisions…
The FBI launched an awareness campaign few time ago called “Don’t be a Mule”.
People who move money for Money Launderers (ML) or Terrorist Financers (TF) are called “Money Mules”.
ML and TF can send you an email, message or contact you by any other mean to: – Move money; – Open a bank or cryptocurrency account; or – Receive a package.
Their purpose is to transfer the money from one account to the other in the “layering process” (which is the second phase of money laundering). They can incentivize you by promising an amount of money. Don’t fall into this trap! Because while you might not realize you are part of the scheme, and think that you are only a messenger, you become a target for the authorities, and clearly part of the Money Laundering process.
Therefore, when you face such situation you must: – Immediately stop communicating with the person; and – Report to the authorities such message.
The Status of the Automatic Exchange of Information (AEOI) between Lebanon and Switzerland
The AEOI was established in July 2014 to fight tax evasion.
The Lebanese parliament issued law No 55 on October 2016 for the exchange of information.
In January 2017, Switzerland has agreed to participate in the AEOI. However, it opted for the bilateral agreements with certain countries due to concerns related to confidentiality and privacy of the shared information.
Switzerland and Lebanon have signed in December 2019 on a bilateral agreement to exchange information.
This measure entails Switzerland to provide Lebanon with details of bank accounts held by Lebanese residents at Swiss Banks and vice-versa.
However, Lebanon had to meet several conditions, notably in terms of data security and confidentiality prior to starting the exchange, which did not happen.
Therefore, today the situation is as follows: – Banks in Lebanon share details of bank account held by Swiss residents at Lebanese banks; whereas
– Banks in Switzerland DO NOT share details of bank account held by Lebanese residents at Swiss Banks.
Sanctions on Russia are increasing by the hour! This is a quick recap for the EU sanctions:
EU adopted the first package of new sanctions on February 23rd, 2022 further to Russia’s recognition of the Donetsk and Luhansk’s People Republics as independent states.
1- It froze the assets of 351 members of the Russian State Duma, individuals, entities, banks, and senior military officers; 2- It restricted the trade with the Donetsk and Luhansk regions, banning the imports of goods, export for certain goods and technologies, tourism services; 3- It prohibited Russia to access the EU capital and financial markets.
On 25 February 2022, the EU imposed broad sanctions targeting the Russian aviation sector. It imposed a full ban on export of dual-use items, as well as restrictions on supply of various strategic goods and services, including semiconductors, aircraft, and items used in the oil refinery and high-tech sectors. Also, EU added President Putin and Foreign Minister Lavrov to their asset freeze list.
On 28 February 2022, the EU adopted its third package of sanctions, imposing asset freezes on various Russian businesspersons active in the oil, banking and finance sectors, while closing off the EU’s airspace for Russian air carriers and preventing Russia’s Central Bank from accessing its foreign reserves in the EU.
On March 1, 2022 EU ambassadors agreed to ban seven Russian banks from using SWIFT financial messaging system.
On 28 February 2022 Russia issued the first round of economic measures, to respond to recent international sanctions pressure on the Russian ruble, in connection with the current situation in Ukraine.
Measures are: 1- Russian exporters must sell 80% of the foreign currency proceeds, earned from foreign counterparties. Each Russian resident generating income in foreign currency from the sale of goods, service rendering, performance of work, or transfer of intellectual property to non-resident, must exchange 80% of the proceeds into ruble within three business days of crediting the account.
2- Capital Control restrictions: – Russian Banks can no longer grant loans to non-residents in foreign currency; – Transfer of foreign currencies from Russian banks outside Russia. – Transfer of money outside Russia through electronic means (equivalent to OMT in Lebanon).
3- Buy back of a Russian Public Joint Stock Company (PJSC): Till December 31, 2022 all Russian PJSC must buy back their shares if some conditions are met.
