This week, the Financial Action Task Force (FATF) issued a report assessing the United States’ Anti-Money Laundering (AML) and Combating of Terrorist Financing (CTF) progress. The report specifically called out gaps that exist in regulatory oversight for non-banks such as casinos, investment firms, lawyers, accountants and other related entities.

FATF is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction.

FATF stated that “the financial sectors bear most of the burden in respect of required measures under the Bank Secrecy Act (BSA). Financial institutions (FIs), in general, have an evolved understanding of ML/TF risks and obligations, and have systems and processes for
implementing preventive measures, including for on-boarding customers, transaction
monitoring and reporting suspicious transactions.

However, the FATF reports, there is “minimal coverage of certain institutions and businesses (investment advisers (IAs), lawyers, accountants, real estate agents, trust and company service providers (other than trust companies). Minimal measures are imposed on designated non-financial businesses and professions (DNFBPs), other than casinos and dealers in precious metals and stones. Other comprehensive AML/CTF obligations do not apply to these sectors. In the U.S. context, the vulnerability of these minimally covered DNFBP sectors is significant, considering the many examples identified by the national risk assessment process.

In contrast to laws in the United Kingdom and European Union, there are no anti-money laundering rules in place that a non-bank, such as a law firm, would have to adhere to in reporting suspicious activity. But changes could be on the horizon.

Money laundering and terrorist financing are complex global problems. Criminals and terrorists use the global banking industry to place, layer, and integrate funds. And non-financial institutions play an important role in this deep web of money transfers.

Banks and non-financial institutions should consider the new technologies of artificial intelligence, machine learning, and data science which can help examine vast and complex data sets to identify financial crimes.

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