KPMG e-Newsletter | Anti-Money Laundering & Sanctions: Issue 10, June 2021

Issue #10 | June 2021   Here are the latest news and updates on Anti-Money Laundering, Counter Financing of Terrorism ("AML/CFT") and sanctions for your knowledge.       Bank Negara Malaysia ("BNM") issues revised Circular on AML/CFT Compliance Officer Appointment Notification Method and Targeted Financial Sanctions Reporting Forms   BNM has issued a revised circular on 3 May 2021 to inform Designated Non-Financial Businesses and Professions & Non-Bank Financial Institutions that the Compliance Officer Nomination Notification Form has been further amended for clarity and the notification to BNM of new appointment of Compliance Officers may now be submitted via an online form. Additionally, a new email address was made available for targeted sanction reporting.     A new e-platform was launched by BNM to host repository of awareness video materials including all the AML/CFT Webinar applicable to reporting institutions ("RIs"). However, access to the e-platform was restricted to compliance officers whose appointment have been notified to BNM.     Single mother of three charged with 19 counts of Money Laundering ("ML")   A single mother was recently charged in the sessions court with 19 counts of ML which involved nearly RM1 million seven years ago. The proceeds the woman received were allegedly from unlawful activities and the woman had used approximately 28% of the proceeds to pay her credit card bills and to purchase insurance policies for her family members. This is in addition the businesswoman was earlier charged with fraud in December 2020 amounting to RM700 thousand by posing as an insurance agent and cheating victims to purchase non-existent insurance policies. Malaysia sues Deutsche Bank, J.P. Morgan and Coutts over 1MDB   The now-defunct 1MDB state fund is claiming USD 1.11 billion from Deutsche Bank (Malaysia) Bhd., USD 800 million from J.P. Morgan (Switzerland) Ltd and USD 1.3 billion from Coutts & Co. with interest payments, in order to recover billions in alleged losses from the corruption scandal at the fund. The claims are premised on ‘negligence, breach of contract, conspiracy to defraud/injure, and/or dishonest assistance’. The lawsuits come after the recovered USD 5 billion in assets following deals over the past three years with U.S. bank Goldman Sachs, audit firm Deloitte and others. However, these three companies had not responded to the claims.     KPMG Insights   The revised circular of BNM on AML/CFT Compliance Officer Appointment Notification Method and Targeted Financial Sanctions Reporting Forms together with the new AML/CFT training e-platform is levelling the playing field for digitalisation of AML/CFT processes of traditional banks and the upcoming digital banks which will be licensed in 2022. The question for all RIs remains; whether resources are adequately upskilled to embrace digitalisation of AML/CFT processes. A move away from physical processes is driven not only by technological advancement, but also by the effects of the Covid-19 pandemic, changes in demographics and the growing pervasiveness of digitalisation.   Taking into consideration the willingness of BNM to embrace technological advancement, we can expect other RIs who had yet embrace technology to follow suit and digitalise its AML/CFT processes. We foresee that RIs would pursue digital control measures in their reporting systems to be in further compliance with BNM guidelines. What does this mean for digital banking licence applicants?   Applicants of the digital banking licences would do well to showcase their capabilities in complying with the AML/CFT requirements at this early stage - if only to reassure BNM that they have a clear understanding of the AML/CFT laws and regulations and share BNM's commitment to this purpose. Where to start?   Applicants should first identify and assess the potential money laundering and terrorism financing ("ML/TF") risks posed by their intended customer bases and business offerings. Hard-hitting questions need to be asked, such as: What is my level of exposure to ML/TF risks if I allow accounts to be opened through agents? What is the likelihood that scammers or "money mules" will open a digital bank account? How might the transaction channels I am offering be misused for ML/TF? These pulse checks will help identify the control measures needed to mitigate such risks and allow digital banks to set their risk appetite. It does not stop there. Applicants should thereafter outline the AML/CFT compliance programme to be implemented should they successfully receive a digital banking licence. Here, applicants need to prove they can and will mitigate ML/TF risks identified and comply with regulatory requirements. This includes but is not limited to: determining the governance and oversight functions as well as resources; drafting policies and procedures developing plans to identify customers such as via electronic-know-your-customer ("e-KYC"); and identifying user and system requirements for transaction monitoring and name screening systems. The outline of the applicant’s AML/CFT compliance programme should be part of their proposal to BNM as an assurance that they have a thorough action place in place.           Hong Kong arrests seven in USD $810 million ML case   Seven former and current bank employees have been arrested in Hong Kong as part of a major operation against a USD $810 million international money-laundering syndicate. The detainees were alleged to have helped a key Hong Kong-based member of the syndicate apply for business accounts, including falsifying company documents and coaching applicants for interviews. Sydney casinos to ban cash after ML scandal The only two casinos in Sydney to make their gaming operations cashless in a bid to stamp out ML. A commitment by Crown to ban cash comes after an inquiry earlier in 2021 found it was likely for criminal activities to occur at casinos in other Australian cities.         United States ("U.S.") charges ex-Bolivian minister with bribery and ML The U.S. arrested former cabinet minister in the interim government of Bolivia’s ex-President Jeanine Anez for receiving bribes paid by a U.S. company and individuals to secure a Bolivian government contract. The Americans were accused of paying USD $602,000 to the Bolivian officials to secure a USD $5.6 million contract to provide Bolivia’s defense ministry with tear gas and other non-lethal equipment. Investigation on a Cayman Islands-domiciled cryptocurrency exchange platform for ML and Tax offenses The US Justice Department and Internal Revenue Service are investigating Binance Holdings Ltd. in efforts to root out illicit activity that thrived in the unregulated market. However, Binance’s Chief Executive Officer, Changpeng Zhao, has said that Binance closely follows U.S. rules and uses advanced technology to analyse transactions for signs of ML and other illicit activities.         G20 confirm their support for the Financial Action Task Force ("FATF") as the global standard-setter to prevent money laundering, terrorist financing and proliferation financing ("ML/TF & PF") G20 Finance Ministers and Central Bank Governors have confirmed their commitment to tackling all sources, techniques and channels of money laundering and the financing of terrorism and proliferation. G20 Finance Ministers are committed to further strengthening the FATF’s Global Network of regional bodies to reinforce the effective implementation of the FATF standards. Public consultation on FATF draft guidance on a risk-based approach to virtual assets and virtual asset service   The FATF is updating its Guidance on the risk-based approach to virtual assets ("VAs") and virtual asset service providers ("VASPs"). The FATF originally published this Guidance in June 2019 when the FATF finalised changes to its standards to clearly place AML/CFT obligations on VAs and VASPs. In July 2020, the FATF committed to update this Guidance as set out in its 12-month review report and report to G20 on so-called stablecoins. The FATF is consulting private sector stakeholders before finalising the revisions to the Guidance.   NatWest faces criminal case over ML   For the first time, the Financial Conduct Authority ("FCA") started criminal proceedings against NatWest Bank over allegedly failing to comply with ML rules, claiming cash deposits totalling to GBP £365 million were made into a United Kingdom ("U.K.") account between 2011 to 2016. The FCA alleges NatWest’s systems and controls failed to adequately monitor and scrutinise this activity. U.K. returns GBP £4.2 million stolen by ex-governor to Nigeria   The GBP £4.2 million recovered by U.K. agencies that was stolen by former Delta state governor, James Ibori and laundered in Britain have been returned to Nigeria. The GBP £4.2m has been recovered from Ibori's wife, sister and fiduciary agent, who were also convicted of ML.     KPMG Insights   VAs and VASPs based on the financial services they provide will need to adopt risk-based approach according to FATF Standards in line with view of G20 approval of FATF as the standard-settler for preventing ML/TF & PF. VAs and VASPs will need to implement controls to identify how peer-to-peer transactions are being used and options to mitigate the aforementioned ML/TF risks. We believe countries will further tighten regulations on AML/CFT compliance on VAs and VASPs upon the finalisation of the above FATF Guidance.       For more information on our AML & Sanctions Services, please contact:     Regards,     Tan Kim Chuan Head of Forensic Email Khurram Pirzada Executive Director, Forensic Email Chong Yung Hung Manager, Forensic Email     About KPMG Forensic’s AML & Sanctions Services   KPMG’s award-winning AML & Sanctions team assists our clients in protecting themselves against criminals and the increasingly aggressive actions of regulators. Whether designing and implementing new operating models, remediating problems of the past, designing and testing controls or transforming the culture and capability of the organization, our team operates globally with the largest financial institutions. 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