• New FATF Recommendations to Combat Terrorist Financing and Money Laundering; FinCEN Publishes an Advance Notice of Proposed Rule Making Calling for Consolidated Customer Due Diligence Regulations
  • March 12, 2012
  • Law Firm: Crowell Moring LLP - Washington Office
  • On February 16, 2012, the Financial Actions Task Force ("FATF") published its revised Recommendations to address anti-money laundering ("AML"), counter-terrorist financing ("CTF") and those involved with the proliferation of weapons of mass destruction. The new 40 Recommendations replace the 40 Recommendations and 9 Special Measures in place since 2001. The FATF also published nine pages in response to the public sector/private sector involvement in the consultation process. The response highlights certain tensions between the FATF and those who must implement the corresponding AML/CTF rules. Financial institutions and Designated Non-Financial Business and Professions ("DNFBPs") have expressed concerns about the implementation of several of the new FATF Recommendations. In sum, financial institutions and DNFBPs are principally concerned with:

    • Potential confusion over the flexibility allowed by the new risk based approach to AML/CTF;
    • The inclusion of tax crimes as a predicate offense for money laundering;
    • The burden and expense of implementing customer due-diligence ("CDD") measures;
    • The broad definition of politically exposed persons ("PEPs");
    • The failure to clearly define "beneficial owner;"
    • Jurisdiction over lawyers, notaries and accountants involved in real estate transactions; and
    • Conflicting data privacy laws and the resulting complexity and potential cross-border liability.

    The United States Government has cited these new Recommendations in FinCEN's Advance Notice of Proposed Rule Making ("ANPRM"), published February 29, 2012. The ANPRM, in relevant part, solicits public comments on the proposed consolidation of Customer Due Diligence ("CDD") regulations designed to codify, clarify and consolidate existing CDD regulatory requirements. In addition to targeting traditional financial institutions, the ANPRM also announces the intent to include within the concept, at a later date, insurance companies offering covered products, money services businesses, casinos, dealers in precious metals, non-bank mortgage lenders. The ANPRM also calls for the collection of beneficial ownership information - a term that has created much controversy based on its rather amorphous definition.