Financial Crime Summary Q3 2018

9th October 2018

Summary of Relevant Output on Money Laundering and Financial Crime

Period 1st July 2018 to 30st September 2018


Sites Reviewed for this bulletin:

Financial Conduct Authority (FCA)

Prudential Regulation Authority (PRA)

British Bankers’ Association (BBA)

European Securities and Markets Authority (ESMA)

Commodities Futures Trading Commission (CFTC)

Financial Action Task Force (FATF)

HM Treasury (HMT)

Joint Money Laundering Steering Group (JMLSG)

National Crime Agency (NCA)

Transparency International (TI)

Deloitte Forensic Centre (DFC)

Credit Industry Fraud Avoidance System (CIFAS)

Financial Fraud Action UK (FFA)

International Compliance Association (ICA)

Emerald: Journal of Financial Crime (JFC)

Financial Fraud Action, Police: The DCPCU

BBC Business

Telegraph Finance

Financial Times

New York Times





Each quarter, CPA Audit looks at the most interesting and relevant financial crime news in order to paint a picture of the ongoing battle against money laundering and terrorist financing, make firms aware of the potential risks their firm faces and alert them to any preventative measures they can take.

The biggest scandal of the European AML era

The third quarter of 2018 we saw what has been labelled by the European Commission as being “the biggest money laundering scandal” in European history. Thousands of transactions that should have been flagged up as suspicious were able to be carried out due to poor AML procedures and insufficient Due Diligence processes, allowing customers to launder around $243 billion during the last 9 years via an Estonian Branch of Danske bank.

The unravelling of information about those transactions led to the resignation of the Bank’s CEO Thomas Borgen, and also the beginning of full-scale investigations run by competent authorities. The investigations also uncovered some serious deficiencies in the existing AML rules, for example:

  1. the lack of rigidness and application of the AML rules
  2. Lack of a senior management accountability for financial wrongdoings within the companies.

While a number of competent authorities have started their own investigation into this matter, Danske bank has decided to invest more resources into their AML systems and technologies.

5th Anti-Money Laundering Directive and Virtual currencies

 Companies should already start working on implementing the processes required by the 5th Anti-Money Laundering Directive (EU) 2018/843, which amends the 4th Anti-Money Laundering Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. The 5th AML Directive entered into force 9th July 2018, however Member states must implement the new rules into local legislation by 10th January 2020 latest.

The 3rd quarter brought with it a lot of discussion regarding the 5th AML Directive, especially regarding the establishment of a public companies’ register, disclosing and the establishment of a cross border database of beneficiary trust owners, as well as granting intelligence units access to information about Bank accounts holders.

The 5th AML Directive also opens the door for the establishment of a regulatory environment for virtual currencies and exchanges. There has been widespread acknowledgment of the necessity of virtual currencies, prompting its respective need to be regulated after having taken into account that virtual currencies have become more and more accessible, and more embedded into counterparties’ payments.

The updated version of the AML Directive:

  • brings light into the definition of the “Virtual currencies”, defining them as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.” Providing such a definition on a regulatory level gives much more clarity in understanding and defining the firms’ business activity from the authorities’ and counterparties’ perspective;
  • is now applicable to all providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet (referenced to in the future as “obliged entities”). In particular, this means that obliged entities have to conduct all other anti-money laundering and terrorist financing (AML/CFT) measures such as performing Customer Due Diligence and submitting Suspicious Activity Reports, similarly to other financial institutions;
  • enables competent authorities for anti-money laundering purposes to monitor the use of virtual currencies and identify the owner of the virtual currency through obliged entities, since the anonymity of virtual currencies allows their potential misuse for criminal purposes.

In the criminal case of the U.S. Commodity Futures Trading Commission (CFTC) vs My Big Coin Pay, the judge made the decision to classify crypto-tokens as commodities for the purposes of this case. Given that Bitcoin was traded via exchanges, and there are futures contracts linked to it, the judge made the decision to treat Bitcoin as a commodity and set at the same time a quite important precedent for the U.S. judicial system.

In addition to the existing rules for crypto or virtual currencies, the FATF plan to publish a “global set” of AML principles for cryptocurrencies.

HM Treasury Advisory Notice

Competent authorities continue their fight against money laundering and terrorism financing to ensure the safety of the worldwide financial sector. Following the FATF’s statement identifying jurisdictions with strategic deficiencies in their AML/CTF regimes, HMT has issued an Advisory notice, advising firms to consider the following jurisdictions as those with deficiencies in their AML/CTF regimes:

  • The Democratic People’s Republic of Korea and Iran should be considered high risk jurisdictions and be subject to enhanced due diligence measures.
  • Ethiopia, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Yemen – firms should take appropriate actions to minimise the associated risks, which may include enhanced due diligence measures.

Some of the abovementioned jurisdictions are also subject to sanctions measures, requiring firms to take the necessary steps to complete any additional KYC procedures that may need to be completed as a result.


We are now witnessing an interesting period of financial sector restructuration, what has inevitably brought with it new rules and practices that must be applied throughout the financial sector. Firms are therefore advised to regularly review the systems and procedures they have in place to combat financial crime and ensure that they are at all times fit for purpose, taking into account the constant developments and new money laundering techniques used by criminals.

Next steps

CPA Audit’s compliance team is highly experienced and has engaged in extensive correspondence with the FCA concerning authorisations, anti-money laundering frameworks and other compliance-related issues.

Our team are able to assist in a wide variety of ways in relation to the above, including (but by no means limited to):

  • Bespoke Anti-Money Laundering training & audit;
  • FCA Authorisations;
  • Variation of Permission applications;
  • General advice and assistance on regulated activities and their scope

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