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FinCEN Issues Advisory on Financial Action Task Force Updated List of Jurisdictions with AML/CFT Deficiencies

Terri Luttrell, CAMS-Audit
October 15, 2018
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FATF Updated List Includes Pakistan, Removes Iraq and Vanuatu

With all that we have to do each day as AML professionals, sometimes advisories and updates get lost in the shuffle. Here's one you may have missed: 

On September 21, 2018, FinCEN issued an advisory referencing the June 29, 2018, Financial Action Task Force (FATF) publication which updated its list of jurisdictions with anti-money laundering and combatting the financing of terrorism (AML/CFT) deficiencies. Financial institutions (FIs) should consider these changes when reviewing their overall BSA/AML programs and risk-based policies, procedures, and practices.

As you know, the FATF is charged with monitoring jurisdictions for compliance to their global AML/CTF standards, and reporting countries with strategic deficiencies.

What has changed from the FATF list of jurisdictions with AML/CFT deficiencies? What, if any, countries should your financial institution add to your list of areas of concern?

Iraq and Vanuatu, previously included on the FATF deficiency list, have been removed. According to the FATF, these two countries have made significant progress in improving their AML/CFT programs and have established the legal and regulatory framework to meet the commitments regarding the deficiencies that the FATF previously identified.

Financial institutions should still conduct their own analysis of these countries to determine if they are no longer areas of concern for the risk profile of each particular institution. Political unrest, human rights violations, and/or other financial crimes may be reasons to keep a jurisdiction on your internal list of monitoring even if AML/CFT progress has been made.

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Another important change is that Pakistan has been added to the list and will undergo monitoring by FATF based on specific AML/CFT deficiencies including:

  • Terror financing (TF) risks and lack of identifying these risks
  • Lack of authorities identifying cash couriers and enforcing controls on currency and understanding the risk of cash couriers being used for TF
  • Lack of sanctions for AML/CFT violations
  • Lack of competent authorities taking action in these matters

What in the recent FATF update hasn’t changed? The call for countermeasures or enhanced due diligence for the following jurisdictions remains strong:

1) Democratic People's Republic of Korea (DPRK) is subject to counter-measures to protect the international financial system from the ongoing and substantial money laundering and terror financing (ML/TF) risks.

2) Iran is subject to enhanced due diligence measures proportionate to the risks arising from the jurisdiction.

Since these are not new designations and are also on the OFAC list with robust sanctions programs, these jurisdictions should already be on each institution’s higher risk radar.

FinCEN guidance gives a strong reminder of USA PATRIOT ACT Section 312 obligations. The regulations require that covered financial institutions ensure their enhanced due diligence programs include steps to:

  • Conduct enhanced scrutiny of correspondent accounts to guard against money laundering and to identify and report any suspicious transactions in accordance with applicable law and regulation;
  • Determine whether the foreign bank for which the correspondent account is established in turn maintains correspondent accounts for other foreign banks. If so, take reasonable steps to obtain information relevant to assess and mitigate money laundering risks associated with the foreign bank’s correspondent accounts;
  • Determine the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest.

In the September advisory, FinCEN requests that when filing a SAR with suspicious activity in connection with any of these countries of concern, that financial institutions reference this advisory in the SAR narrative and in SAR field 35(z) (Other Suspicious Activity-Other) by including the following key term: “June 2018 FATF FIN-2018-A004”.

FATF generally updates their list of non-compliant jurisdictions on a quarterly basis. Financial institutions should review these updates and adjust their AML programs accordingly. It is important to remember that if a jurisdiction is removed from this list, each institution should still review its risk profile to determine if it continues to be an area of concern for them.

As always, if you have questions about this advisory and how it pertains to your institution, our advisory services team is here to help. With consulting hours or even a BSA risk assessment, our team can make sure your BSA program is on the track to success.

About the Author

Terri Luttrell, CAMS-Audit

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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