March 30, 2022

The war that Russia wages on Ukraine is on top of the news and as a consequence the world of compliance is focusing on the sanctions imposed on Russia. Rightly so, because that’s where new rules and regulations are being implemented and financial institutions need to support the implementation and ensure the rules are followed. That’s what compliance is all about after all; not only understanding and implementing regulations but actually ensuring the organization adheres to all this and is operationally compliant.

All good of course but let’s not forget there is more out there that needs attention. The war is – sadly – just one of the many events that financial institutions need to pay attention to:

  • The Office of Foreign Asset Control has a long list of sanctions. The sanctions against Russia are imminent and important but there’s happening more in the world and financial institutions need to stay vigilant and make sure their sanctions screening is accurate and up-to-date. Not only the ones that have come just into effect…
  • Anti Money Laundering is often brought into connection with the drug trade (who hasn’t seen Ozark yet?) but human trafficking, trade in endangered species or weapons and proceeds from corruption are not to be forgotten. It’s important to keep the drivers and predicate offences behind money laundering in mind to understand the sources of dirty money and as a consequence the red flags that will trigger a high customer risk rating or risk classification of a transaction.
  • Dirty money will try and get into the financial system at the easiest point of entry. Likewise transactions to sanctioned entities will try and find the way least resistance. Without pretending to be complete, financial institutions and the industry as a whole need to be wary of this. Transactions might pop up in remote branches, unusual currencies, using intermediaries, correspondent banks from developing countries and countries with less strict regulations.
  • As we have seen recently money is not always money… value sits often in luxury goods and although regulators are extending their reach to other sectors, the real estate industry is by far not as good at financial economic crime compliance as banks are as just one example illustrates Many banks still have a long way to go to but not as long a way as many other industries that deal with (cash) money like the real estate industry, luxury goods, cars, boats and travel.
  • With Russia largely cut of from international finance, it’s likely that money will find a way via crypto currencies.

All these considerations – and more – give food for thought for MLROs and anybody else working in FEC. In these difficult times it’s even more than before important to assess the existing controls, systems, policies and processes in place. And sometimes it makes sense to consult an outside party – like for instance.