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Italy’s Anti-Money Laundering Regime: Gaps and Challenges
Rome - Italy’s anti-money laundering (AML) regime has been criticized for several gaps and challenges that undermine its effectiveness in preventing money laundering and terrorist financing.
Lack of Specific Requirements
The AML regime in Italy lacks specific requirements to verify the legal status of corporate customers and identify the natural persons behind them. According to a recent report, financial institutions are not required to take reasonable measures to understand the ownership and control structure of corporate customers or determine who ultimately owns or controls them.
Inadequate Due Diligence Measures
The report also highlighted that while Italian law requires financial institutions to identify any person on whose behalf a transaction is carried out, there is no specific requirement to take enhanced due diligence measures for higher-risk customers, operations, or transactions. Additionally, banks are not required to include originator information on wire transfers or have procedures in place to address incoming transfers with incomplete originator information.
Anonymous Bearer Passbook Accounts
Italy allows anonymous bearer passbook accounts, which can be transferred anonymously and may facilitate the movement of criminal proceeds within and across borders. While authorities have not detected evidence of secondary market trading of such passbooks for criminal purposes, their anonymous transferability poses a significant challenge for financial institutions to conduct ongoing due diligence.
Inadequate Treatment of Politically-Exposed Persons (PEPs)
The report found that Italian law does not require additional specific customer due diligence (CDD) measures for PEPs or establishment of cross-border correspondent banking relationships. Additionally, while financial institutions may rely on third parties to conduct CDD, they retain ultimate responsibility for fulfilling this obligation, but the report noted that this may not fully satisfy specific FATF requirements.
Positive Aspects
On a positive note, Italy’s AML/CFT regime has some strengths, including:
- Maintaining a centralized database of all account opening and transaction information
- Requiring financial institutions to develop detailed customer profiles and review account operations against these profiles
Recommendations for Improvement
However, the report emphasized the need for more guidance on how financial institutions should identify countries with significant money laundering or terrorist financing risks. To ensure the effectiveness of Italy’s AML/CFT regime, the following gaps and challenges need to be addressed:
- Provide specific requirements for verifying the legal status of corporate customers
- Introduce enhanced due diligence measures for higher-risk customers, operations, or transactions
- Limit the anonymous transferability of bearer passbook accounts
- Implement additional CDD measures for PEPs and cross-border correspondent banking relationships
By addressing these gaps and challenges, Italy can strengthen its AML/CFT regime and prevent money laundering and terrorist financing.