Higher-Risk Jurisdictions Linked to Bank Accounts Raise Concerns
The Agency for the Supervision of Financial Institutions Sounds the Alarm
Monaco, March 13, 2024 - The Agency for the Supervision of Financial Institutions (AMSF) has issued a warning about a significant increase in bank accounts linked to higher-risk jurisdictions. According to its annual report, several trust and company service providers (TCSPs) have failed to adequately address these risks, posing a threat to the financial system.
TCSPs Failing to Prevent Money Laundering and Terrorist Financing
The report highlights that TCSPs have not developed sufficient anti-money laundering (AML) and combating the financing of terrorism (CFT) procedures to detect and prevent transactions linked to higher-risk jurisdictions. Moreover, some TCSPs have inadequate customer due diligence (CDD) processes in place, making it challenging to identify and verify the true beneficiaries of bank accounts.
Red Flags Identified
The AMSF has identified several red flags that should raise suspicions among TCSPs:
- Disparate addresses between a customer’s structure and their bank account
- Lack of valid explanations for unusual address discrepancies
- Limited understanding of high-risk customers, such as:
- Politically exposed persons (PEPs)
- High-net-worth individuals (HNWIs)
- Virtual asset service providers (VASPs)
TCSPs Failing to Implement Adequate Screening and Risk Assessments
The report also notes that some TCSPs have failed to implement adequate screening processes for targeted financial sanctions and have not assessed their exposure to special purpose vehicles (SPVs) used to hide beneficial ownership over real estate.
Guidance Issued by AMSF
To address these concerns, the AMSF has issued guidance to TCSPs, urging them to:
- Urgently develop, adopt, and implement appropriate AML/CFT procedures and controls
- Collect sufficient KYC/CDD data for all customers and report it in the next STRIX round
- Implement screening for targeted financial sanctions
- Assess exposure to SPVs and ensure compliance with beneficial ownership disclosure requirements
Thematic Inspections and Review Plans
The AMSF has also announced plans to conduct thematic inspections, review individual risk profiles, provide guidance and outreach, collect and analyze data for upcoming rounds, and periodically update its supervisory findings.
Industry Experts Welcome Initiative
Industry experts have welcomed the AMSF’s initiative, stating that it is crucial to address these risks to maintain the integrity of the financial system. “The AMSF’s efforts are a significant step towards ensuring that TCSPs operate in a transparent and compliant manner,” said Suzanna van Es, Financial Transparency Advisors GmbH.
Next Session on AML/CFT Compliance
The next session on this topic will take place on March 26, 2024, where experts will discuss the implications of these findings and provide recommendations for TCSPs to improve their AML/CFT compliance.