Financial Crime World

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The COVID-19 Pandemic and Financial Crime: A Growing Concern

The COVID-19 pandemic has created a favorable environment for financial crime, including money laundering and terrorist financing. Regulatory authorities worldwide have responded by providing guidance to financial institutions on enhanced Anti-Money Laundering (AML) and cyber resilience measures.

Key Points

  • The pandemic has increased the risk of financial crime, including money laundering and terrorist financing.
  • Authorities are urging financial institutions to be extra vigilant and take proactive measures to mitigate these risks.
  • Supervisors, FIUs, and law enforcement agencies are working closely with financial institutions to share information and best practices related to COVID-19-related fraud.
  • Some authorities have provided guidance on digital customer onboarding and simplified due diligence, such as using digital ID systems and live video chats to verify identities.

Regulatory Guidance

Several regulatory bodies have issued statements and guidelines to help financial institutions navigate the challenges posed by the pandemic. These include:

European Regulatory Bodies

  • Basel Committee on Banking Supervision: Provided guidance on cyber-resilience practices in 2018.
  • European Banking Authority (EBA): Has issued guidance on digital identity systems in response to COVID-19.

National Regulatory Authorities

  • Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA): Issued a notice highlighting the heightened risk of cyber-attacks amidst the pandemic.
  • Bank of Italy and the Institute for the Supervision of Insurance (IVASS): Cooperated on cyber security in times of COVID-19.

International Guidance

  • FINCEN: Alerted financial institutions to the risks of COVID-19-related fraud and money laundering.
  • Swiss Financial Market Supervisory Authority (FINMA): Provided flexibility for due diligence requirements during the pandemic.

References

  1. Abu Dhabi Global Market’s Financial Services Regulatory Authority (2020). “Heightened risk of cyber-attacks amidst the COVID-19 pandemic”. Notice No: FSRA/FCPU/04/2020.
  2. Bank of Italy and the Institute for the Supervision of Insurance (2020). “Cyber security in times of Covid-19, Bank of Italy and IVASS’ coordination group for cyber security”.
  3. Basel Committee on Banking Supervision (2018). “Cyber-resilience: range of practices”. December.
  4. Carbon Black (2020). “Amid COVID-19, Global Orgs See a 148% Spike in Ransomware Attacks; Finance Industry Heavily Targeted”.
  5. Coelho, R., and J. Prenio (2020). “Covid-19 and operational resilience: addressing financial institutions’ operational challenges in a pandemic scenario”. FSI Briefs, no 2, April.
  6. Coelho, R., M. De Simoni, and J. Prenio (2019). “Suptech applications for anti-money laundering”. FSI Insights on policy implementation, no 18, August 29.
  7. Commission de Surveillance du Secteur Financier (CSSF) (2020). “Guidance on the use of digital identity systems in the context of Covid-19”.
  8. FINCEN (2020). “Alert: COVID-19-related fraud and money laundering”.
  9. HKMA (2020). “ML/TF Information Sharing with Private Sector Entities”.
  10. Swiss Financial Market Supervisory Authority (FINMA) (2020). “Flexibilisation of due diligence requirements for new business relationships entered into before 1 July 2020”.