Financial Crime World

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Obliged Entities Must Be Aware of TFS Screening Obligations and Requirements to Freeze Funds/Assets

A recent assessment has revealed that obliged entities, including banks, are aware of the risks associated with sanction evasion but struggle to identify close associations (indirect links) with sanctioned entities and individuals.

Risks and Challenges

  • 20% of non-profit organizations (NPOs) in Romania lack a risk-based regulatory and oversight framework, making it difficult for them to prevent terrorist financing (TF) abuse.
  • While banks have developed an understanding of ML and TF risks, this understanding is less developed among other financial institutions, including payment institutes and exchange offices.

Importance of Customer Due Diligence

  • The report highlights the importance of customer due diligence (CDD) measures in preventing TF.
  • While obliged entities generally apply CDD measures, there are limitations in risk understanding which affect their effectiveness.

Supervision and Enforcement

National Bank of Romania

  • The NBR has implemented effective supervisory instruments and uses a broad range of them, but its approach appears to lack a general direction and high-level strategy in the anti-money laundering and combating the financing of terrorism (AML/CFT) field.
  • Remedial measures are applied as a rule by supervisors when breaches are identified, but sanctions have not been consistently applied.

Supervisor Measures

  • The NBR has demonstrated a broad impact on compliance across the sectors it supervises, but neither supervisor measures the success of their activities at a strategic level.

Transparency and Beneficial Ownership

  • The report highlights the importance of transparency and beneficial ownership in preventing TF.
  • Romania’s authorities have taken steps to prevent misuse of legal persons, including the development and use of public registries.
  • However, there are limitations in understanding the risks presented by different types of legal persons created in Romania.

Conclusion

In conclusion, while obliged entities are aware of the risks associated with sanction evasion, there are still limitations in risk understanding which affect their effectiveness in preventing TF abuse. The authorities have taken steps to prevent misuse of legal persons, but implementation is still ongoing. Supervisors must continue to prioritize AML/CFT and ensure that sanctions are consistently applied. Transparency and beneficial ownership must also be maintained to prevent TF.