Financial Sector’s Strong Understanding of Money Laundering Risks in Italy

A review of the financial sector in Italy has revealed a strong understanding of money laundering (ML) risks, with banks taking significant steps to mitigate these threats. In contrast, other sectors, such as DNFBPs, have a more mixed understanding of ML/TF risks.

Comprehensive Institutional Framework

Italy’s law enforcement agencies have a comprehensive institutional framework in place to investigate and prosecute ML, terrorist financing (TF), and predicate offenses. The authorities have access to a wide range of financial and administrative information, including suspicious transaction reports (STRs) and other intelligence. While there is potential for duplication of effort, the LEAs’ powers to obtain information are comprehensive.

Effective Financial Investigations

LEAs and prosecutors in Italy have demonstrated their ability to undertake large and complex financial investigations, resulting in successful convictions and the disabling of criminal enterprises. The country’s criminal and anti-mafia codes provide a comprehensive framework for seizing and confiscating proceeds of crime.

Complex Judicial System

However, the judicial system in Italy is complex, and there are concerns about the length of time it takes to impose sanctions on insurance licensees. Additionally, there is uncertainty about whether the Bank of Italy (BoI) can apply sanctions available under the Consolidated Banking Law (CLB) to banks that come under the prudential supervision of the European Central Bank (ECB).

Financial Sector’s Good Understanding of ML Threats

FIs in Italy generally have a good understanding of ML threats and support the conclusions of the National Risk Assessment (NRA). While there is an over-reliance on due diligence undertaken by banks, CDD measures are well embedded in the financial sector. However, there is a lack of consistency in identifying beneficial ownership, particularly above the 25% threshold.

DNFBPs’ Poor Understanding of ML Risks

In contrast, DNFBPs, such as lawyers and accountants, have a poor understanding of ML risks, with reporting being generally poor. This highlights the need for improved outreach and education to these sectors.

Supervision and Sanctions

Financial sector supervisors in Italy generally have a good understanding of ML/TF risks associated with FIs but could benefit from improved supervisory tools. While sanctions are applied for violations of the AML Law, there is room to strengthen existing arrangements by better aligning sanctions with institutions’ size and financial capacity.

Transparency of Legal Persons

Italian legal persons are used to a relatively large extent in ML schemes, which highlights the need for transparency in this area. The authorities should consider introducing measures to increase transparency and prevent abuse.

Conclusion

Overall, while Italy’s financial sector has made significant progress in understanding and mitigating ML risks, there is still room for improvement, particularly in other sectors and in relation to supervision and sanctions.