Italy’s Anti-Money Laundering Efforts: Strengths and Vulnerabilities

Italy’s anti-money laundering (AML) authorities have made significant progress in combating financial crimes, according to their latest assessment. However, the country still faces vulnerabilities in its organizational structure and internal controls that require attention.

Calculating AML Risks

IVASS, Italy’s insurance regulator, uses a basic risk index to calculate AML risks. This index is based on a comparison of the average premium of each company with the average premium for the system, adjusted by indicators related to premiums, paid services, and control structures.

Risk-Based Supervision

Consob, Italy’s financial regulator, performs AML/CFT supervision of auditors and auditing firms of Public Interest Entities using a risk-based model. The model takes into account factors such as:

• Number of high-risk customers
• Firm size
• Revenue from non-auditing services

However, the effectiveness of this approach may depend on the quality of the data provided by the auditing firms.

Financial Intelligence Unit (UIF)

The UIF receives suspicious transaction reports (STRs) and uses advanced analytics techniques to generate financial intelligence reports. The UIF also coordinates with other agencies, such as the Guardia di Finanza, to enforce targeted financial sanctions against Russia and Belarus.

Effective Registers and Procedures

Italy’s AML authorities have developed effective registers and procedures, including:

• Register of Financial Accounts held in Italy at the Revenue Agency
• Public Business Register designed to host data on beneficial owners

These databases are used for financial analyses, investigative purposes, and application of preventive measures.

Vulnerabilities

Despite these strengths, Italy still faces vulnerabilities in its AML system. The assessment highlights concerns about:

• Organizational structure and internal controls of some entities, which may be vulnerable to previously identified threats

Recommendations

To address these vulnerabilities, Italian authorities should prioritize:

• Improving their risk-based approach
• Enhancing data quality and sharing
• Strengthening enforcement mechanisms

Additionally, they should continue to develop and refine their registers and procedures to stay ahead of emerging AML threats.

Conclusion

While Italy’s anti-money laundering efforts show promise, there is still work to be done to ensure the effectiveness and robustness of its AML system.