Financial Crime World

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Italy’s Anti-Money Laundering and Combating the Financing of Terrorism Regime Falls Short

Rome, Italy - A recent evaluation by the Financial Action Task Force (FATF) has revealed several weaknesses in Italy’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.

Lack of Transparency

According to the report, Italy’s Decalogo requires financial intermediaries to acquire a “thorough knowledge of the customer” to establish a risk profile. However:

  • There are no specific requirements to verify the legal status of a legal person or the power to bind the customer.
  • Financial institutions are not required to take reasonable measures to understand the ownership and control structure of a legal person, making it difficult for authorities to track the flow of funds and prevent illegal activities.

Anonymous Accounts

The report highlights the issue of anonymous accounts in Italy:

  • Credit institutions and Bancoposta provide bearer passbook accounts with balances up to €12,500, which can be transferred anonymously between issuance and closure.
  • While customer due diligence (CDD) is required upon issuance and closure, this does not fully address the issue of anonymity.

Additional Weaknesses

The report also notes:

  • There are no specific CDD requirements for politically-exposed persons (PEPs).
  • There are no additional specific requirements for establishing cross-border correspondent banking relationships.
  • Financial institutions rely heavily on third-party providers to conduct CDD, which does not fully satisfy specific FATF requirements.

Positive Notes

On the other hand:

  • Italy’s centralized database, known as the Automated Unit for Information (AUI), requires all entities subject to CDD requirements to file information on account openings, transactions above €12,500, and account closures.
  • The Decalogo also requires financial institutions to develop detailed customer profiles, review account operations against these profiles, and pay special attention to anomalous transactions.

Reporting Suspicious Transactions

The report notes that:

  • Every transaction suspected of being linked to money laundering must be reported to the UIC, which has a mandate to combat the financing of terrorism.
  • While banks make extensive use of computer systems to screen transactions and are the main reporting institutions, non-bank financial intermediaries report at a disproportionately low frequency.

Conclusion

The report concludes that while Italy’s AML/CFT regime has some strengths, it falls short in several areas:

  • Lack of transparency in legal persons’ ownership and control structures
  • Anonymous account transferability
  • Inadequate guidance on identifying countries with weak AML/CFT measures

Overall, the FATF evaluation highlights the need for Italy to address these weaknesses in order to improve its anti-money laundering and combating the financing of terrorism regime.