Italy’s Anti-Money Laundering Efforts Under Scrutiny

The International Monetary Fund (IMF) has released a scathing report highlighting Italy’s lackluster efforts in combating money laundering and terrorist financing. The report criticizes the country’s authorities for prioritizing asset confiscation over standalone cases involving foreign predicate offenses.

Prioritization of Asset Confiscation Over Standalone Cases

The criminalization of self-laundering did not occur until January 1, 2015, which has hindered the effective use of the Anti-Money Laundering (AML) framework. This has resulted in a complex and lengthy judicial process, exacerbated by insufficient resources. The report suggests that this has led to a lack of criminalization of self-laundering cases, making it difficult to prosecute standalone ML cases.

Limited Understanding of Terrorist Financing Risk

The report also highlights the country’s limited understanding of terrorist financing risk, particularly with regard to Italian residents traveling to conflict zones to support foreign terrorist groups. While authorities have demonstrated a good understanding of the threat, there have been no convictions for terrorist activities in the last five years, despite some investigations finding evidence of terrorist financing.

Implementation of Targeted Financial Sanctions

The IMF has praised Italy’s implementation of targeted financial sanctions (TFS), which includes a passive system of notification for financial institutions and designated non-financial businesses and professions. However, the report notes that the country lacks a focused, interagency approach to supervising the non-profit organization sector.

Limited Outreach and Risk Assessment

Furthermore, the report criticizes the limited outreach undertaken by authorities in mitigating proliferation financing risk through TFS and controls on dual-use goods. The IMF suggests that additional efforts are needed to strengthen the system, particularly with regard to trade with North Korea.

Preventive Measures

In terms of preventive measures, the report notes that financial institutions generally have a good understanding of money laundering threats, but that some sectors (such as insurance and asset management) rely heavily on due diligence undertaken by banks. The report also highlights poor reporting by designated non-financial businesses and professions, particularly among lawyers and accountants.

Remittance Services and Cash Reporting Requirements

The IMF has also expressed concerns over the provision of remittance services by agents acting on behalf of companies that have benefited from EU passporting arrangements under the Payment Services Directive. Investigations have revealed large-scale abuses of cash reporting requirements.

Data Reporting and Supervision

Finally, the report criticizes the lack of comprehensive, timely, and consistent data provided to financial sector supervisors, making it difficult for them to assess ML/TF risk effectively. The IMF suggests that a new risk-based supervisory methodology currently under development by the Bank of Italy will improve existing arrangements but has some limitations.

Conclusion

Overall, the IMF’s report highlights significant shortcomings in Italy’s anti-money laundering and counter-terrorism financing efforts, calling for strengthened supervision, improved data reporting, and increased cooperation among domestic authorities and with home country supervisors.