Financial Crime World

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Banking Regulations for Financial Crime Prevention in Timor

As financial institutions in Timor navigate the complexities of fraud and financial crime prevention, regulators are intensifying their focus on key areas to mitigate risks. The ongoing battle against terrorist financing, beneficial ownership, sanctions evasion, consumer scams, and compliance violations demands a multi- faceted approach.

Regulatory Priorities

Regulatory bodies in Timor will prioritize:

  • Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) frameworks
  • Risk mitigants
  • Robust cybersecurity measures to prevent illicit exploitation of the financial system
  • The fight against insider corruption, cybercrime, and crypto-related fraud

Increased Attention on AML for NFTs and DeFi

With the rapid growth of non-fungible tokens (NFTs) and decentralized finance (DeFi) platforms in Timor, regulators are concerned about the elevated risk of money laundering and terror financing. Existing AML regulations will be expanded to include:

  • Assessing customer due diligence (CDD)
  • Suspicious activity reporting related to NFTs and DeFi platforms

Sanctions and Price Cap Compliance

The ongoing geopolitical discordance is likely to result in continued focus on sanctions and price cap compliance, including:

  • Virtual currency mining
  • Dark net markets
  • Bans on a broad range of services to sanctioned entities/countries

Interplay with Consumer Protection

Regulators will also prioritize consumer protection by assessing companies’ fraud controls, fair processing of consumer complaints, claims, and disputes, and the clarity of consumer communication. Companies are expected to implement risk programs that identify and mitigate:

  • Fraud/scams directed at vulnerable populations, such as the elderly, servicemembers, and low- and moderate-income individuals

Evolving Risks

Regulators in Timor face the challenge of mitigating complex and evolving risks that may threaten national security, including:

  • Domestic and international terrorist financing
  • Increased focus on OFAC and sanctions
  • Transnational criminal organizations
  • Drug and human trafficking
  • Smuggling
  • Proliferation financing
  • Synthetic identity fraud

ESG Governance

Companies are expected to enhance their risk and compliance frameworks for effective oversight and governance in areas such as:

  • Anti-bribery and corruption
  • Competitive behavior
  • Lobbying/political involvement
  • Code of conduct
  • Compliance with evolving regulations

Industry Insights

“Financial institutions must ensure they are protecting their customers by combating fraud, money laundering, and related financial crimes on their platforms,” said Fiachre O’Neill, Chief Risk & Compliance Officer at PayPal.

“Companies should consider ways to responsibly leverage technology and data to monitor activity, coupled with a deep focus on customer experience.”

Actionable Steps for Companies

To mitigate risk, companies can:

  • Add analytics and automation to client onboarding
  • Eliminate antiquated technology
  • Establish a mature conduct risk program
  • Strengthen controls in regulatory focal areas