Financial Crime World

Financial Crime Trends 2022: Regulators Focus on Anti-Money Laundering, Cybersecurity, and Consumer Protection in the Cook Islands

The Cook Islands continue to face significant financial crime threats in 2022, with regulators intensifying their efforts to combat fraud and financial crime. In this article, we’ll explore the key areas of focus for regulators, including anti-money laundering (AML), cybersecurity, and consumer protection.

Emerging Threats

According to KPMG’s report “Ten Key Regulatory Challenges of 2023,” regulatory focus is shifting towards emerging threats such as:

  • Terrorist financing
  • Beneficial ownership
  • Sanctions evasion
  • Consumer scams
  • Potential compliance violations

Regulators are also paying close attention to the rapid growth of digital assets, non-fungible tokens (NFTs), and decentralized finance (DeFi) platforms.

AML/CFT Frameworks

Regulators will continue to prioritize preventing illicit exploitation of access to the US financial system through shell companies and all-cash real estate purchases. Additionally, they’ll focus on:

  • Fraud models, operations, and investigation processes
  • Insider corruption
  • Cybersecurity risk management

Increased Attention to AML for NFTs and DeFi Platforms

Regulators are increasing their attention to AML for NFTs and DeFi platforms, focusing on:

  • Assessing customer due diligence (CDD)
  • Suspicious activity reporting related to these platforms

Sanctions and Price Cap Compliance

Sanctions and price cap compliance will continue to be a priority, particularly in the context of virtual currency mining and dark net markets.

Consumer Protection

Regulators are emphasizing the importance of consumer protection, focusing on:

  • Potential violations of consumer compliance regulations
  • Fair processing and treatment of consumer complaints, claims, and disputes
  • Clarity of consumer communication throughout the process

Companies are expected to implement risk programs that identify and mitigate fraud/scams directed at vulnerable populations, such as:

  • The elderly
  • Servicemembers
  • Low- and moderate-income individuals

Evolving Risks

Regulators are concerned about evolving risks, including:

  • Domestic and international terrorist financing
  • Increased focus on Office of Foreign Assets Control (OFAC) and sanctions
  • Transnational criminal organizations
  • Drug and human trafficking
  • Smuggling
  • Proliferation financing

Synthetic Identity Fraud

Synthetic identity fraud is a growing concern, particularly in the context of consumer protection.

Corporate Governance

Fraud and financial crime management is directly linked to corporate governance. Companies are expected to enhance their risk and compliance frameworks for effective oversight and governance.

Recommendations for Mitigation

To mitigate these risks, companies should consider:

  • Implementing analytics and automation in client onboarding
  • Eliminating antiquated technology
  • Establishing a mature conduct risk program
  • Strengthening controls in regulatory focal areas

Conclusion

The KPMG Regulatory Insights report provides valuable insights for companies operating in the Cook Islands to navigate the evolving regulatory landscape and stay ahead of emerging threats. By prioritizing AML, cybersecurity, and consumer protection, companies can mitigate risks and ensure compliance with regulatory requirements.