Financial Crime World

San Marino’s Financial Sector Lacks Full Appreciation for ML Risks

San Marino’s financial institutions have been found to be aware of anti-money laundering (AML) and combating the financing of terrorism (CFT) laws, but many lack a comprehensive understanding of the risks they face. A recent assessment highlighted several concerns that need to be addressed.

Inadequate Beneficial Ownership Identification

The report emphasized concerns over the ability of smaller financial institutions and designated non-financial businesses and professions (DNFBPs) to properly identify and verify beneficial ownership information. While most financial institutions have a good understanding of customer due diligence measures, there are concerns about the accuracy of the sources used to obtain this information.

Key Concerns

  • Smaller financial institutions may struggle to accurately identify and verify beneficial ownership information
  • DNFBPs may not be using reliable sources to obtain beneficial ownership information
  • The lack of transparency in beneficial ownership information increases the risk of money laundering and terrorist financing

Inadequate Reporting of Suspicious Transactions

The report noted that many sectors, including those with higher risks, do not seem to be reporting suspicious transactions at a level commensurate with the risks they face. For example:

Sector-Specific Concerns

  • The banking sector accounts for most suspicious transaction reports filed
  • Other sectors are lagging behind in reporting suspicious transactions
  • This highlights the need for improved risk assessment and mitigation measures across all sectors

Effective Risk-Based Supervision

The authorities in San Marino have been praised for their good risk understanding and application of a risk-based approach to AML/CFT supervision. However, concerns have been raised about the limited number of on-site inspections conducted by the Financial Intelligence Agency (FIA) for higher-risk DNFBPs.

Recommendations

  • Increase the number of on-site inspections for higher-risk DNFBPs
  • Implement thematic inspections that focus on specific risk areas
  • Enhance risk assessment and mitigation measures across all sectors

Preventing Criminal Associates from Owning or Controlling DNFBPs

The report highlighted the need for more effective measures to prevent associates of criminals from owning or controlling DNFBPs. Currently, there are no specific regulations in place to address this issue.

Recommendation

  • Introduce regulations to prevent associates of criminals from owning or controlling DNFBPs
  • Strengthen due diligence measures to identify and mitigate risks associated with beneficial ownership

Conclusion

While San Marino’s financial sector has made significant progress in implementing AML/CFT measures, there is still much work to be done to ensure that all sectors are aware of the risks they face and take adequate measures to mitigate them. Addressing these concerns will help to strengthen the country’s financial sector and reduce the risk of money laundering and terrorist financing.