San Marino’s Financial System Lacks Full Appreciation for Money Laundering Risks
A recent assessment has raised concerns about the lack of full appreciation for money laundering risks among San Marino’s financial institutions and other entities.
Identification and Verification of Beneficial Ownership Information
Despite having a good understanding of applicable requirements, many smaller financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) struggle to properly identify and verify beneficial ownership information. This is particularly concerning for DNFBPs, which have a basic understanding of customer due diligence measures but may use inaccurate sources.
Reporting Requirements
While most FIs and DNFBPs have a good understanding of suspicious transaction reporting requirements and tipping off measures, some sectors do not seem to be reporting incidents commensurate with the risks they face. This lack of transparency can hinder efforts to combat money laundering and terrorist financing.
Registration and Licensing Process
The report highlighted weaknesses in the registration and licensing process for FIs and professional trustees (PTs). While the CBSM performs fit and proper checks on shareholders, beneficial owners, and senior management before granting market entry, potential associations with criminals are not always considered a standalone ground for declining market entry. Additionally, there is no mechanism to prevent associates of criminals from owning or controlling DNFBPs.
Financial Intelligence Agency (FIA)
The FIA has a good risk understanding of each sector under its supervision and applies a risk-based approach to anti-money laundering and combating the financing of terrorism (AML/CFT) supervision. However, the FIA’s human resources for conducting supervisory activities are inadequate, which may hinder effective oversight.
Exposure to Money Laundering Risks
San Marino’s financial system is exposed to money laundering risks from various sectors, including banking, insurance, and financial fiduciary companies. While the country deems the terrorist financing risk to be “low,” there are concerns about the lack of analysis of vulnerabilities within the AML/CFT system.
Recommendations for Improvement
Overall, while San Marino has made progress in implementing anti-money laundering measures, there is still a need for improvement in certain areas, including:
- Registration and licensing process
- Beneficial ownership verification
- Sector-specific risk assessments
To address these concerns, San Marino’s financial institutions and authorities must prioritize strengthening their AML/CFT frameworks to mitigate the risks of money laundering and terrorist financing.