This article is intended to provide guidance to address the COVID-19 crisis and its effects in the face of new risks.
The current coronavirus contingency (COVID-19) has created different challenges for the authorities in charge of fighting and preventing the crimes of Money Laundering and the Financing of Terrorism (ML/FT). As usual, all companies must strive for the prevention and detection of these risks in a timely manner and carry out an analysis of the new ML/TF risks derived from the COVID-19 crisis. In this paper, we have generated a series of recommendations that companies may consider, as a good business practice, to implement timely mechanisms to prevent and detect them quickly.
What Are The New Risks in Money Laundering and Terrorist Financing?
In addition to the ML/TF risk factors listed in existing local regulations, after the COVID-19 pandemic, new risk factors have been classified as the main risks of money laundering and terrorist financing the following:
- Traffic in counterfeit drugs, adulteration of medical supplies, and sale of some supplies without the quality standards required by the health sector.
- There is an increase in financial fraud and scams on the occasion of economic uncertainty and fears caused by the pandemic.
- An increase in crimes related to corruption for the need and urgency of a state of national emergency within the state's treatment processes.
- Use of informal economy to provide financing.
- An offer of fraudulent investments in the form of a Ponzi scheme in the face of economic uncertainty and means derived from the pandemic.
- Use of virtual assets as a method for laundering assets.
- An increase in remote or off-site financial operations and purchases of products and services online could be used by criminals to carry out fraud and cybercrime.
- Evasion of the controls arranged by the companies for the adequate knowledge of the clients and other counterparts due to working remotely.
- Reduction in the volume of suspicious reports received and possible delays in obtaining additional information required for the analysis or investigations in progress.
- Recruitment of people to support criminal activities that generate resources that can be laundered in light of the economic needs of the population and unemployment.
- Misuse and abuse of non-profit organizations.
- Misuse of legal entities to obtain and subsequently launder or hide money.
- Temporary or intermittent closure of some economic activities that impede the adequate fulfillment of the obligations regarding ML/FT.
What Are The Practices and Measures Aimed at Mitigating The Main AML / CFT Risks Associated with COVID-19?
In order to mitigate the risks associated with COVID-19 in money laundering&terrorist financing and respond to new challenges, the following practices and measures are proposed, among others:
- Implement business continuity plans in response to the crisis that includes the implementation of ML/TF measures with a risk-based approach.
- Implement clear protocols for remote work aimed at human talent with the aim of maintaining optimal operation due to economic uncertainty and fears caused by the pandemic.
- Identify the risks associated with COVID-19 regarding the type of business, the operation, the size, and the geographical areas where it operates, among other particular characteristics, and establish controls to decrease the possibility of occurrence or impact of ML/TF risk.
- Make responsible use of digital financial and non-financial services.
- Seek greater and better monitoring of financial transactions, especially electronic ones of international order.
- Make use of a client and other counterparties due to a diligence approach based on the new risks associated with COVID-19.
- Make use of digital identity to identify customers at onboarding and when transacting.
What Is The Role of The Compliance Officer Regarding AML / CFT Risks Associated with COVID-19?
The Compliance Officer plays a critical role in identifying, assessing, and mitigating Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) risks associated with COVID-19. Here are some of the key responsibilities:
- Risk Assessment: The Compliance Officer should conduct a comprehensive risk assessment to identify the potential AML/CFT risks associated with the pandemic. This could include changes in customer behavior, new payment methods, and increased use of online channels.
- Enhanced Due Diligence (EDD): The Compliance Officer should apply EDD measures to high-risk customers, such as those involved in medical supplies, pharmaceuticals, and other pandemic-related products and services. This may include additional documentation and transaction monitoring.
- Transaction Monitoring: The Compliance Officer should monitor transactions for suspicious activity related to COVID-19, such as payments from high-risk jurisdictions, unusual transaction patterns, or large cash deposits.
- Training and Awareness: The Compliance Officer should ensure that employees are trained on the latest AML/CFT risks associated with COVID-19 and how to detect and report suspicious activity.
- Reporting: The Compliance Officer should report any suspicious activity to the appropriate authorities in a timely manner, as required by law.
Overall, the Compliance Officer plays a critical role in ensuring that the company's AML/CFT program is effective in mitigating risks associated with COVID-19. It is important for the Compliance Officer to stay informed about the latest developments and guidance from regulatory authorities to ensure that the program remains up-to-date and effective.