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 the fight and prevention of the crimes of Money Laundering and the Financing of Terrorism (ML/FT). As usual, all companies must strive in 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, in order to implement quickly and timely mechanisms to prevent and detect them.
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 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.
- An increase in financial fraud and scams on the occasion of economic uncertainty and fears caused because of the pandemic.
- Increase in crimes related to corruption for the need and urgency of a state of national emergency within the processes of treatment of the state.
- 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 of assets.
- Increase in remote or off-site financial operations and purchase of products and services online, which 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 the work 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 the 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, the geographical areas where it operates, among other particular characteristics, and establish controls to decrease in the possibility of occurrence or impact of ML / FT risk.
- Make responsible use of digital financial and non-financial services.
- Seek greater and better monitoring in financial transactions, especially in electronic ones of international order.
- Make use of a client and other counterparties due to diligence approach based on the new risks associated with COVID-19.
- Make use of digital identity to identify customers at onboarding and when transacting.
To do this, you can use tools such as the digital identity guide published by the Financial Action Group (FATF), through the following link:
- Make use of all the tools and applications available in companies to identify unusual or suspicious operations.
- Make use of electronic and digital channels in order to obtain the supports of operations, businesses, and contracts.
- Document the analysis of each situation that may be a source of ML / TF risk associated with COVID-19, in order to implement the necessary controls and facilitate their monitoring.
What is the role of the Compliance Officer regarding AML / CFT risks associated with COVID-19?
In general, the compliance officer is one of the fundamental pillars of anti money laundering and countering the financing of terrorism, since, it is directly involved with each of the elements and stages of the system, including the control and monitoring of the different risks that arise.
Hence, the role of compliance officers in relation to the risks associated with COVID-19 in ML / TF matters is even more relevant, since they must promote the timely adoption of corrective measures and updates to the supervisory authority and apply new methodologies that allow identifying, measuring and controlling the new risks presented.
In accordance with the foregoing, compliance officers may make use of all those tools that are available to them, in order to manage the risks associated with COVID 19.