Anti-Money Laundering Newsletter - April 2021 | Legislation and publications of official bodies

The Commission for the Prevention of Money Laundering and Monetary Infringements has published the list of positions determining Politically Exposed Person (PEP) status

In January 2021, the Commission for the Prevention of Money Laundering and Monetary Infringements (“CPBC”, for its acronym in Spanish) published in the web page of the Spanish Public Treasury the list of positions determining Politically Exposed Person  status (from now on, the “List”) in compliance with  the provisions of article 14.3 of Law 10/2010, of April 28, on the prevention of money laundering and financing of terrorism (from here on, “Law 10/2010”).

Article 14 of Law 10/2010 establishes that obliged entities shall apply the enhanced due diligence measures set forth in that article in the business relationships or transactions with politically exposed persons (hereinafter, the "PEP").

Specifically, this provision stipulates that those who perform or have performed important public functions at both national and international level will be RPRs, establishing a specific series of cases -among which we can find, among others, heads of state, members of parliament, senior management positions in Spanish trade union or business organizations or ambassadors-.

Given the breadth of this definition, the same Article 14, in its paragraph 3 and as a result of the amendment of Law 10/2010 through Royal Decree-Law 11/2018, of August 31, which transposed the IV Directive (EU) 2015/859 on the prevention of money laundering in our country, included a mandate for the CPBC to prepare and publish a list detailing what type of functions and positions determine the consideration of PEP.

Said List, has been expressly included in the Community legislation by Article 20a of the V Directive (EU) 2018/843 on the prevention of money laundering, which establishes that Member States shall draw up an updated a list of the exact functions which, according to national laws, regulations and administrative provisions, are considered to be important public functions.

The aforementioned List published in January 2021 on the website of the Public Treasury, was drawn up in July 2020 by the CPBC, without prejudice to the existence of other persons of legal responsibility due to their positions or functions in other countries (foreign persons of public responsibility), or in international organizations as defined in Article 14 of Law 10/2010. Thus, the list enumerates the functions or positions that determine the consideration of a person with Spanish public liability, for those who perform or have performed such functions or positions.

The list also includes the affected positions within the scope of political parties and trade unions, the State, autonomous communities and local entities:

1. Political parties and trade unions: in this section, it includes those persons holding senior management positions with representation in democratic institutions - leaving out of this framework the parties that are not represented - and in Spanish trade unions and business organizations, enumerating a list of senior management positions.
2. State: in this block, the CPBC broadly lists a series of positions related to the General State Administration or other large public administrations such as the Supreme Court, the Constitutional Court, the Congress, the Senate, among others.
3. Autonomous Communities: this section includes positions of great responsibility related to the autonomous structure such as presidencies and vice-presidencies, the autonomous legislative power or the senior management of the public companies in which the Autonomous Community has an interest, among others.
4. Local entities: this item includes mayors, councilors and other positions of responsibility that operate in municipalities with more than 50,000 inhabitants and, in any case, in the capitals of the provinces, as well as of the Autonomous Communities.

The List has been a step forward in the identification of the PEP, facilitating the work of the obligated entities by being able to specifically define which positions will have this status. However, the number of positions contemplated is still high, so the obliged entities need to rely on other additional mechanisms for the identification of the PRPs, such as digital tools, self-declarations or contrasts with public sources of information.

Lastly, the list contains the positions within political parties and labor unions, central government, regional governments and local authorities.

More information here.

Countdown for the transposition of the “whistleblowing” or anonymous reporting channel Directive

December 17, 2021 is the limit date for transposition of Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019, which came into force on December 16, 2019, on the protection of persons who report breaches of Union law. On that date, national legislation which gives effect to the obligation to establish internal reporting channels must be in force (article 26 of the Directive).

This Directive contains rules and procedures to protect persons who provide information acquired in a work-related context, regarding breaches of EU Law in key policy areas. The breaches include both unlawful acts and omissions and unfair practices.

The Directive covers the reporting of breaches of anti-money laundering and counter-terrorist financing regulations, together with other different areas, such as public procurement; financial services, products and markets; protection of the environment; consumer protection; protection of privacy and personal data; breaches affecting the financial interests of the EU; breaches relating to the internal market, including breaches of EU competition and state aid rules, as well as breaches of corporate income tax rules, amongst other.

The EBA launched a public consultation on changes to its guidelines regarding the supervision of anti-money laundering systems with a risk-based approach

The European Banking Authority (EBA) has issued a public consultation proposing changes to its guidelines on the supervisory features of anti-money laundering and terrorist financing prevention systems with a risk-based approach. 

Since the publication of the guidelines in 2016, the EBA has observed that EU supervisors find it difficult to implement the risk-based approach for AML/CFT supervision, which means that supervision is not always as effective as would be advisable. The proposed changes address the key obstacles to effective AML/CFT supervision.

The revised guidelines also propose taking into consideration the changes in the EU legal framework since the original guidelines were published, as well as new international guidance of the Financial Action Taskforce (FATF) and the Basel Committee on Banking Supervision on this subject.

The public consultation will run until June 17, 2021. Comments on the draft guidelines can be sent on the EBA consultation page. All contributions received will be published following the close of the consultation, unless requested otherwise.

EBA highlights the main money laundering and terrorist financing risks in the EU’s financial sector

On March 3, 2021 the EBA published its Opinion on the risks of money laundering and terrorist financing affecting the EU financial sector. 

In the document, the EBA identifies the risks that are applicable to the entire financial system, for instance the use of innovative financial services or the differences in the treatment by competent authorities of financial institutions’ involvement in facilitating tax-related crimes. 

The list of risks includes those arising from COVID-19 which have an impact on compliance with prevention obligations, since they require immediate attention and monitoring by competent authorities.

Other risks identified in the document were already identified in previous reports, like those associated with virtual currencies. 

As a complement to this report, the EBA has developed an interactive tool giving European citizens, competent authorities and financial institutions access to all risks relating to money laundering and terrorist financing covered in the document. 

The Spanish Public Treasury publishes its National Risk Analysis

The Spanish Public Treasury published, in mid-December 2020, the document National Analysis of Money Laundering and Terrorist Financing Risks– 2020, which revises and updates the various existing risk assessments, with the participation of authorities and institutions associated with combating money laundering and terrorist financing.

Among the objectives of this analysis it is sought to integrate in a single document the analyses and conclusions of various existing documents regarding risks and threats in these areas, taking into consideration the framework of the National Security System. Additionally, to review the threats to which Spain is subject and their weight in determining the AML/CFT risk, to establish the general vulnerabilities of the system and describe their evolution in the various sectors, identify and assess the residual risks following application of legislative, preventive, supervisory and financial intelligence measures and determine lines of action for mitigation of the risks identified.

The Bank of Spain and the Commission for the Prevention of Money Laundering enter into a new agreement that sets out the basic rules for collaboration and coordination between both entities

The Bank of Spain and the Commission for the Prevention of Money Laundering and Monetary Infringements have entered into a new agreement, defined in a decision of February 23, 2021 and published in the Official State Gazette (BOE) on February 26.. The agreement sets out the basic rules for collaboration and coordination between both entities for the economic, budgetary and procurement system of the Commission’s Enforcement Service.

The Commission, which reports to the Secretary of State for the Economy and Business Support attached to the Ministry of Economic Affairs and Digital Transformation, is in charge of coordinating the enforcement of Anti-Money Laundering and Counter-Terrorist Financing Law 10/2010, of April 28, 2010, which entrusts to it the function of approving the budget of its Enforcement Service, following consultation with the Bank of Spain.

The Commission’s Enforcement Service permanently guides its activity, which means that the powers relating to the economic, budgetary and procurement system for the enforcement service are exercised by the Bank of Spain.

The Bank of Spain and the Commission for the Prevention of Money Laundering and Monetary Infringements considered it necessary to prepare a new agreement,  after the previous agreement expired, in order to adapt its content to the current legal requirements and to the identified needs.

The new agreement provides, among other things, for the creation of a mixed monitoring committee, which will meet at the request of either of the parties (at least once a year) and will be formed by two members appointed by the Bank of Spain and another two who represent the secretariat of the Commission.

The European Commission favors a new independent AML/CFT supervisor

European Union Finance ministers (ECOFIN) at their meeting at the end of 2020 supported the establishment of an EU anti-money laundering supervisor (EU AML/CFT supervisor) to complement the oversight of national authorities, after several cases of money laundering in EU banks in recent years.

In this regard, in May 2020, the European Commission published an AML/CFT Action Plan, which proposed, in section 3, the creation of an independent EU AML/CFT supervisor, as a result of which this task would cease to fall within the powers of the European Banking Authority (EBA). The new agency would be financed by a tax on financial institutions and other organizations that use their services.

ECOFIN has supported the creation of this EU AML/CFT supervisor with the power to impose administrative sanctions and the capacity to review internal policies, procedures and controls, as well as their effective implementation by the supervised entities, together with the review of documentation regarding transactions and clients. It will also incorporate new rules which will make suspicious activity reports (SARs) more important and will coordinate the information that is shared by obliged entities.

Given the complexity of the functions and the considerable number of obliged entities at EU level, the AML/CFT supervisor may also be devised in an incremental way, allowing it, as it consolidates and proves its effectiveness, to cover all (financial and non-financial) sectors subject to AML/CFT obligations. Another option would be for the EU supervisor to take direct charge of the financial sector as part of a system integrated with the national supervisor and to would be responsible for the indirect supervision of the nonfinancial sector, ensuring a minimum standard.

The U.S. updates its laws on the prevention of money laundering and terrorist financing

On December 2020 the U.S. Senate passed the National Defense Authorization Act and, as part of that legislation, the Anti-Money Laundering Act of 2020 and the Corporate Transparency Act.

The act’s provisions broaden and update the Bank Secrecy Act, or BSA, and U.S. AML/CFT rules.

Among the key provisions of the new regulation, it:

• Establishes new reporting requirements in relation to beneficial ownership for certain entities that do business in the U.S., shell companies.
• Increases the rewards for AML/CFT whistleblowers, to of up to 30% of the penalties imposed on an entity when the reporting gives rise to penalties of more than one million dollars, and increases the protection of whistleblowers.
• Updates the legal definition of financial institution to include, in accordance with the existing FinCEN regulations, entities that offer custodian wallet providers or virtual currency services.
• Modifies the penalties for breaches of the Bank Secrecy Act, or BSA and AML.
• Established measures coordination and cooperation between international and federal agencies in applying AML/CFT law.

The European Council intends to adopt new rules to avoid the spread of terrorist contents online

The EU seeks to prevent terrorists encouraging violence on the internet. To achieve this, on March 3, 2021, the European Council has proposed a Regulation on the dissemination of text, images, audio or video files used to incite the commission of acts of terrorism, give instructions to commit offenses or seek participation in terrorist groups.

The purpose of this legislation is to combat misuse of the internet for criminal purposes by terrorists, with the objective of spreading propaganda, learning to manufacture explosives, inciting the commission of lone terrorist attacks or publishing their activities live, by establishing a common instrument for all the member states. The rules will apply to hosting service providers that offer services in the EU, regardless of whether they have establishments in the member States.