The Week Of: July 6, 2020
This week’s news and stories of interest to the AML community. If you prefer a news roundup plus other AML/KYC content sent to you, subscribe to This Week Today – our weekly newsletter.
FinCEN updates: Hemp and COVID-19 fraud
The Financial Crimes Enforcement Network (FinCEN) recently published guidance and an advisory for banking with hemp-related businesses and scams and frauds related to the COVID-19 pandemic, respectively.
For hemp businesses, financial institutions still need to conduct due diligence and monitor their transactions while tailoring anti-money laundering programs to reflect the industry’s specific risks, the guidance said.
“The guidance highlights the risk and challenge that financial institutions can face in dealing with customers involved in the expanding cannabis markets,” said the Wall Street Journal. “Hemp was legalized nationally in 2018, but a federal ban on marijuana remains and some states don’t allow possession of any kind of cannabis, including hemp.” Banks no longer need to file suspicious activity reports on customers who cultivate hemp, however.
Watch RDC’s webinar on banking with marijuana-related businesses where we also discuss the 2018 Farm Bill and hemp producers.
The July 7 advisory on pandemic-related fraud alerted financial institutions to potential indicators of imposter scams and money mule schemes. The advisory contains descriptions of these scams and schemes, financial red flag indicators for both, and information on reporting suspicious activity.
How terrorists use cryptocurrency in Southeast Asia
A report published by The Diplomat, a current-affairs magazine focused on the Asia-Pacific region, demonstrates how terrorist networks are adapting to using cryptocurrencies to finance their activities.
The report details a money laundering operation involving cryptocurrencies run by Islamic State-linked groups that generated funds, “which were then allegedly used to finance the activities of terror networks operating in the conflict-ridden Mindanao region in the southern Philippines.”
Cryptocurrency use by terrorists in the region remains relatively low because of a lack of tech-savvy militants and Internet connectivity in rural areas. However, experimentation is likely to continue and the operation run by the IS-linked groups signals a new push to diversify funding tactics, according to the Diplomat.
The Philippines in particular may be prone to these activities because it allows cryptocurrencies to be used as legal tender, unlike other South East Asia countries, and is not a member of the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog. The Philippines is on the verge of being included on the FATF’s gray list due to “strategic deficiencies” in its money laundering and terrorism financing system.
Soft commodities trade targeted by wildlife traffickers
Criminal groups are using soft commodities businesses as front companies to move illegally trafficked wildlife and animal products, according to a new report. Soft commodities are commodities that are grown rather than extracted or mined.
The FATF issued the report after its June 2020 plenary meeting. The group made wildlife trafficking a priority last year under the presidency of Xiangmin Liu of China, who was succeeded in July by Marcus Pleyer of Germany.
One example in the report was of a seizure of 7 tonnes of ivory in Thailand in Singapore between April and May 2015. A criminal syndicate had established a legitimate tea trading company in Kenya to conceal its ivory business. Investigators uncovered it by studying import/export data from the seizure.
According to Global Trade Review, financial institutions might soon face more pressure to identify transactions that could be linked to wildlife trafficking. The FATF asked governments to report back to it within a year on progress they made to improve their anti-wildlife trafficking systems. Strengthening public-private partnerships is a goal as such partnerships are useful for data sharing as currently too little data makes its way to the private sector.