On 23 February the fifth Financial Action Task Force (FATF) plenary session concluded with some important outcomes for the legal industry. Three days of discussions on key money laundering, terrorism financing and proliferation financing issues have produced new risk-based guidance for the implementation of Recommendation 25 on the beneficial ownership and transparency of legal arrangements. This completes FATFs work on enhancing transparency of beneficial ownership globally and preventing criminals and terrorists from hiding their activities and funds behind complex corporate structures and legal arrangements such as trusts.
FATF has already provided some industry specific guidance and recommendations for the legal industry. Developed in 2019, FATF recommends legal professionals take a risk based approach. This involves identifying, assessing, and understanding specific money laundering/terrorist financing (ML/TF) risks, prioritising resource allocation where risks are highest. The FATF Risk Based Approach Guidance supports this by offering tailored advice considering national ML/TF risk assessments and legal frameworks. It emphasises the diverse nature of the profession’s business structures and services.
See the full recommendations. (PDF)
The ‘grey list’
Further outcomes of the sessions in Paris were the removal and addition of a number of countries to the ‘grey list’. The grey list comprises countries under increased monitoring by FATF who are believed to be higher risk due to identified strategic AML deficiencies. Barbados, Gibraltar, Uganda and the United Arab Emirates were all removed from increased monitoring due to progress made in addressing these previously identified deficiencies.
Kenya and Namibia have now joined Bulgaria, Burkina Faso, Croatia, Democratic Republic of Congo, Jamaica, Mali, Mozambique, Nigeria, Philippines, Senegal, South Africa, South Sudan, Tanzania and Türkiye. Additionally, Cameroon, Haiti, Syria, Vietnam and Yemen have all deferred reporting.
Learn more about the grey list.
Progress on the anti-money laundering agreement in Europe
Elsewhere, The European Council and Parliament have reached a provisional agreement on parts of a new anti-money laundering package, aiming to safeguard EU citizens and the financial system from money laundering and terrorist financing.
The package includes new regulations and directives covering obliged entities like financial institutions, real estate agencies, and crypto-asset service providers, expanding due diligence requirements and imposing stricter rules on cash payments and beneficial ownership disclosure. It also introduces measures for high-risk third countries and enhances the responsibilities of financial intelligence units (FIUs) and supervisors. Risk assessments, both at the EU and national levels, remain crucial components, with the Commission and member states committed to mitigating identified risks effectively. Pending approval, the finalized texts will enter into force upon formal adoption.
Read more about the agreement between the European Council and the European Parliament.
What does this mean for the legal industry in Europe?
The Dutch Bar has elaborated on how this provisional agreement will change the role of lawyers in Europe:
Cash payments within the EU are capped at €10,000, with lawyers obligated to verify the identity of individuals conducting occasional transactions ranging from €3,000 to €10,000.
Ultimate Beneficial Owners (UBOs) must now undergo scrutiny for both ownership and control, applicable even to entities outside the EU conducting business or buying real estate within the EU.
Enhanced customer due diligence is required for clients from high-risk third countries, with risk-based supervision overseen by the European Anti-Money Laundering and Anti-Terrorist Financing Authority (AMLA).
Regulatory technical standards for supervisory boards will be established by AMLA.
Additional FATF resources: