September 2009

25/09/2009: G-20 Pittsburgh Summit conclusions regarding anti-money laundering laws in non-compliant countries

Amongst the leaders of the G-20 Pittsburgh Summit, it was agreed that the recent push to fight non-cooperative countries in relation to anti-money laundering laws has proven to be successful. There will be an ongoing commitment to deal with tax havens, money laundering, corruption and terrorist financing. 

The leaders fully embrace the Global Forum on Transparency and Exchange of Information in its attempt to involve developing countries as well as providing a new peer review process. The Forum will draw particular attention to tax transparency and exchange of information in countries around the world; this will essentially put into effect their tax laws and protect their tax base. Countermeasures will be used against tax havens from March 2010. The Financial Action Task Force (FATF) will maintain its efforts to combat money laundering and will publish a list of high risk jurisdictions by February 2010.

By November 2009, the Financial Stability Board (FSB) will disclose any improvements regarding non-compliant countries concerning international cooperation and the exchange of information as well as commencing a peer review process by February 2010.

These findings will fundamentally help lawyers across the globe; in that in the future legal professionals will know exactly what their obligations are with regards to reporting money laundering or terrorist financing, and will also know what jurisdictions are blacklisted for their close links to money laundering. 

For the full text of the Leader’s Statement, click here.

Prepared by:

Zina Jamilova
IBA Commercial Law Intern

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16/09/2009: IMF Report commends Jersey’s compliance with FATF’s “40 + 9” recommendations

The IMF has recently published a Financial System Stability Assessment commending Jersey’s Anti-Money Laundering (AML) legal framework. This 79-page report concluded that Jersey complies or largely complies with 44 of the Financial Action Task Force’s (FATF) “40 + 9” recommendations. Lawyers are covered under the current AML framework as a Designated Non-Financial Business and Profession (DNFBP).

Amongst the findings relating to lawyers, the IMF concluded that the requirements on client due diligence and suspicious transaction reporting and the range of sanctions available to the Jersey Financial Services Commission (JFSC) for breach of AML obligations achieved a high level of compliance with the FATF’s recommendations. However, it was unable to provide an appraisal of the effectiveness of the enforcement and monitoring framework for lawyers. This is attributed to the fact that lawyers and other DNFBPs have only recently been subjected to AML regulatory oversight by the JFSC.

Concerning lawyers, two minor deficiencies have been highlighted. Firstly, the report cast doubts on the extent to which DNFBPs were permitted to rely on intermediaries and introducers when conducting client due diligence. However, the report concluded that “the increase in risk is partially mitigated by strong JFSC supervision”. Secondly, the report suggested empowering the JFSC to apply monetary fines, in addition to other sanctions already available under existing legislation, in a bid to further strengthen its enforcement powers. Consequently, these deficiencies have been acknowledged as minor and they do not affect overall compliance with the recommendations.

According to an article by Hedgeweek, thus far, this has been the best finding of AML compliance. This compares favourably with Singapore, the USA, and Belgium – the only other jurisdictions to comply with 40 or more of the recommendations.

For the full text of the IMF’s report, click here.

Prepared by:
Kexian Ng
IBA Commercial Legal Intern

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11/09/2009: Russian Parliament proposes amendments to AML enforcement provisions

The State Duma, the lower house in the Russian Parliament, has introduced amendments to the enforcement provisions for breaches of Federal Law No. 115 “On Opposing Money Laundering and Terrorist Financing” (Law No. 115). These amendments were proposed with a view to bringing its anti-money laundering (AML) enforcement provisions one step closer in line with the recommendations made by the Financial Action Task Force (FATF).

As lawyers are covered by the aforementioned legislation, these amendments would affect their AML obligations. The main features of the proposed amendments are summarised in the following paragraphs. 

The first set of amendments concerns imposing special fines on lawyers, amongst other designated entities, for more serious violations of Law No. 115. Currently, there is no further information on which acts or omissions classify as serious breaches of the law; nor is there information available on the nature or quantum of these special fines.

This change has been implemented in line with a more general consensus to impose tougher fines on more severe breaches of the law. The minimal value of fines as a result of severe breaches of Law No. 15 may be increased to 50,000 rubles for officials and 1,000,000 rubles for legal entities, as opposed to the current minimum of 20,000 rubles and 500,000 rubles respectively. 

The second set of amendments concerns including a disqualification provision within the types of penalties available for breaches of AML law. According to gaap-ifrs, citing Mr Dmitry Skolbelkin, deputy chief of Rosfinmonitoring, the imposition of the disqualification penalty will be conditional upon a breach of a poorly organised internal control system, as opposed to a breach of a technical nature.

Mr Skolbekin further cited the chief of a company’s financial monitoring system as an example of a person who may be affected by this new provision.

To curb fears on its potentially extensive application, Alexander Naumov, the chairman of the anti-money laundering committee of the Association of Russian Banks, has stated that the disqualification provision may only be imposed on a closed and specific list of violations. As of now, there is no further information on which officers may be subject to the disqualification penalty; the extent to which this penalty will apply to lawyers or the list of violations to which this penalty will apply.

Lastly, in line with introducing a more flexible set of enforcement mechanisms, the State Duma has proposed the option of warnings as an alternative penalty for non-serious violations of the law. Currently, the only sanctions available are fines and temporary suspension of business activities.

Taken in totality, these mechanisms demonstrate Russia’s commitment to tightening the effectiveness and flexibility of her AML legislation in line with the recommendations made by the FATF.

We will continue to monitor the development and contents of the proposed amendments.

There is no English text of the amendments available online.

To view the FATF’s mutual evaluation report of 20 June 2008, click here. 

Sources:

1. Article entitled “Anti-money laundering legislation getting a bit tougher in Russia” by gaap-ifrs;
   
2. Article entitled “Russia ‘edging closer’ international AML Standards” by Complinet
   

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09/09/2009: Jersey proposes amendments clarifying some provisions of its ML Order

On 7 September 2009, the Jersey Financial Services Commission (“JFSC”) proposed a consultation paper, entitled Money Laundering (Amendment No. 4) (Jersey) Order 200- (“Amendment No. 4”) which aims to inject greater clarity into its Money Laundering (Jersey) Order 2008 (“Order”).

If passed, this amendment will affect lawyers, by virtue of them being included within the definition of a “financial services business” under Schedule 2 of the Proceeds of Crime (Jersey) Law 1999.

These changes have been proposed to address the criticisms made by the International Monetary Fund (IMF) on the lack of clarity of some of the provisions in the Order. It must be noted that none of these amendments tackle any of the substantive issues in the IMF’s final report.

These changes are summarised briefly as follows:

• Modifying Article 1 to include a definition of “a customer”, thus expressly covering both natural persons and legal persons;
  
  
• Modifying Article 3(2)(b) to explicitly cover the case where a customer is a trustee of a trust;
  
  
• Extending the definition of “records” which must be kept by a compliance offer and a reporting officer under Articles 7,8,9 and 21 to include records that must be kept by a relevant person under Article 19;
  
  
• Modifying Article 11 to include an explicit reference to the need for additional measures to prevent the misuse of technological developments in money laundering – a requirement which has been previously set out in the AML/CFT Handbook;
  
  
• Further modifying Article 11 to provide that particular attention must be paid to implementing policies and procedures that are sufficient to prevent and detect money laundering in subsidiaries and branches that are situated in countries that do not, or insufficiently apply, the FATF Recommendations; and
  
  
• Defining the scope of reliance to be placed on information already applied by an “introducer” under Article 16.

Additionally, Amendment No. 4 calls for feedback on two particular proposed amendments. The first concerns whether concessions on due diligence requirements to any prospective relationship in respect of a pension, superannuation or similar scheme under the Article 18 should be extended to cover self-employed individuals.

The second proposes introducing new powers to the Minister of Treasury and Resources to give directions to persons where it considers that such directions may address a particular risk of money laundering.

The deadline for comments to reach the JFSC is on 11 October 2009.

We will continue to monitor the development and contents of the proposed amendments.

For the full text of the Consultation paper, click here.

For the full text of the Money Laundering (Jersey) Order 2008, click here.

For the full text of Proceeds of Crime (Jersey) Law 1999, click here.

For the full text of the AML/CFT Handbook, click here.

The text of the IMF report is currently not available online as it will only be published shortly.

Sources:

1. Press Release by Jersey Financial Services Commission.

Prepared by:
Kexian Ng
IBA Commercial Legal Intern

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08/09/2009: Kazakhstan’s President has signed Draft AML Law

According to Kazakhstan Today, citing the President’s press service, the President of Kazakhstan has recently endorsed the law on Counteracting the Legalization (Laundering) of Ill-gotten Proceeds and Terrorist Financing. Under this Act, lawyers are now included as a profession with Anti-Money Laundering (AML) monitoring obligations.

It is believed that this Act addresses the deficiencies in Kazakhstan’s AML framework as identified by a Report conducted by the International Monetary Fund (IMF) in October 2004. To this end, the Act has empowered authorised bodies to handle, investigate and enforce anti-money laundering legislation, along with imposing AML obligations on a number of entities and professions. 

Under this new Act, lawyers’ obligations include verifying their clients’ identity before undertaking any transactions on their behalf, undertaking enhanced due diligence when handling transactions with public officials and other banks, reporting a suspicious transaction to the authorities and monitoring a wide range of transactions. 

Additionally, it appears that the attorney-client privilege prevents lawyers from divulging any information obtained in the course of defending a client.

This Act will enter into force upon the expiry of 6 months after its first official publication.

We will continue to monitor the development and implementation of this Act, and we will update our country page on Kazakhstan shortly.

For the IMF’s report on Kazakhstan released on October 2004, click here.

Sources:

1. Article by Kazakhstan Today.

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02/09/2009: Kenyan Government reintroduces AML Bill in Parliament.

On Thursday, 27 August 2009, the Kenyan Government reintroduced the Anti-Money Laundering Bill 2008 in Parliament. If passed, lawyers will be included in the list of designated non-financial businesses or professions with specific anti-money laundering obligations.

At present, these obligations include monitoring and reporting suspicious transactions, verifying clients’ identity, keeping records of all transactions undertaken on behalf of clients and establishing internal reporting and compliance procedures.

The Bill’s other main features include establishing an agency to recover and seize proceeds from illegal sources and empowering investigators to withhold assets under investigation.

Previously, and according to the 2009 Department of State report, the “bill made it through the second reading [of Parliament], one step before final passage, before it stalled.” This was due to fears and alleged lobbying, particularly by human rights advocates, that the Bill was a guise for the reintroduction of the anti-terror Bill.

As Parliament has been scheduled to go on recess, the earliest the Bill can be debated is October.

We will continue to monitor the development and contents of this bill

Click here to access the full text of the Bill.

Sources:

1. Government Introduces Bill on Money Laundering in House, in The Standard in Kenya;
   
   
2. US Department of State’s Country Report, 2009.

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02/09/2009: Uganda’s Draft AML Bill has been presented to Parliament.

According to Bloomberg, the Draft Anti-Money Laundering (AML) Bill has been presented to Uganda’s Parliament, where it will be debated over the next two months. At this stage, the Bill focuses on imposing obligations on financial institutions, and excludes any mention of lawyers. Currently, AML laws in Uganda do not apply to lawyers.

The Bank of Uganda’s head of communications department, Mr. Juma Walusimbi, has expressed her government’s commitment in pushing this bill to become law.

According to a press release by East African Business Week, this legislation, if passed will harmonise Ugandan laws with those of Kenya, Tanzania, Rwanda and Burundi. None of the aforementioned countries have legislation imposing money laundering obligations for lawyers.

We will continue to monitor the development and contents of this bill.

A text of the Bill is currently not available online.

 

Sources:

1. Anti-Money Laundering Bill goes to Parliament, in East African Business Week;
   
   
2. Ugandan Parliament to Debate Anti-Money Laundering Bill, in Bloomberg. 
   
   
    

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