Key AML Regulatory Updates in 2024
In this day and age, financial technology (FinTech) has been visibly evolving in front of our eyes, witnessing an almost cashless society. For this reason, it is crucial that the derived digital financial activities are regulated, becoming intact from economic, political, and social influences, that may result in illicit affairs. On a European level, the supervision exercised in these sectors is significantly improving, creating a reliable and robust securities market.
To this end, the Cyprus Securities and Exchange Market (CySEC) has established the Republic’s securities market as one of the safest and one of the most attractive destinations for the establishment of an investment firm.
In this article, the SALVUS Regulatory Compliance team analyses the anticipated AML regulatory updates applicable to CySEC regulated entities, and explores the relevant CySEC Circulars discussing further the below:
1. Upcoming AML Regulatory Updates
2. The 6th AntiMoney Laundering Directive (AMLD6)
3. Important Circulars with regard to AML
1. Upcoming AML Regulatory Updates
As a member of the European Union (EU), Cyprus is required to uphold uniform rules and practices similar to those of other EU Member States to tackle Money Laundering (ML) and Terrorism Financing (TF). To fulfill this obligation, Cyprus reviews and integrates AML European Directives into its national laws, ensuring compatibility with its existing legal framework. The anticipated AML Regulatory changes encompass:
- The new AML/CFT Regulation, which provides directly applicable rules in the areas of customer due diligence and beneficial ownership.
- The Revision of Regulation 2015/847/EU, which allows the trace of crypto-asset transfers and the adoption of travel rule.
- The Amending Directive (EU) 2019/1153, which offers Member States’ national authorities with competencies to combat serious crime with direct access to the Bank Account Registers Interconnection System (BARIS).
- The 6th AML Directive, which repeals EU Directives AMLD 4 and AMLD 5 and further improves the latter, by addressing emerging risks and increasing transparency.
In addition to the above, one of the key updates under the European Commission’s package is the establishment of the new Anti-Money Laundering and Countering the Financing of Terrorism Authority (AMLA). AMLA is expected to be established in 2024, once the AMLA Regulation is published in the EU Official Journal. The Authority will be mainly responsible for the EU AML/CFT supervision and the enhanced cooperation of the Financial Intelligence Units (FIU), by carrying out reviews and assessments at individual and group-wide basis.
2. The 6th Anti-Money Laundering Directive (AMLD6)
The 6th Anti-Money Laundering Directive (AMLD 6) aims to establish a more cohesive and stringent framework for combating ML and TF across the European Union. It seeks to harmonize the definitions and offenses related to money laundering, ensuring consistent application, and understanding across all Member States. By enhancing the legal framework, AMLD 6 aims to improve the detection, investigation, and prosecution of illegitimate activities through National and Supra-national Risk Assessments.
Essentially, the Directive increases accountability and liability for obliged entities, emphasises the importance of cooperation and information exchange between competent authorities and supervisors. It also, introduces administrative sanctions and measures to hold companies accountable for offenses committed on their behalf. Thus, it fills potential gaps and strengthens the EU’s overall defence against financial crime.
The enforced administrative sanctions that Member States may impose to non- compliant entities include:
- at least EUR 10,000,000, or
- 10% of annual turnover for legal persons, or
- at least EUR 5,000,000 for natural persons, or
- at least twice the benefit derived from the breach or at least EUR 1,000,000.
In instances of minor breaches, supervisors can:
- issue recommendations,
- order compliance and specific corrective measures,
- publicly identify the person and nature of the breach,
- order cessation and prevention of the conduct,
- withdraw or suspend authorizations,
- temporarily ban responsible individuals from managerial roles,
- request necessary documents,
- reinforce arrangements, processes, mechanisms, and strategies,
- apply specific policies for high-risk clients, transactions, or activities.
Such measures shall be accompanied by a binding deadline for their effective implementation and a follow-up assessment of the progress made on the requested actions. However, Member States may allow authorities to impose higher sanctions or empower supervisors to impose additional types of administrative measures, if considered necessary.
Overall, the effectiveness of AMLD 6 depends on its implementation by Member States and the adequacy of resources allocated to supervisory authorities. Additionally, the proposal’s ability to adapt to emerging money laundering risks, such as those posed by new technologies, is crucial for its long-term effectiveness.
Contact us at info@salvusfunds.com if you require support with your regulatory compliance obligations or are interested in our Know all 2024 Anti Money Laundering Regulatory Updates course with IforPE.
3. Important Circulars with regard to AML
CySEC releases circulars, through its website, to convey important information to its regulated entities. These circulars may be directed at specific types of entities such as Cyprus Investment Firms (CIF), Crypto-Assets Service Providers (CASP), Alternative Investment Fund Managers (AIFM), Management Companies (MC), or a combination of such entities.
The following list discusses specific circulars that the SALVUS Regulatory Compliance team deems crucial for the AML/CFT operations of regulated entities:
- Circular C614 issued in relation to the two sets of the European Banking Authority’s (EBA) Guidelines on national restrictive measures.
The first set of Guidelines concerns financial institutions and prudential supervisors, setting regulatory expectations for internal governance, senior and risk management. Equally, the second set of Guidelines is directed to Payment Service Providers (PSP) and Crypto Asset Service Providers (CASP), focusing on Know your Customer (KYC), screening and due diligence processes.
- Circular C516 issued addressing CySEC’s findings of the Anti-Money Laundering Compliance Officer (AMLCO) Annual Reports’ Assessment.
The Circular focuses on the identified weaknesses and shared key reminders for its supervised entities, in order to fulfill their regulatory obligations.
- Circular C550 issued regarding the onsite inspections that were performed by CySEC in relation to the prevention of ML/TF.
CySEC, according to this Circular, has observed that there are certain common deficiencies among its regulated entities and documented instances of good practices.
- Circular C535 issued corresponding the EBA Guidelines on compliance management and the role and responsibilities of the AML/CFT Compliance Officer.
The Guidelines lay down clear expectations of the role, tasks and responsibilities of the AMLCO and the management body, along with the instruction that a group AML compliance officer shall be appointed, in case the credit or financial institution is part of a group.
Final Thoughts
In conclusion, it is essential for obliged entities to recognize that the ultimate responsibility for regulatory compliance rests with them. Therefore, relevant stakeholders must ensure they stay informed and employ a methodical approach when dealing with regulatory updates.
To this end, SALVUS Funds continuing its cooperation with the Institute for Professional Excellence (IforPE), has developed a self-study course named Know all 2024 Anti Money Laundering Regulatory Updates.
This online self-study program aims to educate industry professionals on the current AML framework and anticipated regulatory updates. Specifically, the course offers valuable and detailed information on the compliance culture and the regulatory updates introduced on a national, as well as on a European level.
This course can be of considerable value to Compliance Professionals, Board members, Senior Management personnel, lawyers and auditors who wish to cement their understanding of the topic. Last but not least, it grants 5 Continuous Professional Development (CPD) units counting towards the annual requirements of CySEC Advanced, Basic and AML certification holders.
Please contact us at info@salvusfunds.com if you require support with your regulatory compliance obligations or are interested in our Know all 2024 Anti Money Laundering Regulatory Updates course with IforPE.
#StayAhead
Should you be interested to read more about the AMLCO annual report or the Cyprus National Risk Assessment, please visit the selected articles below:
The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.