Fines, Fines, Fines: The cost of not complying with AML Law

Understanding the complexities of anti-money laundering (AML) laws is crucial for financial institutions. Non-compliance not only results in substantial fines but also poses significant operational and reputational risks. Recent regulatory actions highlight the severe consequences of inadequate AML measures. In this article, we explore notable cases of non-compliance and emphasize the importance of robust AML frameworks to safeguard your business. The importance of complying with applicable anti-money laundering standards and regulator’s expectations can be seen from recent and past regulatory action:

• CB Payments Limited (“CBPL”) part of the Coinbase Group and an authorised Electronic Money Institution was fined GBP 3,500,000 by the FCA. CBPL enables customers to deposit fiat currency into e-money wallets which can then be used to purchase and exchange crypto assets via other entities within the Coinbase Group. The fine was a result of significant weaknesses and gaps in the CBPL’s financial crime control framework identified by the FCA.
• BGL BNP Paribas S.A was fined EUR 3,000,000 by the CSSF for, inter alia, non-compliance with anti-money laundering and terrorism financing’s professional obligations. Breaches related to deficiencies in the enhanced due diligence measures implemented and ongoing due diligence.
• Investment fund manager abrdn Investments Luxembourg S.A was fined EUR 17,200 by the CSSF for failing to, inter alia, comply with the AML/CFT Law in relation to its distribution delegates.
• NP Capital GP S.à r.l. was fined EUR 10,000 by the CSSF for failure to file the “AML/CFT External Report” which is a form of mandatory reporting.
• Danske Bank A/S was fined EUR 1,820,000 and reprimanded by the Central Bank of Ireland for transaction monitoring failures in respect of anti-money laundering and terrorist financing system.
• Qonto a payment institution received an order from the Banca d’Italia imposing a temporary ban from onboarding clients through its Italian branch until improvements were made in Qonto’s anti-money laundering measures.

AML/CFT Law in Luxembourg

Professionals of the financial sector and other entities are subject primarily to the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (“AML/CFT Law”) and CSSF Regulation No. 12-02 of 14 December 2012 relating to the fight against money laundering and the financing of terrorism, as amended (“RCSSF 12-02”).

The AML/CFT Law and RCSSF 12-02 require the implementation of a number of safeguards including:

• Policies, controls, and procedures to mitigate AML and CTF risks,
• Customer due diligence and identification of ultimate beneficial owners,
• Specific measures must be taken to mitigate risks related to high-risk countries, and,
• Ongoing monitoring of business relationships to detect changes in risk levels.

Prevention of money laundering and terrorist financing in Ireland

The prevention of money laundering and terrorist financing in Ireland is primarily governed by the Criminal Justice (Money Laundering & Terrorist Financing) Act, 2010 (“CJA 2010”).

The CJA 2010 obliges Regulated Financial Service Providers (“RFSPs”) and other designated persons operating in the financial services sector to take measures and put in place controls to effectively prevent money laundering and terrorist financing.

Some of the key measures that must be implemented are set out as follows:

• Customer Due Diligence (“CDD”) includes identification and verification as well as ongoing monitoring of the business relationship and scrutiny of transactions.
• Suspicious transaction reporting includes mandatory reporting obligations and halting suspicious transactions.
• Enhanced due diligence requires additional measures to be taken in situations of higher risk, such as dealing with politically exposed persons (PEPs), clients from high-risk jurisdictions, or complex and unusually large transactions.
• Record keeping, internal controls and training must be in place at the RFSP.

Implementation

Financial services providers who have anti-money laundering and countering terrorist financing obligations must ensure that not only do they have the required framework in place at an institutional level, but crucially, they have an effective implementation of those measures. As seen from the above examples, fines can be significant and business operations can be suspended. Moreover, reputational damage and potential criminal prosecution can also result from failures of this nature.

How Zeidler Can Assist

Don’t let non-compliance cost you. At Zeidler, we offer a robust due diligence solution along with comprehensive compliance analysis and expert guidance to help you navigate AML laws and regulations effectively. Our global team of investment fund lawyers and regulatory specialists is dedicated to keeping you informed and compliant with the latest legal, regulatory, and compliance changes in the asset management industry. Contact us today to ensure your business is safeguarded against financial and reputational risks.