Client overview BRD – Groupe Société Générale is one of the largest financial institutions in Romania. Established in 1923, BRD has evolved into a full-service bank offering a wide range of products and services such as personal and business banking, insurance, leasing, and asset management. With a strong presence in Romania, BRD has 446 branches…
A Suspicious Activity Report (SAR) is a documentation submitted by relevant institutions to monitor and report suspicious activities to regulatory bodies. When there are suspicions of money laundering or fraud, financial institutions and their affiliates are required to report such activities to the authorities. The specific regulatory body overseeing SAR reports varies based on the location; in the UK, it is the UK Financial Intelligence Unit, operating on behalf of the National Crime Agency (NCA), responsible for handling SAR reports.
These SARs are mandated under the Bank Secrecy Act (BSA) of 1970. They serve to alert law enforcement agencies about potential cases of money laundering or terrorist financing, making them a vital source of intelligence not only for economic crime but also for other criminal activities. The ultimate purpose of SAR is to detect and identify illegal activities such as money laundering, terrorist financing, tax evasion, and other forms of financial fraud.
Severe human rights violations and abuses continue to occur in various regions worldwide, often without consequences for those responsible. On December 7, 2020, the European Union adopted a decision and regulation inspired by the US Global Magnitsky Act. This framework enables the EU to target individuals, entities, and organizations, including both state and non-state actors, involved in significant human rights crimes and abuses, regardless of their location.
The US Global Magnitsky Act, enacted in 2016, empowers the US government to impose sanctions on human rights abusers globally. Several other countries, including certain EU member states, swiftly followed the US’s lead by implementing similar measures to address foreign human rights violations. For instance, in 2016, Estonia passed legislation prohibiting foreigners convicted of human rights violations from entering the country. Subsequently, Lithuania, Latvia, and the United Kingdom, all EU members at that time, enacted identical legislation.
Moreover, the Dutch parliament has repeatedly urged the Dutch government to enact similar legislation. However, the Dutch government declined, stating that such legislation would be more effective if implemented at the EU level. This led to subsequent discussions on establishing an EU-level human rights sanction framework.
Businesses utilize the practice of due diligence to assess and mitigate risks associated with specific transactions or commercial partnerships. Through due diligence analysis, companies ensure they are not unwittingly supporting or engaging in criminal activities. However, conducting comprehensive due diligence for every deal or business connection can be time-consuming and expensive.
To address this challenge, Simplified Due Diligence (SDD) comes into play. SDD is a streamlined due diligence process employed when the risks linked to a particular transaction or business relationship are deemed low. This approach enables businesses to save time and resources while still adhering to Anti-Money Laundering (AML) regulations. It is crucial to note that not all transactions or business relationships are eligible for SDD, and organizations must exercise caution to avoid assuming additional risks by opting for this method.
Trade-based money laundering (TBML) is a technique employed by criminals to launder the proceeds of their unlawful activities through the global trade network. This method involves manipulating trade transactions, particularly invoicing, to conceal the actual source of funds and present them as lawful earnings. TBML can manifest in various ways, such as inflating or deflating goods’ prices on invoices, misrepresenting goods to evade customs duties, and utilizing counterfeit shipping documents. Through these tactics, criminals can integrate the gains from their illegal ventures into the legitimate financial system, complicating the efforts of law enforcement agencies to trace the origin of these funds.
The Consolidated Sanctions List (CSL) serves as an all-encompassing registry of individuals and entities that the US Government has subjected to export restrictions. When engaging in export transactions, companies are obligated to cross-check their counterparties against the CSL. If there is a match, it demands an additional level of scrutiny and caution before proceeding with the transaction.
The CSL is a compilation of several lists issued by various US government agencies, which include:
Office of Foreign Assets Control (OFAC) Lists:
– Specially Designated Nationals (SDN) List
– SDN Unconsolidated Sanctions List
Department of Commerce / Bureau of Industry and Security Lists:
– Denied Person List
– Unverified List
– Entity List
– Military End User (MEU) List
Department of State / Bureau of International Security and Non-proliferation Lists:
– Nonproliferation Sanctions List
Department of State / Directorate of Defense Trade Controls List:
– AECA Debarred List
UN sanctions lists play a vital role in upholding global peace and security. These sanctions represent diplomatic choices endorsed by United Nations member states to target states, entities, or individuals believed to be involved in unlawful activities that could jeopardize national security interests, international law, and overall peace. For enterprises, adherence to UN regulations is paramount to steer clear of legal consequences and shield themselves from potential risks.
Watchlist screening is the process of checking individuals and entities against watchlists to identify and prevent any potential financial crimes such as money laundering, terrorist financing, fraud, or other illegal activities. Watchlists are created and maintained by governments, international organizations, law enforcement agencies, and other regulatory bodies.
The customer onboarding process serves as the primary and critical point of interaction between the company and its customers. It is considered the initial step that plays a vital role in safeguarding the company and mitigating risks. Notably, regulated financial institutions must adhere to AML/CTF (Anti-Money Laundering/Counter-Terrorist Financing) and KYC (Know Your Customer) regulations during customer onboarding. Ensuring compliance with KYC controls is of utmost significance, and closely monitoring financial transactions also stands as another pivotal aspect.
In the aftermath of the September 11, 2001 attacks and the passing of the Patriot Act in the United States, Anti-Money Laundering (AML) guidelines have gained significant global importance. This led to the establishment of the Financial Action Task Force on Money Laundering (FATF), influencing numerous jurisdictions to mandate financial institutions to monitor, investigate, and report suspicious transactions to their country’s financial intelligence unit.
In the UK, specific legislation targeting terrorism and crime has imposed counter-financing of terrorism obligations on banks and financial institutions. These obligations encompass customer due diligence, transaction monitoring, and reporting requirements. The UK’s laws dictate that financial institutions must implement appropriate AML controls to detect money laundering activities.
Similarly, other countries, particularly those with high crime rates involving money laundering, have also enacted relevant legislation to ensure effective combat against money laundering. As a result, many financial institutions now adhere to AML compliance procedures, offering assistance to companies. The advent of rapid digitalization has introduced AML software, which proves more effective than manual methods of AML compliance.
