COVID-19: Risk and Policy Responses by the FATF

The Financial Action Task Force (FATF) has released a paper recently entitled ‘COVID-19-related Money Laundering and Terrorist Financing Risks and Policy Responses’ whereby the challenges, good practices and policy responses to new money laundering and terrorist financing threats and vulnerabilities that came into light due to the COVID-19 pandemic were addressed. Below is a summary of the main findings:

• This pandemic has created new sources of proceeds for money launderers through COVID-19-related crimes, such as fraud, cybercrime, misdirection or exploitation of government funds or international financial assistance.
• The measures imposed because of COVID-19 have impacted on the criminal economy and has led to a change in criminal behavior to the extent that profit-driven criminals may move to other forms of illegal conduct.
• The impact of this deadly virus has not spared the government as well as the private sector. As a result, there have been deficiencies in implementing anti-money laundering and counter terrorist financing (AML/CFT) obligations, from supervision, regulation and policy reform to suspicious transaction reporting and international co-operation.
• These threats and vulnerabilities are signs of emerging money laundering (ML) and terrorist financing (TF) risks. The outcome of such risks could be in:
  – Criminals finding ways to omit customer due diligence measures;
  – Moving and concealing illicit funds through online financial services;
  – The exploitation of economic boost facilities and insolvency schemes by natural or legal persons to conceal and launder illicit proceeds;
  – The creation of additional opportunities for criminals to turn their black money into clean money by using the unregulated financial sector.
  – Misusing and misappropriating domestic and international financial aid and emergency funding;
  – The development of new cash-intensive and high-liquidity lines of business in developing countries by criminals and terrorists using the economic downturn as a weapon.
• AML/CFT policy responses can help support the swift and effective implementation of measures to respond to COVID-19, while managing new risks and vulnerabilities. These include:
  – A domestic coordination in assessing the impact of this pandemic on AML/CFT risks and systems;
  – Strengthening the bond and communication with the private sector;
  – The use of a risk-based approach to Customer Due Diligence (CDD);
  – Promoting the use of electronic and digital payment options.

Source: https://www.fatf-gafi.org/media/fatf/documents/COVID-19-AML-CFT.pdf