Well 2020 started fine then took a tumble with Covid-19. it would be easy to put AML/CFT to one side with the different levels of lockdown interrupting travel and businesses. Surely even the crims would take a break, right?
Unfortunately not, Covid-19 has created the perfect storm for money laundering and fraud with institutions having reduced staff, social distancing rules and working remotely. Crims are taking the opportunity to push the boundaries and testing your CDD, monitoring and reporting abilities.
The supervisors have put out guidance that recognises the difficulties entities are facing during the pandemic they have suggested applying exception handling procedures for those onboarding new clients or undertaking activities and transactions for existing clients. Examples include allowing entities to accept scanned copies of documents as an interim measure, with the originals to be sighted at a reasonable later time or delaying verification (subject to conditions and limiting transactions) until after COVID-19 Alert Levels have been lifted. Having your exception handling procedures carefully documented in your compliance programme will aid staff in managing this. And of course, utilising electronic verification which requires no face-to-face contact is another option that allows entities to continue onboarding new clients.
The concern is crims trying to take advantage and entities not remaining vigilant, managing the risks, poor cyber security and not reporting suspicious activities where required and on time. Action Fraud in the UK recently reported a 400% increase in fraud relating to online shopping in the nation as a result of the epidemic. This means an increase in compromised identities, personal and financial data that crims will be selling/trading on dark web forums specifically to commit fraud and money laundering.
Closer to home there has been an increase in malware/ransomware activity and other cybercrime, misdirection of government funds, think wage subsidy use – free money, yes please and soberingly increased child exploitation. Some crims are looking for businesses coming up for sale as a result of lockdown and purchasing to either place ill-gotten funds or to use for laundering money.
Now is the time for increased scrutiny for those involved in property transactions and clarity around sources of funds used in these transactions. It’s also a great time to review your documentation and update with regards to the increased risks currently present and how you are managing and mitigating these within your business.
The pandemic has also stymied on-site audit processes, with the timing putting pressure on Lawyers and Accountants especially with their first independent audit deadlines of 1st July and 1st October coming at speed. The DIA has provided some relief by confirming no adverse compliance action would be taken against any DNFBP not able to complete by the relevant deadline, provided they have acted in good faith. Entities still need to be able to explain how Covid-19 affected their ability to complete their audit and must be able to demonstrate what steps they have taken to ensure it is completed as soon as practicable upon lifting of alert levels.
Remote audits are a possibility, however if these are not realistic for your business then starting the audit process with the desk based review during lock-down to be followed with an on-site visit as soon as possible will show that steps have been taken and there is willingness to complete the audit.
It’s great we can now get coffee but how long social distancing, travel restrictions, remote working, businesses closed will last is still unknown. Financial strain is already a reality for many and that can lead to unexpected changes in peoples behaviours and additional criminal activity.
It’s not just criminals that wear gloves and masks any more…..
Covid-19 has shaken the world, don’t let the crims shake yours as well. Be vigilant, be safe, but above all….