FATF Issues AML and CTF Advice for EU States

The worldwide money laundering and terrorist financing watchdog Financial Action Task Force (FATF) has issued new sets of recommendations regarding the way European Union member states should assess risks connected to anti-money laundering (AML) and tackle threats regarding countering the financing of terrorism (CTF/CFT).

Supranational Risk Assessment Report 

Last updated three years ago back in 2019, the European Commission’s Supranational Risk Assessment Report (SNRA) introduced the recommendations. According to the EU’s Anti-Money Laundering Directive, the SNRA report should be updated once every two years. Nonetheless, because of the pandemic, it was delayed to 2022, enabling AML stakeholders to take their time and issue clearer and more relevant judgments on certain sectors.

Among them, the online gambling sector together with crypto-assets, are two areas that required the re-calculation of their levels of risk. The changes were necessary for the context of the stakeholders identifying a series of important changes. 

Covid-19 Aftermath and the War Against Ukraine 

The FATF has also acknowledged these two factors as additional factors with a lot of impact on the EU member states, with emphasis on the rise in the level of money laundering risks throughout businesses and economic sectors in the EU. These have led to the creation of brand new opportunities that criminals did not hesitate to profit from.

The FATF study on CTF and AML threats was conducted on more than 40 services or products included in eight different business categories. Among them is the gambling sector which was “characterized by fast economic growth and technological development,” according to the SNRA’s overview. The significant expansion of the online gambling sector recorded during and at the end of the pandemic also triggered competent authorities to signal higher risks arising from online gambling since the last SNRA report in 2019.

The Cash Problem

In spite of the improvements brought to the regulations, the same SNRA report showed that brick-and-mortar casinos continue to be subject to high-risk exposure to AML threats with cash transactions as the main triggering factors. The report also raised the problem of banknotes and the paradox around them. Namely, the demand for banknotes during the pandemic went up during a time when cash retail transactions dropped significantly across the continent.

Since the criminal economy is still based on cash, EU member states are still subject to significant ML and TF risks. This is especially true because of the anonymity and ease of movement connected to cash and similar assets. 

As for the online gambling sector, AML threats are mostly connected to member states that are targeted by unauthorized online gambling operators. Anonymous e-money processing platforms and virtual currencies are also part of the problem, considered the FATF which signaled the lack of proper feedback and reporting suspicious solutions in the gambling sector. European financial intelligence units are recommended to work on improving the quality of their reports and make better use of the information they are given. At the same time, gambling AML safeguards are advised to strengthen with “training focusing on appropriate risk assessments of relevant products/business models for staff, compliance officers and retailers.”

At the end of September, the UKGC fined Betfred $3 million for failing to protect its customers and failing to prevent money laundering and terrorism funding.