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Moneyval: AML/CFT supervision during the COVID-19 pandemic

On the 25th of January 2022, MONEYVAL released a typologies report entitled ‘AML/CTF supervision in times of crisis and challenging external factors’[1]The report provides best practice measures for effective supervision during crises, aimed at addressesing anti-money laundering and counter terrorist financing (AML/CTF) risks and difficulties triggered by the pandemic, including operational limitations, notably limited human resources and technical complications.

Some key findings identified that Business Continuity Plans (“BCPs”) proved to be beneficial in assisting countries with situations of crisis. Although BCPs were commonplace amongst supervisors, pandemics scenarios were mostly omitted in all countries bar the outlier.

Furthermore, the report notes that due to physical movement limitations, most supervisory authorities found a solution through offsite or hybrid inspections as a means of continuing AML/CFT supervision during the pandemic. In this regard, technological adaptation was crucial, both in terms of software and hardware. Offsite examinations are now seen as being particularly useful for those reporting entities that have limited or no physical presence in a given jurisdiction.

Supervisors kept in touch with reporting entities by conducting several webinars, online training and workshops, highlighting the increased risks of cybercrime and fraud. Through the analysis of Suspicious Transactions Reports (STRs) and Suspicious Activity Reports (SARs), supervisors identified new typologies of ML crisis-specific risks such as embezzlement of government funds allocated for supporting businesses and citizens and also overinflated pricing of personal protective equipment and medicines.

Digitalisation of core functions was key for both supervisors and reporting entities in providing working continuity. Some supervisors developed guidelines that permitted the use of remote onboarding tools such as digital identification. The pandemic did in fact accelerate the adoption of digital identification of customers by financial institutions, something we expect to see becoming the norm.

The report concludes that communication and sharing of information is a vital component of addressing ML/FT risks during a crisis. On the other hand, coss-border cooperation amongst supervisors can be improved by streamlining cross-border data exchange practices.