FATF introduces measures to detect shell companies associated with WMD proliferation financing risks

Financial institutions (FIs) and firms operating in designated non-financial business or professions (DNFBPs) should receive improved flows of information on proliferation of weapons of mass destruction (WMD) financing risks that can be used to detect shell companies once new amendments approved by the Financial Action Task Force (FATF) are actioned.

The amendments aim to reduce the probability of FIs and DNFBPs unwittingly supporting or becoming part of proliferation financing networks or schemes.

Unwitting support

The new obligations seek to ensure that apart from implementing the existing FATF requirements, financial institutions and DNFBPs should identify and assess the risks of potential breach, non-implementation or evasion of targeted financial sanctions when dealing with their customers, and take appropriate mitigating measures commensurate with the level of risks identified.

This should ensure that these entities are aware of the risks involved in their businesses and professions, and do not unwittingly support or become part of proliferation financing networks or schemes.

Treasury welcome

The FATF’s amendments have been welcomed by the US treasury department.

“We have seen North Korea and Iran establish complex and elaborate networks, including front and shell companies incorporated in many FATF member jurisdictions, to evade US and UN financial sanctions and to access and move funds to further their dangerous purposes,” the department said in a statement.

“With these enhancements to the FATF standards, jurisdictions around the world will arm their financial institutions and other covered entities with targeted information on proliferation financing risk that can be used to detect shell companies and other individuals or entities acting on behalf of designated persons.”

Categories: Trade Based Financial crimes News

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