COVID-19 related AML and TF risks and policy responses

The COVID-19 pandemic has led to extraordinary global challenges, human suffering and economic disruption. It has also led to an increase in COVID-19-related crimes, including fraud, cybercrime, misdirection or exploitation of government funds or international financial assistance, which is creating new sources of proceeds for illicit actors.

On 16 July 2020, the Cyprus Securities and Exchange Commission (CySEC) issued Circular 399 on FATF’s recently released paper on COVID-19 related Money Laundering (ML) and Terrorist Financing (TF) which identifies challenges, risks and policy responses, threats and vulnerabilities arising from the COVID-19 crisis and its impact on the ability of government and private sector to implement anti-money laundering and counter terrorist financing (AML/CFT) obligations in areas including supervision, regulation and policy reform, suspicious transaction reporting and international cooperation.

The FATF’s paper affirms that AML/CFT policy responses can help support the swift and effective implementation of measures to respond to COVID-19, while managing new risks and exposures. The FATF paper provides examples of such responses, which include:

• Domestic coordination to assess the impact of COVID-19 on AML/CFT risks and systems
• Strengthened communication with the private sector
• Encouraging the full use of a risk-based approach to customer due diligence
• Supporting electronic and digital payment options

The focus of the FATF paper relates to three broad themes: (1) New threats and vulnerabilities stemming from COVID-19-related crime and impacts on ML and TF risks; (2) Current impact on AML/CFT efforts by governments and the private sector due to COVID-19; and (3) Suggested AML/CFT policy responses to support the swift and effective implementation of measures to respond to COVID-19, while managing new risks and vulnerabilities identified, including: charitable activity and economic and fiscal stimulus and financial rescue packages for firms and individuals.

CySEC directs its regulated entities to remain vigilant to detect suspicious financial transactions and implement the appropriate measures and procedures, on a risk-based approach to safeguard against any such illegal practices.

CySEC’s Circular can be found here.

FATF’s Paper can be found here.