Country-specific Guide to Money Laundering Regulations: 2021 Update

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Shufti Pro

4 min readJul 8, 2021

Money laundering refers to the act of concealing illegally earned funds by passing them through a series of transactions. Generally, the three stages of money laundering — placement, layering, and interaction — are implemented by criminals to make the money trail as untraceable as possible. Any efforts made to eliminate this act of laundering dirty cash are known as Anti-Money Laundering (AML) practices. Online businesses and financial institutions, in particular, need to implement AML practices, as directed by global regulatory bodies under respective AML laws. In this post, we will be looking at the global landscape of AML regulations.

Global Regulatory Body: The FATF

The FATF, abbreviated for Financial Action Task Force, is a global money laundering and terrorism financing watchdog. The policy-making body is located in Paris and works tirelessly to provide guidance to businesses worldwide on the mitigation of money laundering. Its 40 Recommendations, the main AML/CFT guidance, is internationally endorsed and implemented by companies worldwide. Countries that fail to comply with the recommendations of the FATF risk being placed on the grey or blacklist, leading to global sanctions, adverse media news, and other penalties. Examples of such countries include Panama, Malta, Yemen, and Morocco.

USA: The Financial Crimes Enforcement Network

The most important regulation regarding money laundering in the US is the Bank Secrecy Act (BSA). Compliance with the BSA is monitored by the Financial Crimes Enforcement Network, commonly known as FinCEN. Banking and non-banking financial institutions in the US need to ensure compliance with the BSA by implementing necessary procedures such as ongoing transaction monitoring, suspicious activity reporting, AML screening, and more.

To stay up-to-date with recent financial crimes, FinCEN has suggested amendments to the BSA act of 1970, some of which have been implemented. These include the following:

Formation of Customer Identification Program (CIP)
Addressing the emerging threats of illegal financing
Higher flexibility in resource allocation
Significant changes in processes such as enhanced due diligence and beneficial ownership requirements
Increasing the effectiveness of national AML laws

These measures have been deemed necessary for the security of customers, companies, and the country. Firms that fail to comply with BSA can face imprisonment charges and fines up to USD 250,000 on top of a tarnished brand image.

UK: Financial Conduct Authority (FCA)

The Financial Conduct Authority (FCA) is an independent, non-governmental body that regulates 58000 financial services firms and financial markets in the United Kingdom. The main task of the FCA is to combat money laundering, terrorist financing, and other criminal activities.

Following Brexit, the country is following the Sanctions and Money Laundering Act of 2018.

The Sanctions and Money Laundering Act of 2018 includes the following key factors:

Foreign policy objectives will be met and UN sanctions will be followed
Updated AML and CFT measures will be implemented
The Act also focuses on assisting advancements in the UK’s national security and compliance with international security standards
Canada: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

As of June 2021, Canada’s Financial watchdog updated its AML regulation to effectively combat money laundering and terrorism financing. FINTRAC will also be publishing an updated “Assessment Manual” by March 2022, and an update “Harm Done Assessment Guide” by spring 2022. All businesses in Canada are mandated to follow the regulations put forward by FINTRAC, a failure of which can lead to hefty fines and penalties.

HONG KONG: Hong Kong Monetary Authority (HKMA)

The regulatory body responsible for monitoring financial crime in Hong Kong is the HKMA (Hong Kong Monetary Authority). HKMA ensures that all authorized institutions (AIs) adopt a risk-based approach for detecting money laundering and associated crimes. Under the country’s AML law, all institutions are required to closely monitor customer transactions, implement enhanced due diligence for high-risk entities, and file a Suspicious Matters Report (SMR) in the event a suspicious transaction or activity is detected.

JAPAN — Financial Services Agency (FSA)

In Japan, banking, securities, exchange, and insurance sectors are regulated by the Financial Services Agency (FSA). The government agency and financial regulator overlook compliance with various AML laws. These include the “Act on Prevention of Transfer of Criminal Proceeds” and “Foreign Exchange and Foreign Trade Act”. Financial institutions that aim to stay compliant with Japan’s AML regulations need to implement risk screening against PEP (Politically Exposed Person) lists, adverse media news, and international sanctions. This implies that a risk-based approach must be adopted for the prevention and timely detection of financial crime.

How Can AML Compliance Targets Be Met?

Any firm, regardless of its geographical location, needs to meet the AML compliance requirements of its respective jurisdiction. Without such regulations in place, financial crime within the country would rise, leading to sanctions and bans from regulatory bodies such as the FATF. To stay compliant, companies need to integrated RegTech solutions. Solutions such as Identity Verification software are powered by artificial intelligence and machine learning models. As a result, the entire compliance process from risk screening to report generation becomes automated. To test an AI-powered IDV solution right away, try our 7-day free trial.

Country-specific Guide to Money Laundering Regulations: 2021 Update

How Can AML Compliance Targets Be Met?

Written by Candice Spencer