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Cryptocurrencies, international AML struggles and more on Deutsche Bank & Epstein in last week's headlines.
Antonis Melis
July 20, 2020

Both Romania and Ireland were penalised for failing to implement EU regulations to prevent money laundering and terrorist financing.

As both countries try to catch up with their legislation, the potential popularity of stablecoins may bring new money laundering and terrorist financing threats to the financial sector, as described in the recent FATF report.

Meanwhile Deutsche Bank’s ties to Epstein were in the news again as the New York Times names the bank’s key individuals who overlooked the regulations to continue banking with Epstein.  

See below for brief overviews of these stories.

The threat of unregulated stablecoins – a report by the Financial Actions Task Force (FATF)

The Facebook-led Libra project has caused watchdogs to scramble to investigate the benefits and risks of stablecoins and how they should be regulated. This form of cryptocurrency is more likely to reach the masses as they are sponsored by big firms and will be able to retain their value.

FATF, the global money laundering and terrorist financing watchdog, released a report in June outlining both the risks involved in stablecoin, and new crime prevention standards. The report concluded with FATF urging the G20 to “lead by example” and implement its revised standards as a matter of priority.

Stablecoins have the potential to spur innovation and improve financial inclusion, but if they reach mass-adoption, they could be tapped by criminals and terrorists – creating new threats to AML defences.

The FATF has said “…central developers and governance bodies of so-called stablecoins will have AML/CFT obligations under the revised FATF Standards, where they are carrying out the activities of a financial institutions…”

Romania & Ireland fined for failing to adhere to EU AML requirements

Governments in Romania and Ireland have failed to transpose EU law into their own legislations. The EU set the deadline for countries to adjust their legislature by July 2017. Romania only managed to make the required changes by July 2019, with Ireland following a few months later in December 2019.

The court stated that “Both member states failed to transpose in full, within the period prescribed, the directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing…”

Romania and Ireland were ordered to pay the European Commission fines of 3 million and 2 million euros respectively.

Deutsche Bank executives involved in Epstein saga revealed

The New York Times has named the employees who dealt with Epstein during his time banking with Deutsche Bank. At least one of these named executives, a high-ranking employee, still holds position as head of compliance in the Americas.

It is not mandatory for banks to name individuals in cases such as these, and to date the shareholders bear the brunt of penalties issued against banks.  This may change in the next few years, and almost certainly in Europe with 6AMLD coming into play at the end of the year. The updated directive extends criminal liability to corporates where a money laundering offence is committed for their benefit by an individual in a leading position

It is not the first time Deustche Bank has been fined in relation to money laundering failures. Since 2008 the bank has paid more than $9 billion in fines related to a litany of alleged and admitted financial crimes.

The bank now claims to have put all of this behind it since hiring a new CEO in 2018. We can only wait and see if corporations, do in fact, have it in them to change.

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