Potential money laundering risks arising from the COVID-19 pandemic

6 May, 2020

The Financial Action Task Force (FATF) has published a report on COVID-19 related money laundering and terrorist financing risks and policy responses across its member states. It notes that at present, most risks relate to the offences that generate criminal proceeds, and specific ML/TF typologies are in the early stages of being identified. However, you should be aware that the UKFIU has already published three new COVID-19 specific Glossary Codes for suspicious activity reporting.

The ML/TF risks that FATF identifies as potentially arising are that:

• Criminals may exploit vulnerabilities caused by remote working to get around CDD measures;
• There may be more misuse of online financial services and virtual assets to launder money;
• Economic stimulus measures and insolvency schemes could be used to hide and launder illicit funds;
• Use of the unregulated financial sector may increase;
• There may be more opportunities for the misuse and misappropriation of financial aid and emergency funding, meaning increased corruption and ML risks;
• Criminals taking advantage of an economic downturn to move into new lines of business to make and launder money.

In order to minimise risks at your own practice, refer to the LSAG AML Advisory Note and the CLC’s note on using electronic ID; both available on the CLC’s Coronavirus: Resources and Information page.