Money Laundering Risks of Designated Non-Financial Businesses and Professions (DNFBPS); Challenges and Solutions

Document Type : Scientific research

Authors

• bagher shamloo ¹
• Somaye Parhizkary ²

¹ 1- Associate Professor, Department of Criminal Law and Criminology, Faculty of Law, Shahid Beheshti University, Tehran

² PhD Student in Criminal Law and Criminology, Faculty of Law, Shahid Beheshti University, Tehran,

10.22067/economlaw.2024.84933.1321

Abstract

As one of the main drivers of the economy, Non-Financial Businesses and Professions play an undeniable role in promoting financial and economic activities. However, the existence of some inherent features such as the breadth of activity and the lack of transparency in financial exchanges and transactions of some types of these businesses have caused them to become a cover and platform for committing crimes, especially money laundering. This, along with the governments' lack of correct and comprehensive understanding of the risk of committing crimes in these jobs, has turned them into an important challenge that requires attention at the legislative and structural levels. In this regard and considering the importance of taking effective measures to reduce the risks of this category of businesses, the Financial Action Task Force, as a transnational group, while identifying the types of Non-Financial Businesses and Professions, extended the anti-money laundering requirements to this category and asked governments to include preventive and countermeasures of the anti-money laundering system in their country. Undoubtedly, success in this matter requires the removal of legislative obstacles and also the improvement of governments at the structural level in order to implement the requirements. Thus, in this article, with a descriptive and analytical method and relying on reliable sources, the risks of money laundering in non-financial businesses will be examined and the challenges and solutions to solve them will be analyzed in the light of the recommendations of the Financial Action Task Force. The results of the research show that the ineffectiveness of the laws in the field of Non-Financial Businesses and Professions and the non-compliance of its trustees with the risk-based approach have brought challenges in the implementation of anti-money laundering requirements. Therefore, it is necessary to regulate Non-Financial Businesses and Professions and apply a risk-based approach in the implementation of regulations, through training to the custodians of this field. Also, creating an infrastructure based on new technologies, in a way that provides the basis for the effective implementation of requirements, appropriate to the nature of Non-Financial Businesses and Professions, will be effective in reducing the risk of money laundering.

Keywords

• Non-Financial Businesses and Professions
• money laundering
• Financial Action Task Force
• money laundering risk
• regulation

References

• Ai, L., Broome, J., & Yan, H. (2010). Carrying out a risk-based approach to AML in China: partial or full implementation?Journal of Money Laundering Control, 13(4), 394-404.
• Buno (Okenyebuno) Emmanuel Nduka & Giwa Sechap, (2021). "Refocusing designated non-financial businesses and professions on the path of anti-money laundering and combating the financing of terrorism compliance," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 24(4), pp. 693-711.
• Bussmann, K.-D. and M. Vockrodt (2016), “Geldwäsche-Compliance im Nicht-Finanzsektor: Ergebnisse aus einer Dunkelfeldstudie”, in Compliance-Berater 5, pg.138-143; referenced in the EU Supranational Risk Assessment (2019).
• Desai, Susan . (2012) “Implementation of anti-money laundering standards in Asia”. Retrieved from Country Analysis Unit, Asia Focus, Federal Reserve Bank of San Francisco, p.3
• Fahmi Bin Adilah & Mohd Zamre Mohd Zahir & Hasani Mohd. Ali & Muhamad Sayuti Hassan, 2022. "A study of Malaysian anti-money laundering law and the impact on public and private sector," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 26(4), pages 831-844.
• FATF, (2007). Money Laundering and Terrorist Financing Through Real Estate Sector, pp. 1-41
• FATF (2012-2022), “International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation”, Paris, France, www.fatf-gafi.org/recommendations.html
• FATF, (2019). “Guidance for a Risk-Based Approach for Legal Professionals”, Paris, fatfgafi.org /publications/documents/Guidance-RBA-legal-professionals.html
• FATF, (2019). “Guidance for a Risk-based Approach to Virtual Assets and Virtual Assets Service Providers”, Paris: www.fatf-gafi.org/publications/fatfrecommendations/documents/Guidance-RBA-virtual-assets-html
• FATF, (2019). “Risk-based Approach for the Accounting Profession”, Paris, fatf-gafi.org /publications/documents/ rba-accounting-profession.html
• FATF, (March 2021). “Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations Guidelines for Designated Non-Financial Businesses and Professions”
• FATF Annual Report, 2020-2021, Published Mutual Evaluation And Follow-Up Reports, 1-81
• FATF (2022), Anti-money laundering and counter-terrorist financing measures –Germany, Fourth Round Mutual Evaluation Report, FATF, Paris, p.26. http://www.fatfgafi.org/publications/mutualevaluations/documents/mer-germany-2022.html
• Federal Ministry of Finance (2019), First National AML/CFT Risk Assessment 2018/2019, pg.26
• Ginting, J., & Chairunissa, A.T. (2021). Adopting the Financial Action Task Force (FATF) recommendations in realizing beneficial owner’s transparency in limited companies to prevent money laundering criminal acts in Indonesia. Journal of Legal, Ethical and Regulatory Issues, 24(S4), 1-15
• Houben, r, Snyers, A. (2020). “Crypto-assets- Key developments, regulatory concerns and responses, Study for the Committee on Economic and Money affairs”, Policy Department for Economic, scientific and Quality of Life Policies, European Parliament, Luxembourg, p.104
• Karin Svedberg Helgesson, Ulrika Mörth, (2018). Client privilege, compliance and the rule of law: Swedish lawyers and money laundering prevention, Crime Law Soc Change 69:227–248
• Kethineni, Sesha; Cao, Ying, Dodge, Cassandra. (2018). “Use of Bitcoin in Darknet Markets: Examining Facilitative Factors on Bitcoin-Related Crimes”, American Journal of Criminal Justice, pp.141-157
• Khalili Paji, Aref. (2022), Virtual Currencies Globalization of Crime and Criminal Policy, mizan publication, Tehran, First edition
• De Koker, Louis 2009, Identifying and managing low money laundering risk : perspectives on FATF's risk-based guidance, Journal of financial crime, vol. 16, no. 4, pp. 334-352..
• Khalili Paji, Aref & Niazpour, Amirhassan. (2022). Requirements for the Inclusion of Anti Money Laundering Law on Virtual Assests in Light of the Recommendations of the Financial Action Task Force, Encyclopedia of Economic Law Journal, Number 20, pp.175-195
• Malakouti Khah, Z.and Khalili Paji, A.(2023), "The legal-criminal aspects of Iran’s anti-money laundering law in light of the FATF recommendations", Journal of Money Laundering Control, Vol pp.1-11
• Omar, N. and Johari, Z.A. (2015), “An international analysis of FATF recommendations and compliance by DNFBPs”, 7th International Conference on Financial Criminology, 13-14 April, 2015,Wadham College, Oxford United Kingdom, Procedia Economics and Finance, Vol. 28 No. 2015,pp. 14-23.
• Parhizkary, Somaye. (2023), Compliance of Iran’s Criminal Policy with the Recommendations of the Financial Action Task Force (FATF) on Designated Non Financial Businesses and Professions, Superviser: Bagher Shamloo, Shahid Beheshti University, Faculty of Law
• Pathberiya, Samarsinghe & Samarasinghe Pathberiya, Theja Dedu. (2023).” An Index to Evaluate Risk of Money Laundering in Designated Non-Financial Institutions”, Challenges Faced by Emerging Market Economies and a Case Study for Sri Lanka
• Republic of the Philippines Anti-Money Laundering Council, 2021 Risk Review of AMLC-Registered DNFBPs and on overview of the Risk-Based Supervisory Frame work, Designated Non-Financial Businesses and Professions (DNFBPs), pp.1-31
• Alexandra Bieler. (2022). “Peeking into the House of Cards: Money Laundering, Luxury Real Estate, and the Necessity of Data Verification for the Corporate Transparency Act’s Beneficial Ownership Registry”, 27 Fordham J. Corp. & Fin. L. 193, pp.193-258
• Shamloo, Baqir & Khalili Paji, Aref. (2020). Legal-Economic Challenges of Virtual Currencies on Political Systems in the Light of Alternative Theory, Political and International Approaches, Volume 12, Number1, pp.125-152.
• Stevens, Robert. (2020). “Criminals Could use “Exclusive mining” to pass off their money laundering as Bitcoin mining income”, Researchers Find New Way for Criminals to Launder Money Using Bitcoin,https://decrypt.co/41024/researchers-find-new-way-for-criminals-to-launder-money-using-bitcoin
• Takats, E. (2011). A Theory of "Crying Wolf" : The Economics of Money Laundering Enforcement. Journal of Law, Economics & Organization, 27(1), 32-78.
• Tom Hajda, Esq, (2022). “Qualifying your borrower: What Lenders Need to Know About Anti-Money Laundering Compliance”, American Association of Private Lenders, geracilawfirm.com
• pymnts.com
• riskscreen.com /kyc360/article/precious-metals-the-gold-standard-in-money-laundering/