Anti-money laundering and counter-terrorist financing …

1 February 2016 Anti-money laundering and counter -terrorist financing measuresItalyMutual Evaluation Report 2016 FATF. All rights reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue Andr Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: coverphoto: Ministero dell Economia e delle FinanzeCiting reference:The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering , terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global Anti-money laundering (AML) and counter -terrorist financing (CTF) more information about the FATF, please visit the website: document and/or any map included herein are without prejudice to the status of or soverignty over any territory, to the delimitation of international frontiers and bounderies and to the name of any territory, city or area.)

2 This assessment was conducted by the International Monetary Fund (IMF) and adopted by the FATF at its October 2015 Plenary (2016), Anti-money laundering and counter -terrorist financing measures - Italy, Fourth Round Mutual Evaluation Report, FATF, Paris Anti-money laundering and counter -terrorist financing measures in Italy 2016 @ FATF 2016 1 CONTENTS EXECUTIVE SUMMARY .. 5 Key Findings .. 5 Risks and General Situation .. 6 Overall Level of Effectiveness and Technical Compliance .. 7 Priority Actions .. 10 Effectiveness & Technical Compliance Ratings .. 12 MUTUAL EVALUATION REPORT .. 13 Preface .. 13 CHAPTER 1. ML/TF RISKS AND CONTEXT .. 15 ML/TF Risks and Scoping of Higher-Risk Issues .. 15 Materiality .. 18 Structural Elements .. 19 Background and other Contextual Factors .. 19 CHAPTER 2. NATIONAL AML/CFT POLICIES AND COORDINATION.

3 31 Key Findings and Recommended Actions .. 31 Immediate Outcome 1 (Risk, Policy and Coordination) .. 32 CHAPTER 3. LEGAL SYSTEM AND OPERATIONAL ISSUES .. 37 Key Findings and Recommended Actions .. 37 Immediate Outcome 6 (Financial intelligence ML/TF) .. 38 Immediate Outcome 7 (ML Investigation and Prosecution).. 47 Immediate Outcome 8 (Confiscation) .. 59 CHAPTER 4. TERRORIST financing AND financing OF PROLIFERATION .. 67 Key Findings and Recommended Actions .. 67 Immediate Outcome 9 (TF Investigation and Prosecution) .. 68 Immediate Outcome 10 (TF Preventive Measures and Financial Sanctions) .. 69 Immediate Outcome 11 (PF Financial Sanctions) .. 73 CHAPTER 5. PREVENTIVE MEASURES .. 79 Key Findings and Recommended Actions .. 79 Immediate Outcome 4 (Preventive Measures).. 80 CHAPTER 6. SUPERVISION .. 91 Key Findings and Recommended Actions.

4 91 Immediate Outcome 3 (Supervision) .. 92 CHAPTER 7. LEGAL PERSONS AND ARRANGEMENTS .. 107 Key Findings and Recommended Actions .. 107 Immediate Outcome 5 (Legal Persons and Arrangements) .. 108 CHAPTER 8. INTERNATIONAL COOPERATION .. 117 Key Findings and Recommended Actions .. 117 Immediate Outcome 2 (International Cooperation) .. 118 2 Anti-money laundering and counter -terrorist financing measures in Italy 2016 @ FATF 2016 TECHNICAL COMPLIANCE ANNEX .. 125 Recommendation 1 - Assessing Risks and applying a Risk-Based Approach .. 125 Recommendation 2 - National Cooperation and Coordination .. 128 Recommendation 3 - money laundering offence .. 129 Recommendation 4 - Confiscation and provisional measures .. 133 Recommendation 5 Terrorist financing Offense .. 135 Recommendation 6 Targeted Financial Sanctions Related to Terrorism and Terrorist financing .

5 137 Recommendation 7 Targeted Financial Sanctions Related to Proliferation .. 142 Recommendation 8 Non-Profit Organisations .. 144 Recommendation 9 Financial Institution Secrecy Laws .. 149 Recommendation 10 Customer Due Diligence .. 150 Recommendation 11 Recordkeeping .. 156 Recommendation 12 Politically Exposed Persons .. 157 Recommendation 13 Correspondent Banking .. 158 Recommendation 14 money or Value Transfer Services .. 159 Recommendation 15 New Technologies .. 161 Recommendation 16 Wire Transfers .. 162 Recommendation 17 Reliance on Third 165 Recommendation 18 Internal Controls and Foreign Branches and Subsidiaries .. 166 Recommendation 19 Higher-Risk Countries .. 167 Recommendation 20 Reporting of Suspicious Transaction .. 168 Recommendation 21 Tipping-Off and Confidentiality .. 169 Recommendation 22 DNFBPs: Customer Due Diligence.

6 170 Recommendation 23 DNFBPs: Other Measures .. 172 Recommendation 24 Transparency and Beneficial Ownership of Legal Persons .. 173 Recommendation 25 Transparency and Beneficial Ownership of Legal Arrangements .. 178 Recommendation 26 Regulation and Supervision of Financial Institutions .. 180 Recommendation 27 Powers of Supervisors .. 183 Recommendation 28 Regulation and Supervision of DNFBPs .. 184 Recommendation 29 Financial Intelligence Units .. 187 Recommendation 30 Responsibilities of Law Enforcement and Investigative Authorities .. 189 Recommendation 31 Powers of Law Enforcement and Investigative Authorities .. 192 Recommendation 32 Cash Couriers .. 194 Recommendation 33 Statistics .. 196 Recommendation 34 Guidance and Feedback .. 196 Recommendation 35 Sanctions .. 197 Recommendation 36 International Instruments.

7 202 Recommendation 37 Mutual Legal Assistance .. 202 Recommendation 38 Mutual Legal Assistance: Freezing and Confiscation .. 204 Recommendation 39 Extradition .. 205 Recommendation 40 Other Forms of International Cooperation .. 206 Summary of Technical Compliance Key Deficiencies .. 213 ANNEX II. OVERVIEW OF ITALY S ANTICORRUPTION MEASURES .. 217 ANNEX III. ITALIAN COMPANIES CLASSIFIED BY SIZE OF CAPITAL .. 219 ANNEX IV. ANTI-MAFIA MEASURES, SEIZURE, AND CONFISCATION .. 220 ANNEX V. DIA SEIZURES AND CONFISCATIONS .. 222 Anti-money laundering and counter -terrorist financing measures in Italy 2016 @ FATF 2016 3 ANNEX VI. NUMBER OF ALLEGED CROSS-BORDER TRANSPORTATION VIOLATIONS AND THE AMOUNTS SEIZED (2013) .. 224 ANNEX VII. ITALY-SWITZERLAND CROSS-BORDER MOVEMENTS OF CASH .. 225 GLOSSARY .. 226 Anti-money laundering and counter -terrorist financing measures in Italy 2016 @ FATF 2016 5 Executive Summary Executive Summary This report provides a summary of the Anti-money laundering and combating the financing of terrorism (AML/CFT) measures in place in Italy as at the date of the on-site visit (14-30 January 2015).

8 It analyses the level of compliance with the Financial Action Task Force (FATF) 40 Recommendations and the level of effectiveness of Italy s AML/CFT system, and provides recommendations on how the system could be strengthened. Key Findings 1. Italy has a mature and sophisticated AML/CFT regime, with a correspondingly well-developed legal and institutional framework. It is nonetheless confronted with a significant risk of money laundering (ML) stemming principally from tax crimes and activities most often associated with organised crime, such as corruption, drug trafficking, and loan sharking. 2. All the main authorities have a good understanding of the ML and terrorist financing (TF) risks, and generally good policy cooperation and coordination. Italy is now developing a nationally coordinated AML/CFT strategy informed by its 2014 national risk assessment (NRA).

9 3. Law enforcement agencies (LEAs) access, use, and develop good quality financial intelligence. The authorities are able to successfully undertake large and complex financial investigations and prosecutions, and have confiscated very large amounts of proceeds of crime. 4. Nevertheless, current results are not fully commensurate with the scale of ML risks. This is partly due to the insufficient focus on standalone ML cases and other cases, generated by foreign predicate and/or involving legal persons offenses, as well as to the length of the judicial process. 5. The risk of TF in Italy appears to be relatively low, and Italy has effectively implemented targeted financial sanctions (TFS). It also actively mitigates the proliferation financing (PF) risk, but additional outreach to the private sector would be beneficial.

10 6. Financial institutions (FIs) generally have a good understanding of ML threats that they face, and the larger banks appear to be strongest in their mitigation efforts. The nonfinancial sector, with some exceptions, is far less attuned to ML/TF risk, and is hampered by the absence of detailed secondary legislation. 7. Customer due diligence (CDD) measures are well embedded in the financial sector, but 6 Anti-money laundering and counter -terrorist financing measures in Italy 2016 @ FATF 2016 EXECUTIVE SUMMARY there appears to be an over-reliance on the due diligence undertaken by the banks when accepting business through agency arrangements, and the processes for identifying beneficial owners are not consistent. Reporting by the nonfinancial sector is generally poor, especially among the lawyers and accountants, but on the rise.