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The profile of reporting entities

This section examines the size and composition of the regulated sectors in Australia, the United States, the United Kingdom, Belgium, France, Germany, Hong Kong, Singapore and Taiwan. While the aim is to provide a profile of the regulated sectors in these countries, there are considerable limitations in the data that were able to be provided and as a result, the discussion is less definitive than originally planned.

The largest gaps in the available information are for industries without prudential regulation or other long-standing registration processes. Additional issues of accessing English translations of documents, different year dates for collecting the information between countries and between industries and ambiguities in the exact businesses that might provide regulated services mean that the data presented should be considered estimations at best.

Many of the countries included in this section consider MSBs (such as remittance providers and issuers of travellers’ cheques) as financial services. To facilitate a comparison between counties, in this context, providers of these services are described as MSBs.

Australia

The enactment of the AML/CTF Act in Australia vastly extended the number of businesses regulated for money laundering purposes beyond those with responsibilities under the earlier FTR Act. Legislative provisions that would have amended the AML/CTF Act to expand the range of regulated businesses were released for public comment in 2007. The draft amendment proposed expanding the scope of the regulations to real estate agents, some professional services and dealers in precious metals and stones. The amendments to the AML/CTF Act, expanding the regime’s requirements to these industries, had not been implemented at the time of writing.

Australia’s regulated sector currently includes:

  • financial services (banks, credit unions, building societies, lending, leasing and hire purchase companies, asset management companies, financial planners (who arrange for the issue of financial products), life insurers, superannuation funds, custodial services companies and security dealers);
  • MSBs (stored value card issuers, issuers of traveller’s cheques, foreign exchange dealers, remittance dealers and cash couriers);
  • the gambling sector (casinos, bookmakers, TABs, clubs and pubs, internet and electronic gaming service providers); and
  • bullion dealers.

Confirming, or estimating, the full extent of the regulated sector in Australia is a task made difficult by the legislation’s approach to defining the regulated sector. The AML/CTF Act names the services that are to be regulated for AML/CTF purposes, but not specific business types. AUSTRAC reported that Australia regulated approximately 17,700 businesses for AML/CTF in 2009. As of 30 June 2009, a total of 13,415 businesses were regulated by AUSTRAC and required to submit a compliance report (AUSTRAC 2009a). Table 1 outlines that around 40 percent of businesses regulated for AML/CTF were MSBs and 29 percent were businesses providing financial services. The remaining 31 percent of regulated non-financial businesses were encompassed in the regime were bullion dealers or providers of gambling facilities.

Table 1: Estimated size of the regulated sector in Australia, 2009
Sector Estimated providers (n) Proportion of total (%)
Financial services 5,200 29.38
MSBs 7,000 39.55
Non-financial businesses 5,500 31.07
Total 17,700 100.00

Sources: AUSTRAC 2009g

United States

The United States’ expansion of the regulated sector for AML/CTF came with the PATRIOT Act. The PATRIOT Act added numerous business types to the definition of financial institutions and included a range of non-financial businesses to the regime. As noted in the second section, these included broker-dealers, casinos, futures commission merchants, introducing brokers, commodity pool operators, commodity trading advisors, providers of remittance services and dealers in precious metals, stones or jewels. The regulated sector in the United States is also based on regulating specific services and not specific entities.

The service providers identified as financial institutions under the Bank Secrecy Act, with AML/CTF obligations, are:

  • banks (commercial banks, savings and loan associations, credit unions);
  • federally regulated securities brokers;
  • currency and exchange houses;
  • funds transmitters;
  • check-cashing businesses;
  • persons subject to state or federal bank supervisory authority;
  • casinos and card clubs; and
  • insurance companies offering selected products, such as life insurance, annuity contracts, property and casualty insurance and health insurance.

The United States has also included additional service providers in the definition of financial institutions. Some of these businesses, such as those involved in settling real estate transactions, have not yet had AML/CTF rules issued by FinCEN.

Table 2 shows the estimated number of businesses within the US regulated sector from each of the three categories of financial services, MSBs and non-financial businesses. MSBs are the largest group of businesses with AML/CTF responsibilities in the United States, comprising around 74.4 percent of all businesses covered using the available figures. Businesses providing financial services represent around 18.7 percent of the entire regulated sector and non-financial businesses (for which figures are not available for all services) constitute approximately 6.9 percent of the estimates given by FATF-GAFI in 2006 (FATF-GAFI 2006).

Table 2: Estimated size of the regulated sector in the United States, 2006
Sector Estimated providers (n) Estimated proportion of total (%)
Financial services 56,447 18.68
MSBs 224,844 74.42
Non-financial businesses >20,845 6.90
Total >302,136 100.00

Source: FATF-GAFI 2006

Table 3 goes some way to explain the breakdown of the US regulated sector. Estimates for the number of trust companies and dealers in metals and stones are not available.

Table 3 outlines the number of banks in the United States in 2006 by regulatory agency. The different business structures of banks determine which regulatory agency supervises the banking business.

Table 3: Regulated entities in the United States, 2006—estimates of service providers
Sector Business type Providers (n)
Financial services FDIC insured nationally chartered commercial banks 1,818
State chartered banks—members of federal reserve 907
Uninsured US branches of foreign banks 204
State-chartered banks not members of federal reserve 5,245
Insured US branches of foreign banks 8
Savings associations 862
Credit unions 8,695
Trust companies No estimate
Broker dealers 6,296
Mutual funds 8,000
Investment advisors 10,283
Futures commission merchants 211
Brokers in commodities 1,711
Commodity trading advisors 2,635
Commodity pool operators 1,783
Domestic insurance companies 7,789
Total 56,447
MSBs MSBs (registered) 24,844
MSBs—estimated total 200,000
Total 224,844
Non-financial businesses Casinos 845
Precious metals and stones 20,000
Total >20,845
Total >302,136

Source: FATF-GAFI 2006

The OCC supervises the 1,818 Federal Deposit Insurance Corporation (FDIC)-insured nationally chartered commercial banks and the 50 federal branches and agencies of foreign banking organisations. The Federal Reserve supervises the 907 FDIC-insured state chartered banks that are members of the Federal Reserve System and 204 uninsured US branches and agencies of foreign banking organisations.

The FDIC itself supervises the 5,245 FDIC-insured, state-chartered commercial and savings banks that are not members of the Federal Reserve and eight FDIC-insured US branches of foreign banking organisations. Savings associations are supervised by the Office of Thrift Supervision. Of the 8,695 credit unions listed in Table 3, 5,393 were insured, federally chartered and regulated by the National Credit Union Administration (NCUA) and 3,302 were NCUA-insured, state-chartered and regulated by state supervisory authorities. The remaining 319 credit unions were privately insured, state-chartered and regulated.

The estimates of MSBs in Table 3 stem from the number of businesses that had registered with FinCEN by 5 April 2006. A total of 24,884 MSBs had registered with FinCEN by this date, although Coopers & Lybrand (in FATF-GAFI 2006) estimated that this could exceed 200,000. The 200,000 figure includes 40,000 US Postal Service outlets that sell money orders, as well as a number of agents of MSBs. The primary businesses, in these cases, are responsible for maintaining a complete list of agents with which they do business. FATF-GAFI further estimated that eight companies sell the bulk of MSB financial products and the agents of these eight companies account for most of the MBS outlets (FATF-GAFI 2006).

Professions in the United States, such as legal practitioners and accountants, are not subject to preventive AML/CTF requirements beyond the criminal enforcement risks associated with the violation of counter-terrorism financing requirements and assisting money laundering (Levi & Reuter 2006). FinCEN estimated that there were 845 casinos and card clubs operating in 34 states, tribal nations and territories in the United States at the time of the mutual evaluation in 2006. Fourteen states license casinos in the United States and the industry saw more than US$800b wagered at casinos and card clubs in 2004, which was 85 percent of the total amount of money wagered for all legal gaming activities in the United States (FATF-GAFI 2006).

In 2008, there were 29.6 million businesses in the United States, according to Office of Advocacy estimates based on data from the US Department of Commerce, Bureau of the Census (US Office of Advocacy 2009). As there were 302,136 regulated entities in 2006, it appears that approximately one percent of all businesses in the United States are regulated by FinCEN for AML/CTF purposes, a percentage comparable to that in Australia.

The United Kingdom

The United Kingdom, like Australia, defines the limits of its regulated sector by function rather than naming specific business sectors. Also like Australia, the extent of the regulated sector in the United Kingdom was recently expanded with new regulations. The Money Laundering Regulations 2007 expanded the regulated sector to include a number of non-financial businesses previously without AML/CTF obligations. These included auditors, accountants and tax advisors, independent legal professionals, trust or company service providers, estate agents, high-value dealers and casinos.

FATF-GAFI (2007a) estimated the total number of businesses with AML/CTF obligations in 2007 to be at least 206,566. Financial service businesses made up 27.2 percent of this figure, MSBs accounted for approximately 30.1 percent and businesses in the non-financial sector comprised the remaining 42.7 percent. Table 4 shows the estimated numbers of businesses in each of the three areas from the UK Mutual Evaluation.

Table 4: Estimated size of the regulated sector in the United Kingdom, 2007
Sector Estimated providers (n) Estimated proportion of total (%)
Financial services 28,969 27.15
MSBs 32,131 30.12
Non-financial businesses >45,588 42.73
Total >106,688 100.00

Source: FATF-GAFI 2007a

Table 5 divides the number of regulated entities in the United Kingdom according to the specific type of businesses offering designated services. As is the case with the Australian figures, some of the totals given, particularly for MSBs and non-financial businesses, are the best estimates available.

Table 5: Regulated entities in the United Kingdom, 2007—estimates of service providers
Sector Business type Providers (n)
Financial services Personal investment 5,006
Investment management 1,635
Securities and futures 975
Banking (including building societies and e-money issuers) 400
Insurance 1,201
General insurance 9,473
Mortgages 3,589
Professional firms 652
Credit unions 562
Other 614
Category not supplied 4,862
Total 28,969
MSBs Money transmission only 9,767
Bureau de change only 4,276
Cheque casher only 1,371
Bureau de change and money transmission agent 407
Cheque casher and money transmission agent 311
Bureau de change and cheque casher 534
Bureau de change, cheque casher and money transmission agent 15,465
Total 32,131
Non-financial businesses Casinos 140
Real estate agents 10,000
High-value dealers 1,500
Solicitors >12,673
Barristers 15,045
Conveyancers 230
Notaries 1,000
Accountants No estimate available
Trust and company service providers 5,000
Total >45,588
Total >106,688

Source: FATF-GAFI 2007a

The UK financial services industry

The United Kingdom employs over one million people in financial service businesses. It is one of the largest commercial banking sectors in the world. The United Kingdom insurance industry is the largest in Europe and third largest in the world (FATF-GAFI 2007a). Most of the 28,969 financial institutions are supervised by the FSA and the remaining institutions are European Economic Area (EEA)-authorised institutions. EEA-authorised institutions are banks from other countries within the European Union with branches in the United Kingdom or UK banks with branches elsewhere. The FSA and EEA banks in the United Kingdom or supervised in the United Kingdom are shown in Table 6.

Table 6: Banks authorised by either Financial Services Authority or European Economic Area, 2007 (n)
Financial sector FSA-authorised financial institutions EEA-authorised institutions
UK branches (EEA) UK (cross-border) services (EEA)
Personal investment 5,005 0 1
Investment management 1,632 3 0
Securities and futures 967 6 2
Banking (including building societies and e-money issuers) 301 94 5
Insurance 723 74 404
General insurance 9,473 0 0
Mortgages 3,588 0 1
Professional firms 652 0 0
Credit unions 562 0 0
Other 605 5 4
Category not supplied 3 52 4,807
Total 23,511 234 5,224
Overall total 28,969

Source: FATF-GAFI 2007a

MSBs in the United Kingdom must register with HMRC. For businesses that use agents, such as remittance services (money transmitters), the principal is the registered entity. The agents of the business must comply with the regulations, although the principal remains responsible for the level of compliance. Table 7 gives an indication of the number of principals responsible for MSBs in the United Kingdom. The number of premises is the figure included in Tables 5 and 6.

Table 7: Principals and agents of money service businesses in the United Kingdom, 2007
Business type Registered principals (n) Premises (n) Premises (%)
Money transmission only 1,515 9,767 30.3
Bureau de change only 852 4,276 13.3
Cheque casher only 546 1,371 4.2
Bureau de change and money transmission agent 244 407 1.2
Cheque casher and money transmission agent 103 311 0.9
Bureau de change and cheque casher 73 534 1.6
Bureau de change, cheque casher and money transmission agent 288 15,465 48.1
Total 3,621 32,131

Source: FATF-GAFI 2007a

Note: Percentages may not total 100 due to rounding

Non-financial businesses

Non-financial business numbers are more difficult to gauge as not all are required to register with a supervisory authority or other agency. The numbers of non-financial businesses, by business type, are shown in Table 8.

Table 8: Non-financial businesses in the United Kingdom, 2007—including calculations and estimates
Business type Entities (n)
Casinos 140 currently operating out of 165 total. Internet casinos have recently been legalised and will have to register. No estimates are available yet
Real estate agents Approximately 10,000 firms
High-value dealers Just over 1,500
Legal practitioners 100,938 solicitors holding practicing certificates in England and Wales. 1,976 practicing in Northern Ireland, 9,637 in Scotland

14,000 barristers in England and Wales, 585 in Northern Ireland, 460 advocates in Scotland
Conveyancers Most conveyancing is done through legal firms, but there are 230 separate firms who specialise in conveyancing alone
Notaries About 1,000 in England and Wales, Scotland. All are solicitors
Accountants (including auditors) No estimate as registration not compulsory
Trust and company service providers 5,000 estimated but figures are hard to gauge

Source: FATF-GAFI 2007a

In the United Kingdom, there were 2.15 million enterprises registered for Value Added Tax and/or Pay as You Earn in 2009, compared with 2.16 million in March 2008 (ONS 2009). Using the 2008 estimate of the number of enterprises of 2.16 million, and the number of businesses with AML/CTF obligations in 2007 of 206,566, it appears that approximately 9.6 percent of all businesses were regulated by SOCA for AML/CTF purposes. This is a considerably higher proportion than in Australia or the United States. The reasons may lie in the inclusion of the UK’s regulated sector of the large number of professional legal and accountancy practices.

Belgium

Belgium’s AML/CTF regime covers core financial institutions (banking, credit, investment, insurance, mortgage, lease-financing, derivatives), adds key MSBs (currency exchange and funds transport) and many non-financial businesses (notaries, bailiffs, auditors, approved accountants, tax advisors, tax specialist-accountants, real estate agents, dealers in diamonds and gambling establishments and gaming halls). As with other countries, such as the United Kingdom, legal practitioners in Belgium have AML/CTF requirements only when engaging in financial and real estate transactions. Comprehensive information on the numbers of regulated entities across each business type is not available for Belgium. Selected numbers of entities with AML/CTF requirements are shown in Table 9.

Table 9: Selected reporting entities in Belgium, 2006
Sector Business type Providers (n)
Financial services Banks 105
Investment and securities companies 74
UCI management companies 6
Financial holding companies 7
Settlement institutions 2
MSBs Bureaux de change 21

Sources: CBFA 2007

Banking was by far the largest component of Belgium’s financial sector in 2006. The banking sector in Belgium was a larger contributor to gross domestic profit than that of the banking sector in the United States (FATF-GAFI 2005a). Belgium banks are increasingly foreign owned, with just under half of the banks operating in Belgium in 2006 being foreign-owned entities (see Table 10).

Table 10: Banks operating in Belgium, 2006 (n)
Banks authorised in Belgium 59
Banks governed by Belgian law 51
Banks 32
Savings banks 16
Securities banks 2
Municipal savings banks 1
Foreign banks—non European Union-based banks 8
Foreign banks—European Union-based banks 46
Total banks 105

Source: CBFA 2007

Table 11 provides a breakdown of the investment companies operating in Belgium in 2006.

Table 11: Investment firms in Belgium by business type, 2006
Investment firms governed by Belgium 53
Stockbroking firms 27
Portfolio management companies 22
Financial instrument broking firms 1
Financial instrument placing firms 3
Investment firms—governed by European Union country 17
Investment advice company 3
Derivative specialist 1
UCI management company 6
Total 80

Source: CBFA 2007

France

The regulated sector in France encompasses financial institutions, real estate agents, casinos and gaming houses, high-value dealers (including precious stones and metals and art and antiques dealers) and accountants. Legal professionals in France have obligations when engaging in real estate or financial transactions. The numbers of banking and finance companies in France is falling. Table 12 shows that the number of credit and finance companies in France in 2008 was 1,253. Of that number, nine were in the process of liquidation or having their licence withdrawn.

Table 12: Credit institutions (finance companies) in France, 2008 (n)
Credit institutions approved in France (Établissements de credit agrees en France) 672
Credit institutions approved in other European countries (Établissements tablissements de credit de l’espace economique European exercant en libre etablissement (succurales)) 69
Credit institutions in Monaco

(Établissements de credit agrees pour exercer leur activite a Monaco)
27
Credit institutions approved in other European countries exerting in free performance of service

(Établissements de credit de l’espace economique European exercant en libre prestation de services)
476
Credit institutions—course of withdrawal agreement (Établissements de credit dont l’agreement est cours de retrait) 2
Credit institutions—liquidation (Établissements de credit don’t la liquidation est en cours) 7
Total 1,253

Source: Banque de France 2008

Germany

Germany’s AML/CTF regulatory regime extends across core financial institutions:

  • credit institutions (who provide banking services);
  • financial institutions (any financial service provider that is not a credit institution such as remittance providers, currency exchange, credit card providers);
  • insurance companies (providing accident insurance with a premium redemption clause, life insurance and insurance brokers placing these policies);
  • financial enterprises (such as those providing leasing contracts, investment advice and money broking services);
  • legal practitioners and notaries (engaging in real estate and financial transactions or trust matters);
  • auditors, tax consultants, accountants;
  • real estate brokers; and
  • casinos.

Germany’s economy is the third largest in the world, when measured by market exchange levels. The German financial system is traditionally bank-oriented rather than stockmarket oriented.

Estimates of the number of regulated entities within the industries covered by Germany’s AML/CTF legislation are not available in English. Table 13 presents the number of banks in Germany in 2004.

Table 13 Banks authorised in Germany, 2004 (n)
Credit co-op 1,340
Savings bank 477
Commercial banks 357
Regional banks 12
Total banks 2,186

Source: Library of Congress, Federal Research Division 2008

Hong Kong

Hong Kong’s regulated sector encompasses legal practitioners, real estate agents, accountants, trust and company service providers, and the dealers of precious metals and stones, in addition to the banking and finance sectors. Regulated entities in Hong Kong’s banking and finance sectors take in banks, deposit-taking companies, insurance companies and insurance intermediaries, money lenders, and securities and futures companies.

Table 14 estimates the number of businesses regulated for AML/CTF purposes in Hong Kong’s financial sector, as well as MSBs and non-financial businesses. The FATF-GAFI (2008b) does not consider the non-financial businesses listed in Table 14 as included in Hong Kong’s regulated sector. These industries have industry-based AML/CTF obligations rather than legislated (and externally enforceable) obligations.

Table 14: Regulated entities in Hong Kong, 2008–09—estimates of service providers
Sector Business type Entities (n)
Financial services Banks 200
Insurers 172
Insurance agencies 2,342
Insurance brokers 559
Securities and futures 2,896
Total 6,169
MSBs Money lenders 741
Remittance providers 1,760
Total 2,501
Non-financial businesses Accountants 3,705
Real estate agents 4,589
Legal practitioners—firms 712
Notaries 380
Total >9,386
Total >18,056

Sources: EAA 2009; FATF-GAFI 2008b; HKICPA 2009; HKMA 2009; Law Society of Hong Kong 2008; OCI 2009; Securities and Futures Commission 2009

Hong Kong’s banking sector is substantial. Sixty-eight of the 100 largest banks in the world operated in Hong Kong in 2009 (HKMA 2009). Hong Kong’s insurance industry is also substantial. In 2009, the industry was comprised of 172 companies. Of those companies, 46 were long-term insurers and 107 were general insurers. The remaining 19 offered composite services.

Singapore

Singapore’s regulated sector is comprised almost entirely of businesses regulated by the Monetary Authority of Singapore (MAS). The only additional service providers with AML/CTF regulatory obligations are legal practitioners and approved trustees. The MAS is the issuing body of AML/CTF regulations for the financial sector and the Law Society of Singapore issues the AML/CTF requirements for legal practitioners. The Institute of Certified Public Accountants of Singapore is the regulating body for approved trustees.

The types of businesses regulated by the MAS include service providers that are considered MSBs in other countries. Tables 15 and 16 consider remittance providers, money changers and money brokers as MSBs. Tables 15 and 16 present figures from January 2010, with the exception of the number of legal practitioners in Singapore. The most current figures available for legal practitioners are from 2009 and these appear in both Tables.

Table 15 gives figures for the number of businesses providing financial services, MSBs and non-financial businesses with AML/CTF regulatory obligations. Financial service businesses represent 60 percent of the total regulated sector, MSBs approximately 15 percent and non-financial businesses 25 percent.

Table 15: Estimated size of the regulated sector in Singapore, 2009–10
Financial services 1,914
MSBs 473
Non-financial businesses 855
Total 3,242

Sources: CRA 2009; Law Society of Singapore 2009; MAS 2009

Capital markets service license holders include businesses that deal in securities and trade in futures contracts, leveraged foreign exchange traders, advisors on corporate finance, fund managers and businesses that provide securities financing and custodial services for securities. Multiple companies provide more than one of these services and are not counted for each service. Financial advisor’s licence holders, from which banks and other entities registered with a different core business are exempt, have been included in Table 16 rather than as individual categories of advisors.

Table 16: Regulated entities in Singapore, 2009–10—estimates of service providers
Sector Business type Entities (n)
Financial services Local banks 6
Foreign banks 113
Financial holding companies 1
Merchant banks 46
Representative offices of banks 33
Institutions with Asian currency units 161
Finance companies 3
Singapore Government Securities Market—primary dealers 11
Singapore Government Securities Market—secondary dealers 23
Approved holding companies 1
Approved exchanges 2
Designated clearing houses 2
Recognised market operators 25
Holders of capital markets services licence 224
Holders of financial adviser’s licence 70
Exempt financial advisers—companies providing financial advisory services to not more than 30 accredited investors 289
Exempt fund managers—companies providing fund management services to not more than 30 qualified investors 486
Exempt corporate finance advisers—companies advising on corporate finance to only accredited investors 122
Exempt leveraged foreign exchange traders—companies carrying on business in leveraged foreign exchange trading for the purpose of managing customer’s funds to only accredited investors 4
Registered insurers 152
Authorised reinsurers 6
Lloyd’s Asia scheme 20
Representative offices of insurers and reinsurers 4
Insurance brokers 63
Exempt insurance brokers carrying on business as direct insurance brokers 23
Other relevant organisations 24
Total 1,914

MSBs
Money changers 377
Remittances 86
Money brokers 10
Total 473
Non-financial businesses Holders of trust business licence 40
Exempt persons carrying on trust business—advocates and solicitors 32
Legal practitioners (2009) 781
Casinos 2
Total 855
Total 3,242

Sources: CRA 2009; Law Society of Singapore 2009; MAS 2009

Republic of China (Taiwan)

Taiwan’s regulated sector is almost entirely comprised of businesses defined as financial institutions. These are currently:

  • banks;
  • trust and investment corporations;
  • credit cooperative associations;
  • credit departments of farmers’ associations;
  • credit departments of fishermen’s associations;
  • Agricultural Bank of Taiwan;
  • postal service institutions which also handle the money transactions of deposit, transfer and withdrawal;
  • negotiable instrument finance corporations;
  • credit card companies;
  • insurance companies;
  • securities brokers;
  • securities, investment and trust enterprises;
  • securities finance enterprises;
  • securities investment consulting enterprises;
  • securities central depository enterprises;
  • futures brokers; and
  • trust enterprises.

Taiwan has also included jewellery businesses in the AML/CTF regime. Jewellers in Taiwan play a substitute role for financial institutions and exchange large amounts of Taiwanese currency to foreign currency in addition to dealing in gems and gold.

Foreign currency exchange was added as a regulated service for AML/CTF in Taiwan in 2007. Foreign currency exchange can be carried out by a very wide range of businesses in Taiwan. The types of businesses permitted to provide this service are hotels, travel agencies, department stores, handicraft shops, jewellery stores, convenience stores, administrative offices of national scenic areas, sightseeing service centres, railway stations, temples, museums, institutions and associations providing services to foreign travellers in remote areas, and hotels located in remote areas. The number of businesses providing currency exchange services outside of their core business was not available. Table 17 shows the number of service providers for business types from the available information.

Table 17: Regulated entities in Taiwan, 2007—estimates of service providers
Sector Business type Entities (n)
Financial services Insurance—life 30
Insurance—other 24
Domestic bank 45
Foreign bank branches 36
Credit cooperatives 29
Farmers’ association credit departments 253
Fishermen’s association credit departments 25
Securities investment and trust enterprises 2
Bills finance companies 14
Postal savings system 1
Agricultural Bank of Taiwan 1
Futures brokers Unknown
Trust brokers Bank’s complete function
Total >460
MSBs Currency exchange Unknown
Non-financial businesses Jewellers Unknown
Total Unknown
Total >460

Source: APG 2007

Comparative analysis and conclusions

The core financial institutions (the banking industry, finance companies and insurance industry) are regulated for AML/CTF purposes in all nine countries considered in this section. The variations in the regulated sectors between these countries are in the inclusion or exclusion of key MSBs and non-financial businesses.

Table 18 outlines the extent to which non-financial businesses have been integrated into the AML/CTF regimes of the countries considered. The way AML/CTF requirements are applied to legal practitioners across these jurisdictions shows the greatest variation. Hong Kong and Singapore have included legal practitioners in the full scope of the requirements. Legal practitioners in Germany, Belgium, the United Kingdom and France have obligations when dealing with customers in financial transactions or the settlement of real estate transactions. Legal practitioners in the United States, Taiwan and Australia have not been included unless, in Australia, the legal practitioner holds an Australian Financial Services Licence or provides a service designated under the AML/CTF Act. AUSTRAC estimated that fewer than four legal practitioners fell into this category into 2008. Legal practitioners in Australia are included in the scope of the older FTR Act.

Table 18: Inclusion of non-financial businesses in AML/CTF regimes
Sector Aus US UK Belgium France Germany HK Singapore Taiwan
Lawyer No No Yesa Yesa Yesa Yesa Yesd Yes No
Accountant No No Yes Yes Yes Yes Yesd No No
Real estate No No Yes Yes Yes Yes Yes No Yes
Metal Yes Yes Yesb No Yesb No No No Yes
Stones No Yes Yesb Yesc Yesb No No No Yes
Casinos Yes Yes Yes Yes Yes Yes No No Noe

a: Legal professionals do not have AML/CTF obligations unless engaging in financial or real estate transactions

b: Dealers in precious metals and stones are considered high-value dealers and are regulated

c: Diamond merchants are regulated in Belgium but not dealers of precious stones generally

d: FATF-GAFI does not include these as part of the regulated sector due to industry self-regulation

e: Casinos are currently illegal/not in operation

The requirements for legal practitioners in the United Kingdom, France, Belgium, Germany and Singapore are further complicated by legal professional privilege. Legal professionals in these countries, which would otherwise have AML/CTF obligations for at least some transactions, are exempt from the obligation to report suspicious transactions under some circumstances. Where the information was gained in circumstances protected by legal privilege, the lawyer involved is not required to submit a report.

The non-financial businesses encompassed in Australia, the United Kingdom and Singapore (3 countries with the most data available to estimate the size of the regulated sector) contributed the largest proportion of the regulated sectors in those countries. Table 19 shows that the non-financial businesses regulated for AML/CTF in the United Kingdom comprised more than 40 percent of the total regulated sector in that country. The large representation of non-financial businesses in the United Kingdom’s regulated sector is unsurprising given that accountants, real estate agents, high-value dealers and the gambling sector have been included.

Table 19 illustrates that the number of businesses providing financial services outweigh the number of those in the non-financial sector who provide money services in Australia and the United Kingdom. In Singapore, however, companies in the finance industry outnumber those in either the money service industry or a non-financial industry.

Table 19: Non-financial businesses, money service businesses and the financial sector as a proportion of the regulated sector in Australia, the United Kingdom and Singaporea
Estimated entities (n) Estimated proportion of total (%)
Non-financial businesses
Australia 5,500 31.01
United Kingdom >45,588 42.73
Singapore 855 26.37
MSBs
Australia 7,000 39.55
United Kingdom 32,131 30.12
Singapore 473 14.59
Financial services
Australia 5,200 29.38
United Kingdom 28,969 27.15
Singapore 1,914 59.04

a: Data available for each country

Source: AIC analysis

Estimates for the United Kingdom suggest that finance sector companies are the smallest component. Even with an absence of data for some regulated non-financial industries in the United States, the existing information suggests that finance sector companies also comprise a small number (20%) of the total regulated sector in the country. Hong Kong showed a similar pattern. The proportion of regulated businesses that fell into the finance sector in Hong Kong is approximately 30 percent.

A comparison across countries of the number of businesses providing regulated services is complicated by the different types of businesses providing the service and the lack of availability of data for some countries. Table 20 presents the figures (where available) for two of the core finance sector services regulated in all countries—banking and insurance.

Table 20: Regulated entities in the banking and insurance industriesa (n)
Country Banks Insurance
Australia 57 103—all
United States 8,182 7,789—all
United Kingdom 400—including building society and e-money issuer 10,674—all
Belgium 105 Unknown
France 1,253 Unknown
Germany 2,186 Unknown
Hong Kong 200 172
Singapore 165 158—all and reinsurers
Taiwan 81 54—all
Total 12,582 >18,881

a: Data available for each country

Sources: APRA 2010a, 2010b

In relation to the size of the regulated AML/CTF sector as a proportion of the entire business sector, the broad estimates provided in Table 20 show considerable variation, from Australia and the United States having approximately one percent of businesses being regulated for AML/CTF purposes to the United Kingdom with almost 10 percent regulated. The differences lie largely in the inclusion of the professional sectors in the United Kingdom, which account for very large numbers of businesses subject to regulation.

Conclusion

The lack of data for some countries and for some of the industries regulated for AML/CTF resulted in limitations in developing estimates of the size of the regulated sectors for each of the nine countries of interest. Despite the limitations, the information available suggests that there are common characteristics among some of the countries included. The most prominent of these was the apparent concentration of businesses with AML/CTF obligations in money services and non-financial industries.

The recent inclusion of many regulated services falling into the MSB and non-financial business categories means that a large proportion of all businesses with AML/CTF obligations are new additions to the regimes. The concentration of AML/CTF from MSBs and DNFBPs has several possible impacts for regulators, law enforcement, regulated businesses and for the effectiveness of the regime as a whole.

Businesses that have recently acquired AML/CTF regulatory responsibilities are, arguably, more likely to require assistance from regulatory bodies to achieve compliance. The AML/CTF regime has expanded to include businesses, such as those from the gambling sector in Australia, with little experience with regulatory compliance and no experience with complying with financial regulation. This means that they need additional support to become compliant, with a particular focus on accessible training materials and education workshops (Walters et al. forthcoming). The fourth section will consider differences in the compliance activities of financial businesses and those from the money service and non-financial sectors.

Besides the difficulties newly included businesses might face complying with AML/CTF requirements is the potential for incomplete or ineffective compliance. This may include incomplete reports of suspect activities or difficulties instigating or adapting principles of risk-based compliance (AUSTRAC 2009g). One of the potential implications for law enforcement agencies and others accessing the financial intelligence gathered by an AML/CTF regime include reductions in the quality of the information gathered.