FSMA Inspections of Currency Exchange Offices: A Critical Assessment of Anti-Money Laundering & Counter-Terrorism Financing Efforts

In an effort to tighten up Belgium’s defenses against money laundering and terrorism financing, the Financial Services and Markets Authority (FSMA) recently conducted comprehensive inspections of eight currency exchange offices. The goal was to assess how well these businesses are adhering to the country’s robust anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. And what the FSMA found wasn’t just a few minor lapses—it uncovered systemic weaknesses that pose significant compliance risks.

Between September 2023 and April 2024, the FSMA’s review of these currency exchange offices brought several key issues to the forefront. Compliance professionals should take note—this isn’t just about ticking off boxes, but ensuring thorough, consistent, and strategic adherence to AML and CFT frameworks.

Where Currency Exchange Offices Are Falling Short

The FSMA’s report outlines several critical areas where currency exchange offices need to step up their game. For compliance and risk professionals in the sector, these findings are a wake-up call for a closer look at your own practices:

1. Knowledge Gaps in Regulatory Understanding: One of the most significant shortcomings was the insufficient understanding of Belgium’s AML and CFT legal framework. Both Anti-Money Laundering Compliance Officers (AMLCOs) and frontline staff often lacked the necessary training to effectively implement and monitor compliance procedures. For compliance professionals, this signals a need for robust, ongoing training across the organization—not just at the leadership level but at every point of customer interaction.
2. Inconsistent Customer Identification Protocols: Customer identification procedures—especially for recurring transactions—are essential for detecting suspicious activities. The FSMA found that several offices weren’t applying these procedures effectively. For compliance teams, this highlights the importance of implementing strong, consistent identity verification protocols, especially when customers engage in multiple transactions over time.
3. Due Diligence on High-Risk Transactions: One of the major red flags the FSMA identified was a lack of adequate scrutiny over high-risk transactions. When dealing with countries known for lax financial oversight or tax havens, there’s a need for heightened vigilance. Compliance professionals should assess whether their own procedures for identifying and addressing high-risk transactions align with global standards, such as the FATF’s guidelines.
4. Risk-Based Approach to Vigilance: In some instances, currency exchange offices were applying uniform levels of vigilance across the board, without considering the varying risk levels of different transactions. The FSMA’s report underscores the need for a risk-based approach to compliance—ensuring that resources and efforts are focused where they’re most needed.
5. Sanctions Compliance Needs Strengthening: A lack of effective measures to enforce international sanctions and embargoes was another significant finding. For risk professionals, this is a clear reminder to ensure that sanction screening is fully integrated into day-to-day operations and that procedures are regularly updated to align with the latest regulatory requirements.

Moving Beyond Warnings

The FSMA didn’t just identify weaknesses—they acted. The authority issued 52 injunctions and 7 recommendations, prompting immediate corrective actions. Some of the key enforcement actions included:

• Urgent Corrective Measures: One office was found to have such severe deficiencies in its AML/CFT procedures—particularly related to high-risk jurisdictions and tax havens—that the FSMA required urgent action. The office voluntarily suspended operations until they could resolve these issues.
• Immediate Suspension of Activities: In a particularly high-risk case, the FSMA imposed an immediate suspension of a currency exchange office’s operations, citing significant concerns that it could be used for illicit financial activities. The suspension was lifted only after the office fully complied with the FSMA’s requirements and mitigated the identified risks.

What the Inspections Have Triggered

Despite the challenges revealed during the inspections, there’s a positive takeaway: many of the currency exchange offices are already making significant improvements. Some of the corrective measures include:

• Staff Overhauls: Several offices replaced or strengthened their AMLCO teams, ensuring better oversight and compliance at the leadership level.
• Revised Identification Practices: In response to the FSMA’s findings, many offices are now identifying customers at a lower transaction threshold—starting from just 1 EUR. This shows a move towards more thorough screening, ensuring that all transactions are under scrutiny.
• Technology and Process Upgrades: Technology plays a critical role in modern compliance. Many offices upgraded their transaction monitoring systems, integrating new features to better track high-risk activities and automate alerts for suspicious transactions.
• Increased Staff Training: Compliance is only as strong as the people behind it. Following the inspections, several offices implemented internal training sessions for frontline staff to ensure they understand the latest regulatory requirements. Additionally, AMLCOs are attending external training to further bolster their expertise.

While the FSMA’s findings were troubling, the subsequent actions show that there’s a genuine commitment to strengthening compliance across the currency exchange sector. These inspections highlight a critical opportunity for compliance professionals to reassess their own procedures and ensure they’re prepared for the challenges ahead.

Ultimately, the changes sparked by these inspections will make the sector more resilient to illicit financial activities, but it’s up to each organization to take action. Compliance isn’t just about avoiding fines or penalties—it’s about safeguarding the integrity of the financial ecosystem. Now’s the time to act and ensure your processes are stronger, smarter, and in full compliance with evolving global standards.

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