- •Contents
- •Abbreviations and acronyms
- •Introduction
- •1.1. A brief history of money laundering
- •1. Al Capone, 1920–30s
- •2. Meyer Lansky, 1930–50s
- •3. Watergate Scandal, 1973
- •1.2. The first stage: Al Capone tax evasion charges
- •Illicit earnings were mingled with receipts from the laundromat business and then paid back to the mobsters, making an impression of legitimate income
- •1.3. The subsequent stages: better hiding techniques
- •1.4. The appearance of “money laundering” expression in the legal context
- •1.5. Further development of the international aml/cft standards.
- •2.1. Basic concept of money laundering
- •2.2. Predicate offences: the scope and methods of description
- •2.3. Definition of money laundering in the narrow sense
- •2.4. Definition of money laundering in the broad sense
- •2.5. Anti-money laundering measures of combating organized crime
- •2.6. The process of money laundering
- •3.1. Key institutions of a national aml/cft regime
- •Investigation and field operations, e.G. Making searches, taking witness statements
- •3.2. Methodology bases of a risk-based approach and national coordination
- •Identify
- •Implementation
- •3.3. Financial institutions: general definition and their activities and operations related to managing clients’ assets
- •Individual
- •3.4. Financial institutions: other activities and operations
- •3.6. Risk-assessment obligations and decisions for countries
- •Information necessary for conducting aml/cft risk assessments
- •Including changes to
- •4.1. An extension liability for money laundering to the predicate offence perpetrator: the adverse implications for the economy
- •I. The perpetrator of the predicate offence is not held liable for laundering the proceeds
- •II. The perpetrator of the predicate offence is held liable for laundering the proceeds
- •4.2. Dual criminality for offences committed internationally
- •In Beta this conduct is a predicate offence for money laundering
- •In Alpha this conduct is not a predicate offence for money laundering
- •In Beta this conduct is not a predicate offence for money laundering
- •In Alpha this conduct is a predicate offence for money laundering
- •4.3. “State of mind” connected with a money laundering offence
- •Vienna Convention, Art. 2.3
- •4.4. Confiscation and provisional measures
- •Vienna Convention
- •5.1. Social and economic origins of terrorism
- •5.2. Basic concept of terrorist financing
- •5.3. Legal definition of terrorism and terrorist financing
- •Indirectly
- •Its purpose is
- •It is intended to cause
- •5.4. Characteristics of the terrorist financing offence
- •5 .5. Targeted financial sanctions related to terrorism, terrorist financing and proliferation
- •6.1. The United Nations bodies of the international aml/cft framework
- •1. The United Nations Security Council (unsc)
- •2. The United Nations Office on Drugs and Crime (unodc)
- •It is responsible for carrying out the Global Program against Money Laundering (gpml est. 1997)
- •6.2. The United Nations organizations of the international aml/cft framework
- •1. The International Monetary Fund (imf)
- •2. The World Bank
- •6.3. Main functions of the Financial Action Taskforce
- •Identifying current money laundering and terrorist financing threats
- •Identification of high-risk and non-cooperative jurisdictions, release of relevant public documents
- •6.6. The Wolfsberg Group of banks and its documents
- •It is an association of eleven global private banks that came together in 2000 to develop aml/cft industry standards
- •7.1. General requirements for aml/cft programs of financial institutions and groups of financial institutions
- •Including appropriate compliance management arrangements
- •Intra-group sharing of information (on customers, accounts and transactions) is required for the purposes of cdd and ml/tf risk management
- •7.2. Methodology approach to customer due diligence
- •Information accompanying wire transfers (r. 16, in)
- •Veracity
- •Verifying the customer’s identity
- •Information
- •7.3. Additional features of the customer due diligence
- •It must be ensured that documents, data and information collected are kept up-to-date
- •It may be permitted to complete the verification as soon as practically possible
- •7.4. Customer due diligence measures for legal persons and their arrangements
- •It should be required to understand the following in relation to customers that are legal persons or legal arrangements, r. 10, in, (c)
- •If different, a principal place of business
- •7.5. Actions of financial institutions in case of inability to comply with customer due diligence requirements
- •If it is not possible for a financial institution to comply with the cdd requirements
- •If there are reasonable grounds to suspect that funds are proceeds of criminal activity or are related to terrorist financing, r. 20
- •If they report their suspicions in good faith, even if they do not know precisely what the underlying activity was (they do not know whether activity was criminal)
- •7.6. Record-keeping requirements for financial institutions
- •Information obtained through the cdd measures
- •8.1. Reliance on customer due diligence information received from third parties
- •8.2. Potentially higher-risk situations for enhanced customer due diligence measures
- •It is mandatory to apply enhanced cdd measures when the fatf calls for it, r. 19
- •It was identified by a mutual evaluation, assessment or published in a follow up report
- •8.3. Lower-risk situations for simplified customer due diligence measures
- •If these requirements can ensure adequate transparence of beneficial ownership
- •It was identified by a mutual evaluation
- •8.4. Enhanced customer due diligence measures
- •Information from public databases
- •Volume of assets
- •Increasing the number and timing of controls applied
- •8.5. Simplified customer due diligence measures
- •Verify the identity of
- •Inferring the purpose and nature of the business relationship
- •9.1. Aml/cft requirements for cross-border correspondent banking relationships
- •Including whether the institution has been subject to a money laundering or terrorist financing investigation or regulatory action
- •9.2. Definition of wire transfers and activities of involved parties
- •Initiates the wire transfer and transfers the funds on behalf of the originator
- •Intermediary financial institution(s)
- •Irrespective of whether the originator and the beneficiary are the same person
- •Includes wire transfers that take place entirely with the borders of the European Economic Area (eea)
- •9.4. Aml/cft measures of information gathering related to wire transfers
- •In the absence of an account
- •9.5. Aml/cft responsibilities of financial institutions performing wire transfers
- •9.6. Aml/cft obligations for persons that provide money or value transfer services
- •If these institutions are subject to aml/cft requirements
- •10.1. Definition of politically exposed persons
- •Individuals who are (have been) entrusted with prominent public functions such as
- •It covers family members and close associates of pePs
- •It does not cover middle ranking or more junior individuals
- •10.2. Additional measures for politically exposed persons
- •In case of a higher risk
- •10.3. Aml/cft requirements for financial institutions with foreign operations
- •If aml/cft legislature of the host country does not permit the implementation of
- •If these measures are not sufficient
- •10.4. Customer due diligence and record-keeping requirements for designated non-financial businesses and professions
- •Independent legal professionals
- •Independent accountants
- •10.5. Other aml/cft requirements for designated non-financial businesses and professions
6.6. The Wolfsberg Group of banks and its documents
The Wolfsberg Group
It is an association of eleven global private banks that came together in 2000 to develop aml/cft industry standards
Over twenty standards and statements have been released, including the following:
Consist of twelve principles that cover issues of client acceptance, updating client files, identifying unusual activity, ongoing monitoring, reporting, staff training, etc.
Anti-money laundering principles for private banking (published in 2000, revised in 2002 and 2012)
Anti-money laundering principles for correspondent banking (2002)
Guidance on a risk-based approach for managing money laundering risks (2006)
Consists of fourteen principles; some of them are devoted to different levels of enhancement in due diligence and application of the risk-based approach to this procedure.
Anti-money laundering guidance for mutual funds and other pooled investment vehicles (2006)
Anti-corruption guidance (2011, the predecessor paper was released in 2007)
It identifies some of the measures financial institutions may consider in order to prevent corruption in their own operations and to protect themselves against the misuse of their operations in relation to corruption.
Trade finance principles (2011)
Series “frequently asked questions” on politically exposed persons, beneficial ownership, intermediaries, correspondent banking, etc.
Lecture 7. Customer due diligence measures undertaken by financial institutions
Key words
customer due diligence (CDD)
enhanced customer due diligence (ECDD)
simplified customer due diligence
threshold for occasional transactions
veracity
adequacy
purpose
intended nature
beneficial owner
customer
reasonable measures
to verify one’s identify
scrutiny
source of funds
Key questions
Define the AML/CFT program of a financial institution.
What should be included in the AML/CFT program of a financial institution?
Which statements regarding employees should be included in the AML/CFT program of a financial institution?
On what levels of firm hierarchy should compliance officers be appointed?
Under which four circumstances must a financial organization undertake CDD?
Which Recommendation defines CDD measures for financial institutions?
A customer carries out an occasional transaction that exceeds the threshold. Why is the financial institution required to perform customer due diligence?
What is the threshold, that occasional transactions exceed, necessary for performing CDD on the customer who is carrying out the transactions?
Define the term “veracity of previously obtained customer identification data.”
What is the difference between identifying a customer and verifying his identify?
List two general qualities of sources of information used for verification of a customer identify.
Give a general qualification of financial institution’s activities in the course of verifying the identity of the beneficial owner.
The beneficial owner of an arrangement of legal persons is being identified and his identity is being verified. What should the financial institution learn about structure of this arrangement of legal persons?
List two aspects of a business relationship with a client, that financial institution needs to obtain information on and understand.
Define the ongoing customer due diligence.
List two groups of profiles that transactions conducted should be consistent with in the course of ongoing CDD.
Under what circumstances is it necessary to assure, during ongoing CDD, that transactions being conducted are consistent with the source of funds?
In what case can it be permitted to complete the verification of identification data as soon as practically possible?
Give examples when application of the full set of CDD measures can interrupt the normal conduct of business.
List the risk variables that determine the extent of applying CDD measures.
A bank is performing CDD of a customer that is a legal person. Which three facts about such customer are required to be understood by the bank staff?
What information needs to be obtained in the course of identifying a customer that is a legal person?
What is unique about identifying owners of a company listed on a stock exchange and subject to disclosure requirements?
A company wants to open an account. The bank is identifying the beneficial owners of the company. List the steps of this procedure.
What should a financial institution do when it is not possible to complete the CDD?
What should a financial institution refrain from doing when it is not possible to complete the CDD?
How can CDD process result in tipping-off?
Can employees of financial institutions be made liable for reporting to the FIU? Why?
Give the general definition of record-keeping requirements.
Which three groups of records need to be kept?
An insurance company complies with record-keeping requirements. Which two qualities should these records possess?