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

After the business relation is ended

After the date of the occasional transaction

Record-keeping, R. 11

Must be kept for at least five years

Information obtained through the cdd measures

Records on transactions

Account files and business correspondence

The results of any analysis undertaken

E.g. copies of official identification documents

E.g. inquiries to establish the background and purpose of complex, unusual large transactions

The information should be available to domestic competent authorities

The records must be sufficient to permit reconstruction of individual transactions

The records must be sufficient to provide evidence for prosecution of criminal activity

Lecture 8. Risk-based approach pursued by financial institutions in customer due diligence

Key terms

• nominee shareholder

• asset-holding vehicle

• non-face-to-face business

• anonymous transactions

• public company

• premium payment

• collateral

• contributions

• superannuation

• complex transactions

• unusual large transactions

• unusual pattern

• timing of controls

• higher-risk scenario

Key questions

• Define the nature of performing the CDD process under outsourcing/agency relationships.

• Which elements of the CDD measures performed by the third party may a financial institution be permitted to rely on?

• Whom does the ultimate responsibility for CDD measures performed by the third party remain on?

• A financial institution is relying on CDD information provided by the third party. What information about the third party should be checked by the financial institution in the course of verifying the compliance of the third party with the AML/CFT requirements?

• What information should immediately be obtained from the third party when a financial institution is relying on the third party in the course of CDD?

• The relationships of the financial institution and the third party are regulated by R. 17. Under which conditions does the third party have to provide the financial institution with relevant CDD documentation?

• Give an example of a higher risk customer factor as an unusual circumstance of a business relationship with the financial institution.

• List the main higher risk customer factors that a financial institution can consider as a reason for performing enhanced CDD.

• Which aspects of issuing and holding shares of a company can be considered as a reason for performing enhanced CDD by a financial institution that renders financial services to this company?

• List the main higher risk country and geographic factors that a financial institution can consider as a reason for performing enhanced CDD.

• Define the way of applying CDD measures under R. 19.

• The AML/CFT regime of a country has been identified by a mutual evaluation as not adequate. How will this fact influence the CDD measures applied by foreign financial institutions to customers from this country?

• It has been identified by a credible source that a country has a significant level of corruption. How should a foreign insurance company modify its CDD measures applied to a customer from this country?

• List the main higher risk product, service, transaction and delivery channel factors that a financial institution can consider as a reason for performing enhanced CDD.

• A company has received a payment from unknown parties. Which higher risk factor will it pose to the CDD measures of the bank that the company has an account with?

• List the three groups of lower risk factors that can allow a financial institution to apply simplified CDD measures.

• What does a financial institution have to do before it may be allowed to apply simplified CDD measures?

• List the major types of customers whom a financial institution can apply simplified CDD measures to.

• A public company has an account with a bank. Which disclosure requirements of the company can allow the bank to apply simplified CDD measures in the course of this business relationship?

• There is a life insurance policy that has been presumed to have lower risk product and service factor. What is the value of its single or annual premium?

• What product, service, transaction and delivery channel factors of insurance policies for pension schemes pose lower risk during the course of CDD?

• List the main elements of enhanced CDD measures applied by a financial institution.

• Which three types of transaction pose higher risks of ML/TF and require a financial institution to apply enhanced CDD measures?

• What additional information on the customer should a financial institution obtain when it applies enhanced CDD measures?

• What should the senior management of a financial institution do when enhanced CDD measures are applied?

• There is a suspicion that the customer is laundering money. How will it influence the application of simplified CDD measures to such customer?

• A broker applies simplified CDD measures to a customer. Which elements of the CDD can be performed after the establishment of this business relationship?

• Simplified CDD measures are applied by a financial institution in the course of business relationship. What is the financial institution allowed to reduce regarding identifying and on-going monitoring?

• A financial institution is applying simplified CDD measures to its customer. Define the peculiarities of obtaining information about the purpose and nature of the business relationship between the customer and the financial institution.