- •ABBREVIATIONS AND ACRONYMS
- •INTRODUCTION
- •1. The evolution of money laundering and AML/CFT measures
- •1.1. A brief history of money laundering
- •1.2. The first stage of ML evolution: Al Capone tax evasion charges
- •1.3. The subsequent stages of ML evolution: 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. An overview of money laundering and AML regime goals
- •2.1. Basic concept of money laundering
- •2.2. Predicate offences: the scope and methods of AML/CFT 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 and modeling of its phases
- •3. Applying a risk-based approach to a model AML/CFT regime
- •3.1. Key institutions of a national AML/CFT regime
- •3.2. Methodology bases of a risk-based approach and national AML/CFT coordination
- •3.3. Financial institutions: definition for AML/CFT purposes through activities and operations related to managing clients’ assets
- •3.4. Definition of financial institutions for AML/CFT purposes through activities and operations other then managing clients’ assets
- •3.5. AML/CFT definition of designated non-financial businesses and professions
- •3.6. AML/CFT risk-assessment obligations and decisions for countries
- •4. Legal requirements for a national AML/CFT regime
- •4.1. An extension of liability for money laundering to the predicate offence perpetrator: the adverse implications for the economy
- •4.2. Dual criminality for money laundering offences committed internationally
- •4.3. “State of mind” connected with a money laundering offence
- •4.4. Confiscation and provisional measures related to AML/CFT
- •4.5. Non-conviction based confiscation and corporate liability for money laundering
- •5. Explanations of terrorism and the financing of terrorism
- •5.1. Social and economic origins of terrorism
- •5.2. Basic concept of terrorist financing
- •5.3. Legal definition of terrorism and terrorist financing
- •5.4. Characteristics of the terrorist financing offence and legal capacity to prosecute persons that finance terrorism
- •5.5. Targeted financial sanctions related to terrorism, terrorist financing and proliferation
- •6. Institutional bases of the international AML/CFT framework
- •6.1. The United Nations bodies of the international AML/CFT framework
- •6.2. The United Nations organizations of the international AML/CFT framework
- •6.3. Main functions of the Financial Action Taskforce
- •6.4. The Financial Action Task Force associate members and observers
- •6.5. The Egmont Group of financial intelligence units and international AML/CFT standard setters in banking, securities and insurance sectors
- •6.6. The Wolfsberg Group of banks and its AML/CFT documents
- •7. Customer due diligence measures undertaken by financial institutions
- •7.1. General requirements for AML/CFT programs of financial institutions and groups of financial institutions
- •7.2. Methodology approach to customer due diligence
- •7.3. Additional features of customer due diligence
- •7.4. Customer due diligence measures for legal persons and their arrangements
- •7.5. Actions of financial institutions in case of inability to comply with customer due diligence requirements
- •7.6. AML/CFT-related record-keeping requirements for financial institutions
- •8. Risk-based approach pursued by financial institutions in customer due diligence
- •8.1. Reliance on customer due diligence information received from third parties
- •8.2. Potentially higher-risk situations for enhanced customer due diligence measures
- •8.3. Lower-risk situations for simplified customer due diligence measures
- •8.4. Enhanced customer due diligence measures
- •8.5. Simplified customer due diligence measures
- •9. Additional AML/CFT measures for specific activities of financial institutions
- •9.1. AML/CFT requirements for cross-border correspondent banking relationships
- •9.2. Definition of wire transfers and activities of involved parties
- •9.3. The scope of applying AML/CFT measures to wire transfers
- •9.4. AML/CFT measures of information gathering related to wire transfers
- •9.6. AML/CFT obligations for persons that provide money or value transfer services
- •10. Additional AML/CFT measures for specific customers, entities and professions
- •10.1. Definition of politically exposed persons and the scope of applying AML/CFT measures
- •10.2. Additional AML/CFT measures for politically exposed persons
- •10.3. AML/CFT requirements for financial institutions with foreign operations
- •10.4. Customer due diligence and record-keeping requirements for designated non-financial businesses and professions
- •10.5. Other AML/CFT requirements for designated non-financial businesses and professions
- •11. Competent authorities of a national AML/CFT system
- •11.1. General requirements for government agencies with an AML/CFT function
- •11.2. Approaches to AML/CFT-related regulation and supervision
- •11.3. Financial intelligence unit and its core functions
- •11.4. AML/CFT responsibilities of law enforcement and investigative authorities
- •11.5. Detecting and countering activities of cash couriers for the AML/CFT purposes
- •12. Additional requirements for a national AML/CFT regime and issues of international cooperation
- •12.1. Transparency and beneficial ownership of legal persons and their arrangements
- •12.2. Prevention of using non-profit organizations for the purpose of terrorist financing
- •12.3. General principles of AML/CFT mutual legal assistance
- •12.4. Mutual legal assistance: freezing and confiscation of assets related to money laundering and terrorist financing
- •12.5. Extradition in relation to money laundering and terrorist financing
- •12.6. International exchange of information between government agencies with an AML/CFT function
8. Risk-based approach pursued by financial institutions in customer due diligence
|
|
|
KEY WORDS |
|
|
• anonymous transac- |
• |
higher-risk scenario |
• |
superannuation |
|
|
tions |
• nominee sharehold- |
• |
timing of controls |
|
• asset-holding vehi- |
|
er |
• |
unusual large trans- |
|
|
cle |
• non-face-to-face |
|
actions |
|
• |
collateral |
|
business |
• |
unusual pattern of |
• |
complex transac- |
• |
premium payment |
|
transactions |
|
tions |
• |
public company |
|
|
• |
contributions |
|
|
|
|
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?
•On whom does the ultimate responsibility for CDD measures performed by the third party remain? Why?
•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?
•A financial institution has found unusual circumstances of business relationship with a customer and considered them as higher risk factors. Give an example of such circumstances.
•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.
63
•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 to whom a financial institution can apply simplified CDD measures.
•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 factors. 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 transactions 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.
64
8.1. Reliance on customer due diligence information received from third parties
The outsourced entity applies the CDD measures on behalf of the delegating financial institution
|
|
|
It does not apply to out- |
The outsourced entity is subject to the dele- |
|
|
|
|
|
sourcing/agency relation- |
|
gating financial institution’s control |
|
|
|
|
|
||
|
|
ships (R. 17, IN) |
|
|
|
|
|
|
|
|
|
Financial institution may be permitted to rely on
If the following criteria have to be met (R. 17)
The perform the first three elements of the CDD measures (R. 10)
(a) Customer identity information
(b) Beneficial owner identity information
(c) The purpose and nature of the business relationship
The third party (a financial institution or a DNFBP)
It has to be regulated, supervised or monitored
It has to be subject to
CDD and recordkeeping requirements
The ultimate responsibility for CDD measures remains on the financial institution relying on third parties
(a)The following CDD information should immediately be obtained from the third party
(b)Other relevant CDD documentation has to be made available from the third party upon request without delay
(c)The financial institution should check if the third party complies with
the AML/CFT requirements
(d) The level of country risk where the third party operates
65
8.2. Potentially higher-risk situations for enhanced customer due diligence measures
|
|
|
|
|
|
|
|
|
Customer |
|
|
|
|
|
Financial institution |
||
Higher risk factors, R. 10, IN, (H) |
|||||||||||||||||
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.g. significant unexplained geograph- |
||||||||
|
|
|
|
(a) Customer |
|
||||||||||||
|
|
|
|
|
|
ic distance between |
|||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
Unusual circumstances of business relationship |
|
|
|||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unusual or complex ownership structure
Cash-intensive business
Companies that have
Personal asset-holding vehicles Non-resident customers
Does not correspond to the nature of the company’s business
Nominee shareholders
Shares in bearers form
(b) Country or geographic It is mandatory to apply enhanced CDD measures when the FATF calls for it, R. 19
Countries subject to sanctions, e.g. imposed by the UN
A country was identified by credible sources as
|
|
Not having adequate AML/CFT systems |
|
|
|
|
|
Providing funds (or sup- |
||||||||
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
port) for terrorist activities |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
It was identified by a mutual evaluation, |
|
|
|
|
|
Has designated terrorist |
||||||||
|
|
|
|
|
|
|
||||||||||
|
|
assessment or published in a follow up |
|
|
|
|
|
organizations operating |
||||||||
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
report |
|
|
|
|
|
|
|
within the territory |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Having significant levels of criminal activity, e.g. corruption |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
(c) Product, service, transaction, delivery channel |
|
|
|
Non-face-to-face |
||||||||||||
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
business relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private banking |
|
Anonymous transactions |
|
|
|
|||||||||||
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
Payment received from unknown |
|||||||
Which may include cash |
|
|
|
|||||||||||||
|
|
|
|
or un-associated third parties |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
|
|