Chapter 2 Flashcards
FATF
Identify the three important tasks that FATF focuses on.
- Spreading the anti-money laundering message worldwide,
- Monitoring implementation of the FATF Recommendations among FATF members, and
- Reviewing money laundering trends and counterm asures.
FATF
According to the FATF 40 Recommendations, the complete set of countermeasures against money laundering and terrorist financing covers what 5 elements?
- The identification of risks and development of appropriate policies,
- The criminal justice system and law enforcement,
- The financial system and its regulation,
- The transparency of legal persons and arrangements, and
- International cooperation
FATF
Describe FATF’s Recommendation 15 (2012) on new technologies.
Countries and financial institutions should assess the risks associated with developments of new products, business practices, delivery mechanisms and technology. Financial institutions should assess these risks prior to launching new products; they should also take appropriate measures to mitigate the risks identified.
THE BASEL COMMITTEE ON BANKING SUPERVISION
What are six principles set forth in the Basel Committee’s Statement of Principles called “Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering”?
In 1988, the Basel Committee issued a Statement of Principles called “Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering” in recognition of the vulnerability of the financial sector to misuse by criminals. This was a step toward preventing the use of the banking sector for money laundering, and it set out principles with respect to:
• Customer identification,
• Compliance with laws,
• Conformity with high ethical standards and local laws and regulations,
• Full cooperation with national law enforcement to the extent permitted without breaching customer confidentiality,
• Staff training, and
• Record keeping and audits.
THE BASEL COMMITTEE ON BANKING SUPERVISION
Identify the seven specific customer identification issues as identified in the Basel Committee’s October 2001 paper called “Customer Due Diligence for Banks.”
- Trust, nominee and fiduciary accounts,
- Corporate vehicles, particularly companies with nominee shareholders or entities with shares in bearer form,
- Introduced businesses,
- Client accounts opened by professional intermediaries, such as “pooled” accounts managed by professional intermediaries on behalf of entities such as mutual funds, pension funds and money funds,
- Politically exposed persons,
- Non-face-to-face customers, i.e., customers who do not present themselves for a personal interview, and
- Correspondent banking.
THE BASEL COMMITTEE ON BANKING SUPERVISION
Describe the elements that should be addressed in a global approach to KYC identified in the Basel Committee’s October 2004 paper called “Consolidated KYC Risk Management.”
The Basel Committee’s October 2004 paper called “Consolidated KYC Risk Management” addresses the need for banks to adopt a global approach and to apply the elements necessary for a sound KYC program to both the parent bank or head office and all of its branches and subsidiaries. These elements consist of:
• Risk management,
• Customer acceptance and identification policies, and
• Ongoing monitoring of higher-risk accounts.
EUROPEAN UNION DIRECTIVES ON MONEY LAUNDERING
How does the scope of the European Union’s Third Money Laundering Directive differ from the Second Money Laundering Directive?
- It specifically includes the category of trust and company service providers,
- It covers all dealers trading in goods who trade in cash over 15,000 Euros, and
- The definition of financial institution includes certain insurance intermediaries.
USA PATRIOT ACT
How is a private banking account defined under Section 312 of the USA Patriot Act?
Under Section 312 of the USA Patriot Act, a private banking account is defined as an account with a minimum aggregate deposit of $1 million for one or more non-U.S. persons and which is assigned to a bank employee acting as a liaison with the non-U.S. person.
THE BASEL COMMITTEE ON BANKING SUPERVISION
What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee’s October 2001 paper called “Customer Due Diligence for Banks?”
- Customer identification,
- Risk management,
- Customer acceptance, and
- Monitoring.
EUROPEAN UNION DIRECTIVES ON MONEY LAUNDERING
What was the primary way in which the European Union’s Second Directive on Prevention on the Use of the Financial System for the Purpose of Money Laundering (2001) expanded the scope of the First Directive?
The European Union’s Second Directive on Prevention on the Use of the Financial System for the Purpose of Money Laundering (2001) extended the scope of the First Directive beyond drug-related crimes. The definition of “criminal activity” was expanded to cover not just drug trafficking, but all serious crimes, including corruption and fraud against the financial interests of the European Community.
USA PATRIOT ACT
According to Section 312 of the USA Patriot Act, the due diligence program for foreign correspondent accounts must address what three measures?
The due diligence program for foreign correspondent accounts for non-U.S. persons must include “appropriate, specific and risk-based,” and, where necessary, enhanced policies, procedures and controls reasonably designed to identify and report suspected money laundering in a correspondent account maintained in the United States. This due diligence program must also be included in the institution’s anti-money laundering program. The due diligence program must address three measures:
• Determining whether enhanced due diligence is necessary,
• Assessing the money laundering risk presented by the correspondent account,
• Applying risk-based procedures and controls reasonably designed to detect and report suspected money laundering.
FATF
According to FATF’s Recommendations (2012), what are the designated thresholds for transactions under Recommendations 10, 22, and 23?
FATF also designated specific thresholds that trigger AML scrutiny. For example, the threshold that financial institutions should monitor for occasional customers is €15,000 [Recommendation 10]; for casinos, including Internet casinos, it is €3,000 [Recommendation 22]; and for dealers in precious metals, when engaged in any cash transaction, it is €15,000 [Recommendation 22-23].
FATF
Describe FATF’s Recommendations 20-21 (2012) on suspicious transaction reporting and liability.
The Recommendations say that financial institutions must report to the Financial Intelligence Unit where they suspect or have reasonable grounds to suspect that funds are the proceeds of a criminal activity or are related to terrorist financing. The financial institutions and the employees reporting such suspicions should be protected from liability for reporting and should be prohibited from disclosing that they have reported such activity.
THE WOLFSBERG GROUP
According to the Wolfsberg Anti-Money Laundering Principles for Private Banking (2000), what are situations for private banking that require further due diligence?
- Public officials, including individuals holding, or having held, positions of public trust, as well as their families and close associates,
- High-risk countries, including countries “identified by credible sources as having inadequate anti-money laundering standards or representing high-risk for crime and corruption,” and
- High-risk activities, involving clients and beneficial owners whose source of wealth “emanates from activities known to be susceptible to money laundering.
FATF
Identify the seven topics of international standards incorporated into the FATF 40 Recommendations (2012).
• AML/CFT policies and procedures
[Recommendations 1-2],
• money laundering and confiscation
[Recommendations 3-4],
• terrorist financing and
financing of proliferation [Recommendations 5-8],
• financial and non-financial institution preventative
measures [Recommendations 9-23],
• transparency and beneficial ownership of legal
persons and arrangements [Recommendations 24-25],
• powers and responsibilities of competent authorities
and other institutional measures [Recommendations
26-35], and
• international cooperation [Recommendations 36-40].