Module 6.1 Flashcards
This may be done through depositing cash into different accounts; multiple cash deposits of smaller amounts; buying monetary instruments and financial products; and/or international fund transfers.
Placement
involves separating the illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity or to obscure the source of the funds.
Layering
provides appearance of legitimacy to criminally-derived wealth
Integration
T or F. Laundering only involve money derived from a crime.
F. Laundering does not have to involve money at all, since the proceeds to be laundered can involve any sort of tangible or intangible property derived from crime.
this must be exercised to prevent the use of SEC covered institutions as instruments for money laundering.
Due diligence
are aimed at identifying personal customers and the ultimate beneficial ownership of corporate customers, monitoring transactions, keeping good records and reporting suspicions to the authorities.
anti-money laundering (AML) laws
set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction.
FATF Recommendations
The key aspects of the revised FATF Recommendations are:
- global recognition of the risk-based approach to AML and terrorist finance;
- further focus on ultimate beneficial ownership of companies and other entities;
- inclusion of compliance with international sanctions and counter-proliferation measures as global standards;
- revised definition of PEPs to include domestic PEPs (the previous definition only included foreign PEPs);
- inclusion of tax crimes as predicate offences of money laundering; and
- prevention of abuse of non-profit organizations.
“to reduce the vulnerability of the financial system to money laundering by ensuring that all financial centres adopt and implement measures for the prevention, detection and punishment of money laundering according to internationally recognised standards”.
Non-Cooperative Countries and Territories (NCCT) initiative
objective
is a peer review of each member conducted by the FATF on an ongoing basis to assess levels of implementation of the FATF Recommendations, providing an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system
Mutual Evaluation
You are an investment manager in an investment firm. You have a client on whom your firm’s due diligence has been satisfactorily carried out. They transfer funds to their account with you, from another institution. A few days later the client advises that they wish to cash in their investment, even though they will suffer a loss, and that they wish to transfer the funds to another institution. You report your concerns to your Compliance Office. Which of the stages of money laundering is this potentially an example of?
- Layering
- Placement
- Integration
- Layering
salient features of AMLA
- Criminalizes money laundering.
- Identifies and defines predicate offenses to money laundering.
- Imposes preventive measures to be undertaken by covered persons/institutions. (customer due diligence, record keeping and transaction reporting).
- Created a financial intelligence unit, the AMLC, empowering the same to recover criminal proceeds and prosecute money launderers.
- Authorizes international and domestic cooperation.
- Requires covered persons to properly identify their customers, keep records and report covered and suspicious transactions.
Which of the following is a covered person/institution supervised or regulated by the SEC?
A. Pre-need companies
B. Investment advisor, agent or consultant
C. Issuer of proprietary or non-proprietary shares
B. Investment advisor, agent or consultant
measures of the covered institution should include conducting continuing due diligence on the business relationship to ensure that the transactions being conducted are consistent with the covered institution’s knowledge of the customer and/or beneficial owner, their business profile, including, where necessary, the source of its funds.
“Know your customer” (KYC)
Covered institutions shall ensure that business is conducted in conformity with high ethical standards, that laws and regulations are adhered to, and that service is not provided where there is good reason to believe that transactions are associated with money laundering activities.
Compliance with Laws.
Covered institutions shall cooperate fully with law enforcement agencies. Disclosure of information by covered institutions for the purpose of the AMLA regarding covered transactions and suspicious transactions shall be made to the AMLC.
Cooperation with the Law Enforcement Agencies.
Each covered institution shall adopt policies consistent with the principles set out in the guidelines, and ensure that its directors, officers and employees wherever located are informed of these policies and adequately trained in matters covered herein.
Policies, Procedures and Training.
True or False? Submission of MLPP constitutes substantial compliance of covered persons/institutions with SEC Memorandum Circular No. 2, series of 2010.
FALSE
refers to the procedure of identifying and verifying the true identity, of customers, and their agents and beneficial owners, including understanding and monitoring of their transactions and activities
Customer Due Diligence (CDD)
objective of customer due diligence (CDD)
is to gain a holistic understanding of a client, including their risk profile.
Customer Identification
- Customer Identification Process (CIP)
- Customer Verification Process (CVP)
- Customer Information and Identification Documents
- Presentation of Original Identification Documents
- Additional or Further Verification Measures
- Identify the Source of a Customer’s Assets
- Updating Client Information
- Unusual Transactions
refers to the process of determining the identity of the customer vis à-vis the valid and acceptable identification document submitted to, and/or presented before, the covered person
Customer Identification Process (CIP)
refers to the process of validating the truthfulness of the information, and confirming the authenticity of the identification documents, presented, submitted and provided by the customer; or other ways of verifying the identity and assessing the risk profile of customers, and their agents and beneficial owners, through the use of reliable and independent sources, documents, data or information
Customer Verification Process (CVP)
Covered institutions shall obtain and record competent evidence of the true and full identity, representative capacity, domicile, legal capacity, occupation or business purposes of clients, as well as other identifying information on those clients, whether they be occasional or usual, through the use of documents
Customer Information and Identification Documents.
Covered institutions shall request individual clients who present only photocopies of identification card and other documents to produce the original documents thereof for verification purposes
Presentation of Original Identification Documents
Clients should be made aware of the covered institutions’ explicit policy that business transactions will not be conducted with applicants who fail to provide competent evidence of their identity, but without derogating from the covered institutions’ obligation to report suspicious transactions.
Additional or Further Verification Measures
refers to any natural person who:
a. ultimately owns or controls the customer and/or on whose behalf a transaction or activity is being conducted; or
b. has ultimate effective control over customer that is a legal person or arrangement.
Beneficial Owner
shall refer to express trusts or other similar legal arrangements.
Legal Arrangements
refers to any situation in which ownership/control is exercised through actual or a chain of ownership or by means other than direct control.
Ultimate effective control
The principle is that if a customer can be identified, and the source of funds ascertained, then either the dealings are more likely to be legitimate or, if they are not, there may at least be a partial audit trail to trace their origins.
Identify the Source of a Customer’s Assets
Covered institutions shall ensure that they know their customers well, and accordingly, shall keep current and accurate all material information with respect to their customers by regularly conducting verification and an update thereof.
Updating Client Information
A covered institution should pay special attention to all unusually large transactions or unusual patterns of transactions.
Unusual Transactions.
The covered institution’s policies and procedures may include procedure specifying reliance on an intermediary or third party for its KYC or CDD requirements as long as the intermediary or third party relied upon is considered covered institution as defined under this Guidelines or any other guidelines or rules issued by BSP or the IC, or as defined and identified by foreign jurisdictions in so far as covered institutions in their respective jurisdictions are concerned.
Third Party Reliance
Covered persons may outsource the conduct of customer identification, including face-to-face contact, to a counter-party, intermediary or agent.
Outsourcing the Conduct of Customer Identification
Covered institutions shall maintain customer accounts only in the name of the account holder. They shall not open or keep anonymous accounts, fictitious name accounts, incorrect name accounts, and similar accounts
Prohibited Accounts
refers to an individual who is or has been entrusted with prominent public position in (a) the Philippines with substantial authority over policy, operations or the use or allocation of government-owned resources; (b) a foreign State; or (c) an international organization.
Politically Exposed Person
The term PEP shall include immediate family members, and close relationships and associates that are reputedly known to have:
- joint beneficial ownership of a legal entity or legal arrangement with the main/principal PEP; or
- sole beneficial ownership of a legal entity or legal arrangement that is known to exist for the benefit of the main/principal PEP.
Retention of Records. Where the Account is the Subject of a Case. If a case has been filed in court involving the account, records must be retained and safely kept beyond the __________, until it is officially confirmed by the AMLC Secretariat that the case has been resolved, decided or terminated with finality.
five (5)-year period
Closed Accounts. Covered persons/institutions shall maintain and safely store for _____________ from the dates the accounts were closed, all records of customer identification and transaction documents.
at least five (5) years
Form of Records. Covered persons/institutions shall retain all records _____________ or in such forms as are admissible in court.
as originals
Covered persons/institutions shall, likewise, keep the electronic copies of all CTRs and STRs for, at least, ________ from the dates of submission to the AMLC.
five (5) years
Under the Securities Regulation Code (SRC), every Broker Dealer shall preserve its books and records for a period of not less than ______________, the first ___________ in an easily accessible place
five (5) years; two (2) years
any transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five Hundred Thousand Pesos (Php500,000.00) within one (1) banking day
overed Transaction Report (CTR)
- There is no underlying legal or trade obligation, purpose or economic justification.
- The client is not properly identified.
- The amount involved is not commensurate with the business or financial capacity of the client.
- Taking into account all known circumstances, it may be perceived that the client’s transaction is structured in order to avoid being the subject of reporting requirements under the AMLA.
- Any circumstance relating to the transaction which is observed to deviate from the file of the client and/or the client’s past transactions with the covered institution.
- The transaction is in any way related to an unlawful activity or offense under the AMLA that is about to be, is being, or has been committed.
- Any transaction that is similar or analogous to any of the foregoing.
Suspicious Transaction Report (STR)
Covered institutions shall report to the AMLC all covered transactions and suspicious transactions within five (5) working days, unless the AMLC prescribes a different period not exceeding fifteen (15) working days, from the occurrence thereof
Transaction Reporting.
refers to the date of determination of the suspicious nature of the transaction, which determination should be made not exceeding ten (10) calendar days from the date of transaction.
occurrence
Should a transaction be determined to be both a covered and a suspicious transaction, the covered institution shall report the same as a ________________.
suspicious transaction
is one that a client intended to conduct and made overt acts to do so
attempted transaction
Each covered institution shall maintain a __________ of all suspicious transactions that have been brought to the attention of its Compliance Officer, including transactions that are not reported to the AMLC
register
A general appreciation of the background to money laundering, the need to be able to identify suspicious transactions and report such transactions to the appropriate designated point within the covered institution.
New Staff
Personnel who deal directly with the clients are the first point of contact with potential money launderers. Their efforts are therefore vital to the covered institutions’ reporting system for such transactions. They should be trained to identify suspicious transactions and on the procedure to be adopted when a transaction is deemed to be suspicious.
Cashiers/Dealers’ Representatives or Investment Representatives/Advisory Staff
T or F. “Front-line” staff should be made aware of the covered institution’s policy for dealing with non-regular customers particularly where large cash transactions are involved, and the need for extra vigilance in cases under suspicious circumstances.
T
A higher level of instruction covering all aspects of money laundering procedures should be provided to _________________________. This will include the offences and penalties arising from the AMLA, procedures relating to service of production and restraint orders, internal reporting procedures, and the requirements for verification of identity and the retention of records.
supervisors and managers
Covered institutions shall, at least ________, make arrangements for refresher training to remind key staff of their responsibilities and to make them aware of any changes in the laws and rules relating to money laundering, as well as the internal procedures of the covered institutions.
once a year
You are a business relationship manager of a covered person. A prospective new client approaches you to establish a business relationship. The client advises that she has an urgent transaction to undertake while you are carrying out the identification procedure. The client cannot produce satisfactory proof of identification. What must you do?
A. Undertake the transaction, but make a suspicion report to the AMLC.
B. Establish the relationship and hope satisfactory identification documents are provided.
C. Refuse to proceed and submit an STR to the AMLC.
C. Refuse to proceed and submit an STR to the AMLC.
Which of the following would require covered persons to conduct enhanced due diligence (EDD)?
A. When the prospective client has romantic relationship with a cabinet secretary.
B. When the prospective client is a government institution.
C. When the prospective client is a public company that is subject to regulatory disclosure requirement.
A. When the prospective client has romantic relationship with a cabinet secretary.
Penalty for:
- transacts said monetary instrument or property;
- converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or property;
- conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with respect to said monetary instrument or property;
- attempts or conspires to commit money laundering offenses referred to in first 3 paragraphs
Penalty: Imprisonment ranging from seven (7) to fourteen (14) years and a fineof not less than three million pesos (Php3,000,000.00), but not more than twice the value of the monetary instrument or property involved in the offense
Penalty for:
- aids, abets, assists in or counsels the commission of the money laundering offenses referred to in first 3 paragraphs and
- performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in the first 3 paragraphs
Penalty: Imprisonment from four (4) to seven (7) years and a fine of not less than one million five hundred thousand pesos (Php1,500,000.00) but not more than three million pesos (Php3,000,000.00)
Penalty for:
Any covered person who, knowing that a covered or suspicious transaction is required under this Act to be reported to the Anti- Money Laundering Council (AMLC), fails to do so.
Penalty: Imprisonment from six (6) months to four (4) years or a fine of not less than one hundred thousand pesos (Php100,000.00) but not more than five hundred thousand pesos (Php500,000.00), or both.
Covered person, its directors, officers or personnel who knowingly participated in the commission of the crime of ML
Imprisonment ranging from four (4) to seven (7) years and a fine corresponding to not more than two hundred percent (200%) of the value of the monetary instrument or property laundered
Failure to keep records of covered institutions to be maintained and safely stored for five (5) years from the dates of transactions. With respect to closed accounts, the records on customer identification, account files and business correspondence, shall be preserved and safely stored for at least five (5) years from the dates when they were closed.
Imprisonment from six (6) months to one (1) year or a fine of not less than one hundred thousand pesos (PHP100,000.00), but not more than five hundred thousand pesos (PHP500,000.00), or both
Fines shall be in amounts as may be determined by the Council to be appropriate, which shall not be more than ____________________________ per violation.
five hundred thousand pesos (PhP500,000.00)
The following are some of the SRC violations constituting predicate crimes/unlawful activities:
- Sale or offer of unregistered securities (Section 8)
- Stock manipulation (Section 24)
- Fraudulent transactions (investment scams) (Section 26)
- Insider trading (Section 27)
- Unlicensed securities market institutions and professionals (Section 28)
The SEC may impose administrative sanctions for the following findings:
- Violation of the SRC, SEC rules or orders
- Any registered broker or dealer, associated person thereof has failed reasonably to supervise, with a view to preventing violations, another person subject to supervision who commits any such violation.
- Any registrant or other person has made any untrue statement of a material fact, or omitted to state any material fact required to be stated or necessary to make such statements not misleading in a registration statement or in other reports, applications, accounts, records or documents required by law or rules to be filed with the SEC. Also included are underwriters who failed to conduct an inquiry with reasonable diligence to ensure that a registration statement is accurate and complete in all material respects.
- Any person has refused to permit any lawful examinations into its affairs.
The SEC may impose any or all of the following sanctions for any of the above enumerated findings:
- Suspension, or revocation of any registration for the offering of securities
- A fine of no less than Ten thousand pesos (PhP10,000.00) nor more than One million pesos (PhP1,000,000.00) plus not more than Two thousand pesos (PhP2,000.00)/day of continuing violation
- In certain violations involving fraud, disqualification from being an officer, member of the Board of Directors, or person performing similar functions, of an issuer required to file mandatory reports under the SRC or any other act, rule or regulation administered by the SEC
- In the cases involving members, brokers and dealers, a fine of no more than three (3) times the profit gained or loss avoided as a result of the transactions mentioned under Section 34 of the SRC
- Other penalties within the power of the SEC to impose
the SEC may impose any or all of the following sanctions as may be appropriate in the light of the facts and circumstances:
(i) Suspension or revocation of any registration for the offering of securities;
(ii) A fine of no less than Ten Thousand Pesos (PhP10,000.00) nor more than One Million Pesos (PhP1,000,000.00) plus not more than Two Thousand Pesos (PhP2,000.00) for each day of continuing violation;
(iii) Other penalties within the power of the SEC to impose.
A single AML violation committed by a person may subject him to
which of the following penalties?
- Imprisonment and/or the payment of a fine under criminal liability in the AMLA
- Revocation or suspension of their license and/or payment of a fine under administrative liability based on the SRC
- A warning/reprimand and/or the payment of a monetary penalt under administrative liability based on the AMLA RIRR
- All of the above
- All of the above
- Violations of the Human Security Act of 2007 such as Rebellion, Insurrection and Coup d’ etat83
- Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act
Terrorism
Any entity owned/controlled by any terrorist or group of terrorists that:
- commits, or attempts to commit, terrorist acts by any means, directly or indirectly, unlawfully and wilfully;
- participates as an accomplice in terrorist acts;
- organizes or directs others to commit terrorist acts; or
- contributes to the commission of terrorist acts by a group of persons acting.
furthering terrorist acts where the contribution is made intentionally and with the aim of furthering the terrorist acts or with the knowledge of the intention of the group to commit terrorist acts.
Common purposenof terrorist financing
The willful and unlawful possession, provision, collection, use of property or funds or making available property, funds or other related services by any means.
Terrorist Financing
Which of the following is not considered terrorist financing?
1. Wilful and unlawful use of funds to carry out commission of terrorist act.
2. Organizing or directing others to commit financing of terrorism.
3. Participation in terrorist activities.
4. Intentionally collecting funds by an individual terrorist.
- Participation in terrorist activities.
