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Understanding Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Regulations in Oman
Chapter 1: Methods of Money Laundering
Money laundering is a complex process that involves concealing the origin of illicit funds. It can be achieved through various methods, including:
Placement
- Introducing cash into the financial system through a variety of channels.
Layering
- Concealing the origin of funds by using complex transactions and financial instruments.
Integration
- Incorporating laundered funds into the economy.
Techniques Used in Money Laundering
The following techniques are commonly used to facilitate money laundering:
Cash-Intensive Businesses
- Using large cash transactions to obscure the origin and nature of illicit funds.
- Examples include casinos, restaurants, and retail stores.
Overpayment of Premiums
- Arranging for excessive numbers or high values of insurance reimbursements by cheque or wire transfer.
Prepaid Cards
- Misusing prepaid cards for anonymity and ease of cross-border transactions.
Other Methods
The following methods are also used to launder money:
Mingling (Business Investment)
- Combining proceeds of crime with legitimate business monies to obscure the illegal source of funds.
- This can be achieved through various means, including mergers and acquisitions.
Use of Shell Companies/Corporations
- Obscuring the identity of persons controlling funds and exploiting low reporting requirements.
- Shell companies and corporations are often used to conceal ownership and control.
Identity Fraud/False Identification
- Using fake identities to obscure involvement in money laundering and terrorist financing.
New Payment Technologies
The rise of new payment technologies has created new opportunities for money launderers:
Virtual Assets
- Creating opportunities for money launderers and terrorist financiers to launder their proceeds or finance illicit activities.
- Examples include cryptocurrencies, such as Bitcoin.
Virtual Asset Service Providers (VASPs)
- Requiring FIs to be familiar with AML/CFT risks related to VASPs.
- VASPs are often used to facilitate cross-border transactions and provide anonymity.
Life Insurance Products
Life insurance products can be used for money laundering when they have saving or investment features:
Early Cancellation of Policies
- Returning premiums to an account different from the original account.
Requests for Return Premiums in Different Currencies
- Using this method to launder money.
General Insurance Products
General insurance products can also be used for money laundering when they have saving or investment features:
Regular Purchase and Cancellation of Policies
- Using this method to launder money.
Insurance Policy Being Closed with Request of Payment to a Third-Party Account
- Using this method to launder money.
Chapter 2: Identification and Assessment of ML/TF Risks
A risk-based approach (RBA) is essential in identifying and assessing ML/TF risks:
Risk-Based Approach (RBA)
- FIs must identify, assess, and understand the ML/TF risks to which they are exposed.
- This requires a thorough analysis of business operations, products, and services.
ML/TF Business Risk Assessment
- Conducting a business risk assessment to prioritize areas for combatting ML/TF.
- This involves identifying high-risk customers, transactions, and products.
Inherent Risk
- FIs should consider inherent risks in their business operations when conducting a risk assessment.
- Examples include customer concentration risk and country risk.