Financial Crime World

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Anti-Money Laundering (AML) and Know-Your-Customer (KYC) Practices

Key Points

  • Verification Subjects: Institutions should verify individuals with individual authority to operate a relevant account or give instructions, including:
    • Partners in partnerships
    • Company directors and shareholders
    • Beneficial owners of companies
  • Exempt Cases: Verification is not required for:
    • Small one-off transactions (unless linked)
    • Exempt institutional applicants
    • Certain postal, telephonic, and electronic business transactions
  • Intermediaries: Intermediaries may be treated as verification subjects unless they are an exempt case or have a locally regulated institution acting on their behalf.

Analysis

The guidance notes aim to ensure that institutions verify the identities of customers and beneficial owners to prevent money laundering and terrorist financing. The key principles include:

  • Risk-based approach: Institutions should use their judgment to assess the risk of money laundering and apply the relevant measures.
  • Customer due diligence: Institutions must verify the identity of customers, including individuals with individual authority to operate a relevant account or give instructions.
  • Beneficial ownership: Institutions must identify the beneficial owners of companies, especially in cases where the company is not publicly traded.

Exempt Cases and Focus Areas

The exempt cases highlight that small one-off transactions are not subject to verification unless linked, and certain types of business transactions (e.g., postal, telephonic, and electronic) may also be exempt. This suggests that institutions should focus their efforts on higher-risk customers and transactions.

Conclusion

These guidance notes provide a framework for institutions to implement effective AML/KYC practices, which is essential in preventing financial crimes and maintaining the integrity of the financial system. By following these principles, institutions can ensure that they are taking adequate measures to prevent money laundering and terrorist financing.