Financial Crime World

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Guidelines

Introduction

The following guidelines are designed to assist financial institutions in complying with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. These guidelines outline key recommendations for ensuring robust AML/CFT measures, preventing money laundering and financing terrorism.

Section 1: Customer Due Diligence (CDD)

  • Apply CDD measures to all new customers: Financial institutions should conduct due diligence on new customers before establishing a business relationship.
  • Verify customer identity: Verify the identity of customers and beneficial owners before or during the establishment of a business relationship.
  • Conduct ongoing monitoring: Conduct regular reviews of existing relationships based on materiality and risk.

Section 2: Risk-Based Approach (RBA)

  • Use RBA to determine CDD measures: Financial institutions should use a risk-based approach to determine the extent of CDD measures in accordance with the Interpretive Notes and Recommendation 1.
  • Assess customer risks: Assess the level of risk associated with each customer relationship.

Section 3: Suspicious Transactions Reporting

  • Report suspicious transactions: If financial institutions are unable to comply with applicable requirements, they should not open accounts or commence business relations, terminate existing relationships, and consider making suspicious transactions reports.
  • Maintain records of suspicious transactions: Maintain records of suspicious transactions for at least five years.

Section 4: Record-Keeping

  • Maintain transaction records: Financial institutions must maintain records on transactions for at least five years to enable swift compliance with information requests from competent authorities.
  • Reconstruct individual transactions: Records must be sufficient to reconstruct individual transactions and provide evidence for prosecution of criminal activity.

Section 5: Politically Exposed Persons (PEPs)

  • Perform enhanced due diligence on PEPs: Financial institutions should perform enhanced due diligence measures, including obtaining senior management approval, establishing the source of wealth and funds, and conducting ongoing monitoring for PEPs.
  • Understand PEP risks: Understand the potential risks associated with PEP relationships.

Section 6: Correspondent Banking

  • Gather information on respondent institutions: In cross-border correspondent banking relationships, financial institutions must gather information about respondent institutions.
  • Assess AML/CFT controls: Assess their AML/CFT controls and obtain senior management approval.
  • Establish clear responsibilities: Clearly understand respective responsibilities and conduct customer due diligence on “payable-through accounts”.

Conclusion

These guidelines provide a framework for financial institutions to ensure compliance with AML/CFT regulations and protect against money laundering and financing terrorism. By implementing robust AML/CFT measures, financial institutions can help prevent these financial crimes and maintain the integrity of the global financial system.