Anti-Money Laundering (AML) Regulations for Financial Institutions
Customer Due Diligence Requirements
Financial institutions must adhere to strict customer due diligence requirements to prevent money laundering and terrorist financing.
- Know Your Customer (KYC): Verify the identity of customers.
- Beneficial Owner Identification: Identify the natural person(s) who ultimately own or control a customer.
- Source of Funds and Wealth: Determine the source of funds and wealth of customers.
- Ongoing Due Diligence: Conduct ongoing due diligence on customers.
Risk-Based Approach
Institutions must use a risk-based approach when implementing customer due diligence requirements. This means applying simplified measures if the risk is determined to be lower, but not in cases of suspected money laundering or terrorist financing.
- The regulation requires institutions to assess and manage risks associated with customer relationships.
- Institutions may apply different levels of due diligence based on the assessed risk.
Record-Keeping Procedures
Institutions must maintain accurate records to ensure compliance with regulations and facilitate investigations upon request from regulatory authorities.
- Record Retention: Maintain procedures for retaining records prescribed by law.
- Reconstruction of Transactions: Records must permit reconstruction of transactions and business relationships.
- Information Provision: Records must enable the institution to provide information to regulatory authorities upon request.
Correspondent Banking Responsibilities
When acting as a correspondent bank, institutions have specific responsibilities to ensure the integrity of the correspondent banking relationship.
- Gathering Information: Gather sufficient information about respondent banks.
- AML/CFT Controls: Assess respondent banks’ anti-money laundering (AML) and terrorist financing controls.
- Respective Responsibilities: Clearly understand and document the respective AML/CFT responsibilities of each institution in the correspondent banking relationship.
By adhering to these regulations, financial institutions can effectively prevent money laundering and terrorist financing by implementing robust customer due diligence processes.