Financial Crime World

Implementing Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) Measures in Legal Financial Institutions (LFIs)

Introduction

As a comprehensive guide for Legal Financial Institutions (LFIs) in Lebanon, this document outlines the requirements and best practices for implementing effective AML/CFT programs. By adopting these measures, LFIs can effectively manage their risks and ensure compliance with regulatory requirements.

Transaction Monitoring (TM)

Transaction monitoring systems are crucial in detecting suspicious transactions. Here are some key considerations:

Designing TM Systems

  • Transaction monitoring systems should be designed to monitor transactions in real-time or near real-time.
  • LFIs should implement a risk-based approach to TM, focusing on higher-risk customers, products, and services.

Calibrating TM Rules

  • TM rules should be calibrated to the institution’s risk profile and updated regularly.

Customer Due Diligence (CDD)/Know Your Customer (KYC)

CDD/KYC measures are essential for identifying and verifying customer information. Here are some best practices:

Comprehensive CDD/KYC Program

  • LFIs should implement a comprehensive CDD/KYC program, including risk-based approaches to customer onboarding.

Sanctions Screening

Sanctions screening systems and processes are critical for detecting and preventing transactions with sanctioned entities. Here are some key considerations:

Regular Searches Against Sanctions Lists

  • LFIs should perform regular searches against applicable sanctions lists.
  • Continuous searches of their customer database are also necessary.

Post-Implementation Testing, Tuning, and Validation

LFIs should reassess the functionality of TM systems and processes periodically and in response to material system output or operational irregularities. Here are some key considerations:

System Integration Checks

  • Post-implementation testing should include checks for system integration.
  • Data quality and operational functionality should also be evaluated.

By implementing these measures, LFIs can effectively manage their AML/CFT risks and ensure compliance with regulatory requirements.