Financial Crime World

Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) Regulations in The Bahamas

Part C: Periodic Internal Review, Risk Assessment, and Training

Financial institutions in The Bahamas are required to maintain a robust Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) system. This includes:

  • Conducting periodic internal reviews: Financial institutions must regularly review their AML/CFT systems to ensure they are effective in identifying and reporting suspicious transactions.
  • Upgrading technological systems: Institutions must upgrade their technology to enable them to identify and report suspicious transactions effectively.
  • Risk assessment: A risk assessment is necessary to identify areas of high-risk activity and implement controls to mitigate those risks.
  • Client Know-Your-Customer (KYC) procedures: Client KYC procedures must be in place to verify the identity of customers and understand their business activities.
  • Information sharing: Information sharing between financial institutions and regulatory authorities is essential for effective AML/CFT compliance.

Money Laundering

Money laundering involves concealing the origin and ownership of proceeds from criminal activities to maintain control over them and provide a legitimate cover. The three stages of money laundering are:

Stages of Money Laundering

  1. Placement: Physical disposal of cash proceeds into the financial system.
  2. Layering: Separation of illicit proceeds from their source through complex transactions.
  3. Integration: Providing apparent legitimacy to criminally derived wealth by placing it back into the economy.

Terrorism Financing

Terrorism financing involves providing or collecting funds with the intention that they be used for terrorist activities. The United Nations sanctions regime has produced a list of designated persons and entities with known or suspected terrorist connections, which countries are required to freeze assets and prevent from benefiting from them.

Key Requirements

To ensure effective AML/CFT compliance, financial institutions in The Bahamas must:

  • Maintain accurate records: Institutions must maintain accurate records of customer transactions.
  • Report suspicious activity: Institutions must report suspicious activity to the relevant authorities.
  • Staff awareness and training programs: Staff awareness and training programs are essential for effective AML/CFT compliance.
  • Use of technology: The use of technology, such as monitoring systems, is recommended to identify and report suspicious transactions.