Financial Crime World

Comprehensive Guide to Combating Money Laundering and Terrorist Financing in Oman

Introduction

Financial institutions (FIs) in Oman play a crucial role in preventing money laundering (ML) and terrorist financing (TF). This guide provides a comprehensive overview of the key methods, techniques, and risk-based approach to combating ML/TF.

Methods of Money Laundering

Money launderers employ various techniques to introduce illicit funds into the financial system. The three primary stages of money laundering are:

Placement

  • Using cash-intensive businesses to introduce illicit funds
  • Employing various techniques to conceal the origin and nature of illicit funds

Layering

  • Obscuring the origin and nature of illicit funds through complex transactions
  • Utilizing shell companies, nominees, trusts, and offshore bank accounts to hide assets

Integration

  • Combining illicit funds with legitimate business or investment activities
  • Making it difficult to distinguish between laundered and legitimate funds

Techniques Used for Money Laundering

The following techniques are commonly used by money launderers:

  • Mingling (business investment)
  • Use of shell companies/corporations
  • Offshore banks/businesses, including trust company service providers
  • Nominees, trusts, family members, or third parties
  • Foreign bank accounts
  • Identity fraud/false identification
  • “Gatekeepers” professional services (lawyers, accountants, brokers)
  • New payment technologies (e.g., cell phone-based remittance and payment systems)
  • Virtual assets and related services
  • Life insurance products
  • General insurance products
  • Overpayment of premiums
  • Prepaid cards
  • Tax evasion
  • Non-financial businesses (e.g., travel agencies, car dealerships)

Risk-Based Approach

Financial institutions must apply a risk-based approach to identify and assess ML/TF risks. This involves:

Understanding Risks

  • Understanding the risks faced by Oman and the sector as well as individual FIs
  • Identifying high-risk customers and transactions

Allocating Resources

  • Allocating resources on a risk-sensitive basis, with the objective of using these resources in a more efficient and effective manner

Business ML/TF Risk Assessment

Conducting a business ML/TF risk assessment is essential for understanding risk exposure and identifying areas that need prioritization. This involves:

Highlighting Risks

  • Highlighting risks associated with FIs’ business
  • Establishing specific controls to be applied

Conclusion

The guide emphasizes the importance of financial institutions in Oman adopting a robust approach to combating money laundering and terrorist financing by identifying and assessing ML/TF risks through a risk-based approach. By understanding the methods, techniques, and risk-based approach, FIs can effectively prevent and detect ML/TF activities.