Financial Crime World

Here is the converted article in Markdown format:

Ultimate Responsibility for Customer Due Diligence Measures

Financial institutions have a responsibility to ensure that their customer due diligence (CDD) measures are effective and compliant with regulations. This includes relying on third-party service providers, verifying the accuracy of identification data, and monitoring transactions.

Relying on Third-Party Service Providers

A financial institution must be able to immediately obtain necessary CDD information from a third party and take adequate steps to ensure that copies of identification data and other relevant documentation will be made available upon request without delay.

Furthermore, a financial institution must verify that the third-party service provider it relies on is regulated, supervised or monitored, and has appropriate measures in place for compliance with CDD and record-keeping requirements. Additionally, the jurisdiction where the third-party service provider is based must have anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations in place consistent with international standards.

Watch List Filtering

Financial institutions are required to establish policies and procedures for watch list filtering to detect and filter out individuals or entities sanctioned under the Terrorism Financing Prevention Act or listed as terrorists or terrorist groups by a foreign government or international organization. The policies and procedures must include:

  • Matching and filtering logics
  • Implementation procedures
  • Evaluation standards
  • Documentation

Ongoing Monitoring of Accounts and Transactions

Financial institutions are required to use a database to consolidate basic information and transaction data on all customers for AML/CFT purposes and establish internal control procedures for requests and inquiries regarding customer information. They must also:

  • Establish policies and procedures for account and transaction monitoring based on a risk-based approach
  • Utilize information systems to assist in the detection of suspicious money laundering (ML) and terrorist financing (TF) transactions

The policies and procedures for account and transaction monitoring must include:

  • Complete ML/TF monitoring indicators
  • Parameters setting
  • Threshold amounts
  • Alerts
  • Operation procedures of monitoring
  • Reviewing procedures for monitored cases
  • Reporting standards

Politically Exposed Persons (PEPs)

When conducting CDD measures, financial institutions are required to put in place risk management systems to determine whether a customer and its beneficial owner or senior managerial officer is a PEP. The financial institution must:

  • Treat a current PEP as a high-risk individual
  • Conduct enhanced scrutiny on the whole business relationship with the policyholder

Insurance companies and post offices engaging in simple life insurance business are also required to identify and verify whether the beneficiary and its beneficial owner of a life insurance policy, investment-related insurance policy or annuity insurance policy are PEPs before paying out benefit or cash surrender value.

Insurance Agents and Brokers

Insurance agents that solicit insurance policies on behalf of insurance companies and insurance brokers that negotiate an insurance policy or provide related services may be exempted from certain CDD requirements. However, if an insurance agent company undertakes underwriting and claim settlement business on behalf of an insurance company, the insurance agent company must comply with the provisions of these Regulations.

Record-Keeping

A financial institution must keep records on all business relations and transactions with its customers in hard copy or electronic form and in accordance with regulatory requirements. The financial institution must:

  • Maintain all necessary records on domestic and international transactions for at least five years or a longer period as otherwise required by law
  • Keep all relevant information for at least five years or a longer period as otherwise required by law after the business relationship is ended or after the date of occasional transactions

Source: [Insert source]