Financial Institutions Must Implement Effective AML/CFT Measures Consistent with FATF Standards
In a bid to combat money laundering and terrorist financing, financial institutions in [Country/Region] have been mandated by the government to implement robust anti-money laundering (AML) and combating the financing of terrorism (CFT) measures. These regulations align with the standards set out by the Financial Action Task Force (FATF), requiring financial institutions to establish policies and procedures for watch list filtering, ongoing monitoring of accounts and transactions, and customer due diligence.
Watch List Filtering
Financial institutions are required to establish policies and procedures for watch list filtering based on a risk-based approach to detect and filter out individuals or organizations sanctioned under the Terrorism Financing Prevention Act or identified as terrorists by foreign governments or international organizations. The policies must include:
- Matching and filtering logics
- Implementation procedures
- Evaluation standards, which shall be documented
Ongoing Monitoring of Accounts and Transactions
Financial institutions are required to establish internal control procedures for requests and inquiries regarding customer information made by various units while exercising care to ensure the confidentiality of such information. They must also establish policies and procedures for account and transaction monitoring based on a risk-based approach, utilizing information systems to assist in the detection of suspicious transactions.
The policies must include:
- Complete ML/TF monitoring indicators
- Parameters setting
- Threshold amounts
- Alerts
- Operation procedures of monitoring
- Reviewing procedures for monitored cases
- Reporting standards
Financial institutions are also required to review their policies and procedures periodically based on AML/CFT regulations, nature of customers, business scale and complexity, ML/TF trends, and internal risk assessment results.
Customer Due Diligence
Financial institutions must conduct customer due diligence (CDD) measures to determine whether a customer or its beneficial owner is a person who is or has been entrusted with a prominent function by a domestic government, foreign government, or international organization. They are required to treat customers determined to be politically exposed persons (PEPs) as high-risk customers and adopt enhanced CDD measures.
Record-Keeping
Financial institutions must keep records on all business relations and transactions with their customers in hard copy or electronic form for at least five years or a longer period as otherwise required by law. The records must include information obtained through CDD measures, such as:
- Copies of passports
- Identity cards
- Other relevant documents
The regulations also exempt insurance agents and brokers from certain AML/CFT requirements provided they comply with specific conditions.
Implementation
Financial institutions are expected to implement the new regulations by [Deadline] and demonstrate compliance with the AML/CFT standards set out by the FATF. Failure to comply may result in penalties, fines, or even revocation of licenses.
In conclusion, the implementation of these regulations is a significant step towards combating money laundering and terrorist financing in [Country/Region]. Financial institutions must ensure that they are fully compliant with the new requirements to maintain public trust and prevent financial crimes.