Lesotho Financial Regulators Intensify Fight Against Money Laundering and Terrorist Financing
Strengthening Measures to Prevent Illicit Activities
In an effort to combat the menace of money laundering and terrorist financing, Lesotho’s financial regulators have issued new regulations aimed at strengthening measures to prevent these illicit activities. The regulations, which came into effect on [insert date], require financial institutions and service providers to take a more proactive approach in identifying and verifying the identities of their clients and customers.
Identity Verification: A Key Requirement
Under the new regulations, financial institutions and service providers are required to:
- Identify and verify the identities of all clients and customers
- Obtain information on the purpose and intended nature of the business relationship
- Verify the ownership or control structure of legal persons
Failure to comply with these requirements may result in the termination of existing business relationships.
Correspondent Banking Relationships Under Scrutiny
The regulations also place greater scrutiny on correspondent banking relationships. Financial institutions and service providers are required to:
- Ensure that cross-border correspondent banking relationships do not permit accounts from being used by shell banks
- Gather sufficient information about the corresponding respondent institution or service provider to understand fully the nature of their business
- Determine whether they have been subject to a money laundering or terrorist financing investigation
Reliance on Intermediaries and Third Parties
The regulations permit financial institutions and service providers to rely on intermediaries and third parties to perform certain requirements, but ultimate responsibility remains with the institution. They must also ensure that any intermediary or third party they rely on is:
- Regulated, supervised or monitored for complying with anti-money laundering and counter terrorist financing measures
Higher Risk Countries
The regulations provide for enhanced measures to be applied to clients or customers from higher risk countries, as designated by the Financial Action Task Force (FATF) or where deemed appropriate by Lesotho’s sector supervisory authority or the Unit. These enhanced measures may include requirements such as:
- Obtaining additional information on the source of funds or wealth
- Conducting more frequent monitoring of transactions
Senior Management Responsibility
The regulations emphasize the importance of senior management involvement in ensuring compliance with anti-money laundering and counter terrorist financing measures. Senior management must be satisfied that the institution has implemented adequate measures to prevent money laundering and terrorist financing, and must:
- Approve new correspondent banking relationships before they are established
By implementing these new regulations, Lesotho’s financial regulators aim to strengthen the country’s ability to detect and prevent money laundering and terrorist financing activities, and to protect its financial system from abuse.