Financial Crime World

UN Security Council Sanctions: Combating Terrorist Financing through Non-Profit Organizations, Financial Institution Secrecy Laws, Customer Due Diligence, and Record-Keeping

The United Nations Security Council has imposed sanctions on individuals and entities designated as terrorist financiers. To combat money laundering and terrorist financing, countries are required to implement preventive measures to identify non-profit organizations (NPOs) that may be vulnerable to terrorist financing.

Non-Profit Organizations

Countries should:

  • Identify NPOs that fall under the FATF definition of NPOs
  • Assess their risk of being misused for terrorist financing
  • Review governance structures, financial transactions, and activities
  • Consider imposing targeted measures if found to be high-risk, such as restrictions on activities or freezing assets

Financial Institution Secrecy Laws

Countries should ensure that laws and regulations do not permit the use of secrecy provisions to conceal terrorist financing activities. Financial institutions must:

  • Maintain accurate and comprehensive records of all transactions (domestic and international) for at least five years
  • Prevent the use of secrecy provisions to conceal financial activities

Customer Due Diligence

Financial institutions are required to conduct customer due diligence (CDD) on all new customers, including non-profit organizations. This includes:

  • Verifying the identity of the customer
  • Assessing their risk profile
  • Monitoring their activities
  • Applying CDD measures to existing customers on a materiality and risk basis

Record-Keeping

Financial institutions are required to maintain records of all transactions for at least five years. These records must be sufficient to:

  • Permit reconstruction of individual transactions
  • Provide evidence for prosecution of criminal activity
  • Maintain records obtained through CDD measures, such as copies of official identification documents, for at least five years

Politically Exposed Persons

Financial institutions are required to conduct enhanced due diligence on foreign and domestic politically exposed persons (PEPs). This includes:

  • Obtaining senior management approval for establishing business relationships
  • Determining the source of wealth and funds
  • Conducting ongoing monitoring

Correspondent Banking

Financial institutions are required to conduct enhanced due diligence on correspondent banking relationships, including:

  • Gathering information about the respondent institution
  • Assessing anti-money laundering (AML) and combating the financing of terrorism (CFT) controls
  • Obtaining approval from senior management before establishing new relationships