Financial Crime World

Suspicion of Money Laundering or Terrorist Financing Rocks Financial Institution

A leading financial institution has been accused of failing to conduct thorough customer due diligence (CDD), sparking concerns about money laundering and terrorist financing.

Failure to Identify Customer Identity and Beneficial Owner

According to sources, the institution failed to identify a customer’s true identity and beneficial owner, despite being required by law to do so. This lack of proper CDD measures has raised suspicions that the institution may have been used for illegal activities such as money laundering or terrorist financing.

International Standards

Under international standards set by the Financial Action Task Force (FATF), financial institutions are required to conduct CDD measures, including:

  • Identifying customers and beneficial owners
  • Understanding their business relationships
  • Conducting ongoing due diligence

The FATF also recommends that financial institutions take a risk-based approach to determine the extent of these measures.

Expert Opinion

“Financial institutions must be able to identify and verify their customers’ identities, as well as understand the purpose and nature of their business relationships,” said an expert. “This is crucial in preventing money laundering and terrorist financing.”

Institutional Response

The institution has been ordered to take immediate action to rectify the situation, including:

  • Verifying the identity of its customers and beneficial owners
  • Conducting ongoing due diligence on its business relationships

Records Kept for Five Years

Financial institutions are also required to maintain records of transactions, both domestic and international, for at least five years. These records must be sufficient to permit reconstruction of individual transactions and provide evidence for prosecution of criminal activity.

Additionally, financial institutions are required to keep all records obtained through CDD measures, including:

  • Copies of official identification documents
  • Account files
  • Business correspondence

These records must be maintained for at least five years after the business relationship is ended or the date of the occasional transaction.

Additional Measures for Specific Customers and Activities

The FATF has also recommended additional measures for specific customers and activities, such as:

Politically Exposed Persons (PEPs)

  • Verifying identity and source of wealth
  • Obtaining senior management approval
  • Conducting enhanced ongoing monitoring of the business relationship

Correspondent Banking Relationships

  • Gathering information about the respondent institution’s business and reputation
  • Assessing its AML/CFT controls
  • Obtaining approval from senior management before establishing new relationships