Funds Transfer Regulations: New Requirements for Financial Institutions

Introduction

In a bid to combat money laundering and terrorist financing, the government has introduced new regulations governing funds transfers in the country. These regulations aim to strengthen the anti-money laundering and counter-terrorism financing regime.

Domestic Fund Transfers

• The regulations require domestic fund transfers to include either full originator information or a unique identifier within three business days of receiving a request.
• This information can be included in the message or payment form accompanying the transfer.

Cross-Border Electronic Fund Transfers

• If a cross-border electronic fund transfer is contained within a batch transfer sent by a financial institution, it may be treated as a domestic transfer.

Intermediary Requirements

• Each intermediary in the payment chain must maintain all required originator information with the accompanying fund transfer.
• Beneficiary financial institutions must identify and scrutinize fund transfers that are not accompanied by complete originator information and constitute an enhanced risk of money laundering and financing of terrorism.

Procedures for Missing Information

• Financial institutions must have procedures in place to address fund transfers that are not accompanied by complete originator information.
• This includes:
  • Requesting the missing information from the sending institution
  • Considering whether the absence of complete originator information creates or contributes to suspicion about the transfer
  • Reporting suspicious transactions to the authorities

Anti-Money Laundering and Counter-Terrorism Financing Programs

• Financial institutions must adopt and implement effective programs against money laundering and financing of terrorism, including:
  • Written procedures
  • Policies
  • Systems
  • Controls
• These programs must be tailored to the risk of money laundering and financing of terrorism, the size and nature of business, and the types of products and services offered by the institution.

Customer Identification

• Financial institutions are required to have a system in place to identify customers whose activities pose a lower or higher risk of money laundering or terrorist financing.

Prohibited Relationships

• Financial institutions are prohibited from establishing relationships with shell banks, which are banks incorporated in a jurisdiction where they have no physical presence and are unaffiliated with a regulated financial group.

Compliance Officer

• Financial institutions must designate a senior-level compliance officer who is responsible for ensuring compliance with the Act and these Regulations.
• The compliance officer must provide the institution and the authorities with their contact information and any changes made thereafter.

Independent Testing of Compliance

• Financial institutions are required to undergo independent testing of compliance, which includes:
  • Sample testing
  • Attestation of procedures and policies
  • Transaction testing
  • Assessment of employee knowledge
  • Assessment of reporting requirements

Employee Screening

• Financial institutions must put in place screening procedures to ensure high standards when hiring employees.
• They must prevent the employment of persons convicted of offenses related to money laundering and terrorist financing.

Conclusion

The new regulations are aimed at strengthening the country’s anti-money laundering and counter-terrorism financing regime, and financial institutions must comply with them to avoid penalties and reputational damage.