Financial Crime World

Title: Oman’s AML/CFT Department Issues New Guidelines for Financial Institutions: Understanding Oman’s Regulatory Framework and Risks

1. Introduction

1.1 Purpose and Scope

These guidelines aim to assist all financial institutions (FIs) in Oman, including banks, finance leasing companies, money exchange establishments, payment service providers, insurance and takaful companies, agents and brokers, capital markets companies, and virtual asset service providers, to comply with Oman’s AML/CFT regulations. In a nutshell, Fi’s must be aware of their obligations under the Royal Decree, supervisory instructions, and international standards [1].

1.2 Money Laundering (ML) and Terrorist Financing (TF)

1.2.1 Money Laundering

The AML/CFT Law in Oman criminalizes money laundering, regardless of whether the predicate offense has occurred or not. Money laundering involves:

  • Converting, transferring, or disguising the illegal nature or source of funds
  • Assisting persons to evade punishment
  • Acquiring or possessing proceeds upon receipt [2].

1.2.2 Terrorist Financing

The financing of terrorism is also a criminal offense in Oman, punishable under Article 8 of the AML/CFT Law. Terrorist financing includes activities like collecting or providing funds, directly or indirectly, to carry out a terrorist act or provide training for terrorist activities [2].

1.2.3 Phases of Money Laundering

FIs in Oman should be aware of the three phases of money laundering:

  1. Placement: Introducing cash or monetary instruments into the financial system.
  2. Layering: Transactions that aim to mask the original trail.
  3. Integration: Making the funds appear legitimate through various methods such as the purchase of stocks, real estate, or businesses [3].
  • Understanding the phase in which a certain product or FI itself can be misused allows institutions to identify their specific inherent ML/TF risks [1].

2. Identification and Assessment of ML/TF Risks

2.1 Risk-Based Approach (RBA)

FIs must adopt a risk-based approach (RBA), focusing on identifying, assessing, and mitigating ML/TF risks according to the AML/CFT legislation and supervisory instructions [1]. The RBA approach allows for the efficient allocation of resources to high-risk areas. An effective risk assessment process involves:

  • Understanding the FI’s business model
  • Identifying its customer base
  • Evaluating geographic locations
  • Assessing the risk associated with products/services and transactions

2.2 ML/TF Business Risk Assessment

Omani FIs are required to conduct a business ML/TF risk assessment. This assessment helps FI’s understand their risk exposure, prioritize efforts to combat ML/TF, and establish a robust AML/CFT compliance framework. Assessment factors cover:

  • Customer risk
  • Product/service and transaction risk
  • Country or geographic risk
  • Delivery channel risk [1]. FI’s are encouraged to stay informed about emerging ML/TF risks and new technologies to effectively mitigate their ML/TF risks.

[1]: Source: The new guidelines issued by the CMA-CBO AML/CFT Department in Oman. [2]: Source: Article 3 and 8 of the AML/CFT Law in Oman. [3]: Source: The FATF Recommendations on Money Laundering and Terrorist Financing.