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Financial Institutions Must Implement Vigilance Systems to Prevent Money Laundering
To combat money laundering, financial institutions must implement robust vigilance systems that enable them to identify and report suspicious transactions. According to the latest guidelines issued by [Authority], financial institutions are required to have in place systems that determine or receive confirmation of the true identity of customers, recognize and report suspicious transactions, keep records of business transactions for a prescribed period, train key staff, and liaise closely with the Financial Intelligence Authority (FIA).
Key Requirements
- Determine or receive confirmation of the true identity of customers
- Recognize and report suspicious transactions
- Keep records of business transactions for a prescribed period
- Train key staff
- Liaise closely with the Financial Intelligence Authority (FIA)
Unusual Transactions Must be Investigated
If a transaction is inconsistent in amount, origin, destination, or type with a client’s known legitimate business or personal activities, or has no apparent economic or visible lawful purpose, the institution must consider it unusual and investigate whether the business relationship is being used for money laundering. The institution must also make inquiries about the nature of the activity or transaction and record its analysis or findings.
Vigilance Systems Must be Tailored to Institution’s Size and Structure
The guidelines acknowledge that financial institutions vary in size, structure, and nature of business, and therefore, the vigilance system appropriate for each institution will differ. However, all institutions must exercise a standard of vigilance that meets the guidelines’ requirements.
Compliance Officer Plays Critical Role
Section 16(1)(n) of the Act stipulates that internal reporting procedures must provide for the identification of a person to whom reports must be made in case of suspected money laundering. This person is commonly known as the Compliance Officer, who must be fully acquainted with the provisions of the Act and its regulations.
Compliance Officer Must be ‘Fit and Proper’
The guidelines emphasize that the Compliance Officer must be “fit and proper,” meaning they have not been convicted of an offence involving dishonesty or are an undischarged bankrupt. The officer should also report directly to the Board of Directors to preserve their integrity and protect them from victimization.
Training is Essential
Key staff must receive training on entry, verification, and records based on the guidelines’ recommendations. Compliance Officers must also receive current copies of their company’s instruction manual(s) relating to entry, verification, and records.
Financial Institutions Must Ensure Vigilance Systems are Effective
The guidelines require financial institutions to ensure that internal auditing and compliance departments regularly monitor the implementation and operation of vigilance systems. The FIA has emphasized the importance of effective vigilance systems in preventing money laundering, and non-compliance may result in severe penalties.