Financial Institutions Must Be Vigilant in Identifying Money Laundering and Terrorism Financing Risks
As part of efforts to prevent money laundering and terrorism financing, financial institutions are being reminded of their responsibility to identify and mitigate risks associated with these illegal activities.
Guidelines for Financial Institutions
According to a new set of guidelines, financial institutions should:
- Examine complex transactions and unusual patterns of transactions that have no apparent economic or lawful purpose
- Obtain information on the nature or reason for the transaction
- Conduct enhanced due diligence measures for higher-risk business relationships, including:
- Obtaining additional information about the customer’s occupation, volume of assets, and source of funds
- Updating identification data regularly
- Apply simplified due diligence procedures for customers with lower risk profiles, such as those with publicly available identification information or adequate checks and controls in place elsewhere
Importance of Continuous Monitoring
Experts warn that relying solely on enhanced customer due diligence (CDD) measures may not be enough to identify money laundering and terrorism financing risks. While CDD is an important tool, it should not be the sole source of information.
- Financial institutions must also stay informed about changes in their customers’ businesses and transactions
- Monitor for suspicious activity
Customer Identification Verification
The guidelines also address delayed customer identification verification, allowing financial institutions to engage with customers before completing the verification process under certain circumstances.
Maintaining Customer Information
Financial institutions are required to:
- Gather and maintain customer and beneficial owner information throughout the course of the business relationship
- Keep records up to date and review existing records at appropriate times
Conclusion
Experts stress that financial institutions must remain vigilant in identifying money laundering and terrorism financing risks, and not rely solely on these guidelines.
- Financial institutions must continue to stay informed about changes in their customers’ businesses and transactions, as well as monitor for suspicious activity
- By staying informed and vigilant, financial institutions can play a critical role in preventing these illegal activities and maintaining financial stability
The guidelines are part of a broader effort to prevent money laundering and terrorism financing in the financial sector.