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Financial Regulators Warn Against Shell Bank Transactions

In an effort to combat money laundering and terrorism financing, financial regulators have issued strict guidelines for reporting persons, agents, and institutions.

Prohibitions and Requirements

The guidelines, outlined in Government Notice 758 of 2018, prohibit reporting persons from entering into or continuing business relationships with shell banks. Additionally, they are required to take adequate measures to ensure that their accounts are not used by shell banks.

• Reporting persons must maintain a list of all their agents and sub-agents.
• They must provide this information to relevant authorities upon request.
• They must monitor their agents for compliance with anti-money laundering and terrorism financing programs.

Risk Assessments

The guidelines also emphasize the importance of risk assessments in developing new products, practices, and technologies. Reporting persons are required to:

• Identify and assess potential money laundering and terrorism financing risks before launching or using such products.
• Take appropriate measures to manage and mitigate these risks.

New Wire Transfer Requirements

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In a significant development, financial regulators have introduced new requirements for cross-border wire transfers.

• All wire transfers must be accompanied by accurate originator information, including:
  • Name
  • Account number
  • Address
  • National identity number or customer identification number
  • Date and place of birth
• Beneficiary information must also be provided, including:
  • Name
  • Account number
• Where multiple transactions are bundled in a batch file, the file must contain full originator and beneficiary information that is fully traceable within the beneficiary country.
• Financial institutions must maintain all originator and beneficiary information collected.
• They are prohibited from executing wire transfers that do not comply with these requirements.

Responsibilities of Intermediary Financial Institutions

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Intermediary financial institutions are required to:

• Take reasonable measures to identify cross-border wire transfers that lack required originator or beneficiary information.
• Have risk-based policies and procedures for determining when to execute, reject, or suspend such wire transfers.

Responsibilities of Beneficiary Financial Institutions

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Beneficiary financial institutions must:

• Verify the identity of beneficiaries where necessary.
• Maintain this information in accordance with relevant regulations.
• Have risk-based policies and procedures for handling wire transfers that lack required originator or beneficiary information.

The guidelines are aimed at preventing the misuse of the financial system by criminals and terrorists, and promoting a safe and secure environment for legitimate transactions.