Financial Crime World

Financial Institutions Must Verify Customer Identities and Report Suspicious Transactions

In an effort to combat money laundering and terrorist financing, financial institutions (reporting persons) must take reasonable measures to verify the identities of their customers and report any suspicious transactions.

Verification of Customer Identities

According to Section 16 of the Anti-Money Laundering and Counter Terrorist Financing Act No. 29, reporting persons must establish and maintain records of all transactions above a certain amount (to be published by the Minister in the Official Gazette). These records must include details such as:

  • The customer’s name
  • Address
  • Occupation
  • Business or principal activity

Reporting persons must also verify the identity of each person conducting a transaction, including any ultimate beneficiaries. This can be done through various means, including documentation and questioning.

Maintenance of Customer Records

Section 17 requires reporting persons to maintain customer records for at least five years from the date of completion of the relevant business or transaction. If a document is released before the five-year period has elapsed, the reporting person must retain a copy and maintain a register of released documents.

Reporting Suspicious Transactions

If a reporting person suspects or has grounds to suspect that a transaction may be suspicious, they must take reasonable measures to investigate and prepare a report within 24 hours. The report must include details such as:

  • The purpose of the transaction
  • The origin and destination of the funds
  • The identity and address of any ultimate beneficiary

The report must then be communicated to the Financial Intelligence Unit (FIU) by secure means. The FIU may request further information from the reporting person if necessary.

Failure to Comply with Provisions

Failure to comply with these provisions can result in severe penalties, including fines and imprisonment.

Establishing Customer Identities

Reporting persons must take reasonable measures to establish the true identity of any person on whose behalf or for whose ultimate benefit a customer may be acting. This includes verifying the identity of:

  • Trustees
  • Nominees
  • Agents
  • Other intermediaries

In determining what constitutes reasonable measures, regard shall be had to all the circumstances of the case, including:

  • Whether the customer is based in a country with provisions to prevent money laundering or terrorist financing
  • Custom and practice in the relevant field of business

Reporting Suspicious Transactions

If a reporting person suspects or has grounds to suspect that a transaction may be suspicious, they must report it to the FIU within 24 hours. The report must include details such as:

  • The purpose of the transaction
  • The origin and destination of the funds
  • The identity and address of any ultimate beneficiary

Maintaining Internal Reporting Procedures

Reporting persons must establish and maintain internal reporting procedures, including designating a person to whom employees are to report suspicious transactions. This ensures that all employees are aware of their responsibilities in detecting and reporting suspicious activity.

By following these guidelines, financial institutions can help prevent money laundering and terrorist financing while also maintaining compliance with regulatory requirements.