Financial Institutions Must Verify Customer Identity, Report Suspicious Transactions

Combating Money Laundering and Terrorist Financing

In a bid to combat money laundering and terrorist financing, financial institutions have been mandated to take reasonable measures to verify the identity of customers and report suspicious transactions.

Requirements for Reporting Persons

According to the Anti-Money Laundering and Counter Terrorist Financing Act No.29, reporting persons (which include banks, insurance companies, and other financial institutions) must:

• Establish and maintain customer records that contain information such as:
  • Name
  • Address
  • Occupation or business
  • Nature of the transaction
• Obtain evidence of identity from customers
• Maintain a record of all transactions above a certain amount

Reporting Suspicious Transactions

Reporting persons are required to report suspicious transactions within 24 hours of forming suspicion, providing details such as:

• Purpose of the transaction
• Origin and destination of funds or property involved
• Identity and address of any ultimate beneficiary

The act defines suspicious transactions as those that may be connected with money laundering or terrorist financing. Reporting persons must take reasonable measures to ascertain the purpose of the transaction and the identity of the parties involved.

Consequences of Non-Compliance

Failure to comply with these requirements can result in severe penalties, including:

• Fines
• Imprisonment

Establishing Reasonable Measures

In establishing what constitutes reasonable measures, reporting persons must consider factors such as:

• Whether the customer is based in a country that has laws to prevent money laundering or terrorist financing
• Industry custom and practice

Exceptions

The act also provides for exceptions, where reporting persons are not required to produce evidence of identity if:

• The customer is a reporting person itself
• The transaction is part of an ongoing business relationship

Importance of these Measures

The government has emphasized the importance of these measures in preventing financial crimes and protecting the integrity of the financial system.