• FATF
    Identify the three important tasks that FATF focuses on.

    • Spreading the anti-money laundering message worldwide,
    • Monitoring implementation of the FATF Recommendations among FATF members, and
    • Reviewing money laundering trends and countermeasures.
  • FATF
    According to the FATF 40 Recommendations, the complete set of countermeasures against money laundering and terrorist financing covers what 5 elements?

    • The identification of risks and development of appropriate policies,
    • The criminal justice system and law enforcement,
    • The financial system and its regulation,
    • The transparency of legal persons and arrangements, and
    • International cooperation.
  • FATF
    Describe FATF’s Recommendation 15 (2012) on new technologies.

    Countries and financial institutions should assess the risks associated with developments of new products, business practices, delivery mechanisms and technology. Financial institutions should assess these risks prior to launching new products; they should also take appropriate measures to mitigate the risks identified.

  • The Basel Committee on Banking Supervision
    What are six principles set forth in the Basel Committee’s Statement of Principles called “Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering”?

    In 1988, the Basel Committee issued a Statement of Principles called “Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering” in recognition of the vulnerability of the financial sector to misuse by criminals. This was a step toward preventing the use of the banking sector for money laundering, and it set out principles with respect to:

    • Customer identification,
    • Compliance with laws,
    • Conformity with high ethical standards and local laws and regulations,
    • Full cooperation with national law enforcement to the extent permitted without breaching customer confidentiality,
    • Staff training, and
    • Record keeping and audits.
  • The Basel Committee on Banking Supervision
    Identify the seven specific customer identification issues as identified in the Basel Committee’s October 2001 paper called “Customer Due Diligence for Banks.”

    • Trust, nominee and fiduciary accounts,
    • Corporate vehicles, particularly companies with nominee shareholders or entities with shares in bearer form,
    • Introduced businesses,
    • Client accounts opened by professional intermediaries, such as “pooled” accounts managed by professional intermediaries on behalf of entities such as mutual funds, pension funds and money funds,
    • Politically exposed persons,
    • Non-face-to-face customers, i.e., customers who do not present themselves for a personal interview, and
    • Correspondent banking.
  • The Basel Committee on Banking Supervision
    What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee’s October 2001 paper called “Customer Due Diligence for Banks?”

    • Customer identification,
    • Risk management,
    • Customer acceptance, and
    • Monitoring.
  • The Basel Committee on Banking Supervision
    Describe the elements that should be addressed in a global approach to KYC identified in the Basel Committee’s October 2004 paper called “Consolidated KYC Risk Management.”

    The Basel Committee’s October 2004 paper called “Consolidated KYC Risk Management” addresses the need for banks to adopt a global approach and to apply the elements necessary for a sound KYC program to both the parent bank or head office and all of its branches and subsidiaries. These elements consist of:

    • Risk management,
    • Customer acceptance and identification policies, and
    • Ongoing monitoring of higher-risk accounts.
  • European Union Directives on Money Laundering
    How does the scope of the European Union’s Third Money Laundering Directive differ from the Second Money Laundering Directive?

    • It specifically includes the category of trust and company service providers,
    • It covers all dealers trading in goods who trade in cash over 15,000 Euros, and
    • The definition of financial institution includes certain insurance intermediaries.
  • USA Patriot Act
    How is a private banking account defined under Section 312 of the USA Patriot Act?

    Under Section 312 of the USA Patriot Act, a private banking account is defined as an account with a minimum aggregate deposit of $1 million for one or more non-U.S. persons and which is assigned to a bank employee acting as a liaison with the non-U.S. person.

  • European Union Directives on Money Laundering
    What was the primary way in which the European Union’s Second Directive on Prevention on the Use of the Financial System for the Purpose of Money Laundering (2001) expanded the scope of the First Directive?

    The European Union’s Second Directive on Prevention on the Use of the Financial System for the Purpose of Money Laundering (2001) extended the scope of the First Directive beyond drug-related crimes. The definition of “criminal activity” was expanded to cover not just drug trafficking, but all serious crimes, including corruption and fraud against the financial interests of the European Community.

  • USA Patriot Act
    According to Section 312 of the USA Patriot Act, the due diligence program for foreign correspondent accounts must address what three measures?

    The due diligence program for foreign correspondent accounts for non-U.S. persons must include “appropriate, specific and risk-based,” and, where necessary, enhanced policies, procedures and controls reasonably designed to identify and report suspected money laundering in a correspondent account maintained in the United States. This due diligence program must also be included in the institution’s anti-money laundering program. The due diligence program must address three measures:

    • Determining whether enhanced due diligence is necessary,
    • Assessing the money laundering risk presented by the correspondent account,
    • Applying risk-based procedures and controls reasonably designed to detect and report suspected money laundering.
  • FATF
    According to FATF’s Recommendations (2012), what are the designated thresholds for transactions under Recommendations 10, 22, and 23?

    FATF also designated specific thresholds that trigger AML scrutiny. For example, the threshold that financial institutions should monitor for occasional customers is €15,000 [Recommendation 10]; for casinos, including Internet casinos, it is €3,000 [Recommendation 22]; and for dealers in precious metals, when engaged in any cash transaction, it is €15,000 [Recommendation 22-23].

  • FATF
    Describe FATF’s Recommendations 20-21 (2012) on suspicious transaction reporting and liability.

    The Recommendations say that financial institutions must report to the Financial Intelligence Unit where they suspect or have reasonable grounds to suspect that funds are the proceeds of a criminal activity or are related to terrorist financing. The financial institutions and the employees reporting such suspicions should be protected from liability for reporting and should be prohibited from disclosing that they have reported such activity.

  • The Wolfsberg Group
    According to the Wolfsberg Anti-Money Laundering Principles for Private Banking (2000), what are situations for private banking that require further due diligence?

    • Public officials, including individuals holding, or having held, positions of public trust, as well as their families and close associates,
    • High-risk countries, including countries “identified by credible sources as having inadequate anti-money laundering standards or representing high-risk for crime and corruption,” and
    • High-risk activities, involving clients and beneficial owners whose source of wealth “emanates from activities known to be susceptible to money laundering.
  • FATF
    Identify the seven topics of international standards incorporated into the FATF 40 Recommendations (2012).

    • AML/CFT policies and procedures [Recommendations 1-2],
    • money laundering and confiscation [Recommendations 3-4],
    • terrorist financing and financing of proliferation [Recommendations 5-8],
    • financial and non-financial institution preventative measures [Recommendations 9-23],
    • transparency and beneficial ownership of legal persons and arrangements [Recommendations 24-25],
    • powers and responsibilities of competent authorities and other institutional measures [Recommendations 26-35], and
    • international cooperation [Recommendations 36-40].
  • FATF
    Describe FATF’s Recommendation 1 (2012) on the risk-based approach.

    Countries should start by identifying, assessing and understanding the money laundering and terrorist financing risks they face. Then they should take appropriate measures to mitigate the identified risks. The risk-based approach allows countries to allocate their limited resources in a targeted manner to their own particular circumstances, thereby increasing the efficiency of the preventative measures. Financial institutions should also use the risk-based approach to identify and mitigate the risks they face.

  • Non-Cooperative Countries
    In 2009, FATF began to publicly identify high risk jurisdictions. What made the named jurisdictions high risk?

    The named countries had strategic deficiencies in their AML/CFT regimes.

  • ATF Members and Observers
    At a high level, what are the criteria for becoming a FATF Member?

    • The jurisdiction should be strategically important based on quantitative and qualitative indicators and additional considerations
    • FATF’s geographic balance should be enhanced by the jurisdiction becoming a member
    • The country should provide a written commitment at the political/ministerial level
    • Within a maximum of three years after being invited to participate in FATF as an observer the mutual evaluation process for the country should be launched.
    • Membership is granted if the mutual evaluation is satisfactory
  • History of the Basel Committee
    Does the Basel Committee prohibit the use of numbered accounts?

    No, numbered accounts should not be prohibited but be subjected to exactly the same KYC procedures as other customer accounts. KYC tests may be carried out by select staff, but the identity of customers must be known to an adequate number of staff if the bank is to be sufficiently diligent. “Such accounts should in no circumstances be used to hide the customer identity from a bank’s compliance function or from the supervisors.”

  • EU Directives on Money Laundering
    What must EU member countries do with the EU Directives?

    EU members must transpose the Directives into law

  • First Directive
    What was considered a predicate offense for money laundering under the First EU Money Laundering Directive?

    The First Directive of 1991 confined predicate offenses for money laundering to drug trafficking as defined in the 1988 Vienna Convention. However, member states were encouraged to extend the predicate offenses to other crimes.

  • Fourth Directive
    What is the revised threshold for reporting suspicious transactions under the Fourth EU Money Laundering Directive?

    The threshold for entities obliged to report suspicious transactions (i.e., persons trading in goods or carrying out transactions) decreased from EUR 15,000 to EUR 10,000

  • FATF-Style Regional Bodies
    What are three high-level principles that apply to both FATF and FATF-Style Regional Bodies?

    The following high-level principles apply for both FATF and FSRBs:

    • Role: FSRBs play an essential role in identifying and addressing AML/CFT technical assistance needs for their individual members. In those FSRBs that carry out this co-ordination work, technical assistance necessarily complements mutual evaluation and follow-up processes by helping jurisdictions to implement FATF standards.
    • Autonomy: FATF and FSRBs are free-standing organizations that share the common goals of combating money laundering and the financing of terrorism and proliferation and of fostering effective AML/CFT systems.
    • Reciprocity: FATF and FSRBs operate on the basis of (mutual or joint or common) recognition of their work, which implies that FSRBs and FATF put in place similar mechanisms for effective participation and involvement in each other’s activities.
  • FATF-Style Regional Bodies
    What are the nine FATF-Style Regional Bodies?

    • Asia/Pacific Group on Money Laundering (APG).
    • Caribbean Financial Action Task Force (CFATF)
    • Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL, formerly PC-R-EV)
    • Eurasian Group (EAG)
    • Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
    • Financial Action Task Force of Latin America (GAFILAT) (formerly known as Financial Action Task Force on Money Laundering in South America (GAFISUD)
    • Intergovernmental Action Group against Money- Laundering in West Africa (GIABA)
    • Middle East and North Africa Financial Action Task Force (MENAFATF)
    • Task Force on Money Laundering in Central Africa (GABAC)
  • FATF-Style Regional Bodies and FATF Associate Members
    Which of the FATF-Style Regional Bodies issued its own set of 19 recommendations, which were specific to the region?

    The Caribbean Financial Action Task Force (CFATF), in 1990.

  • OAS CICAD
    What international organization developed the first model legislation specifically designed to combat money laundering?

    In May 1992, the Organization of American States (OAS), via the Inter-American Drug Abuse Control Commission, an OAS entity that goes by the acronym CICAD (Comisión Interamericana para el Control del Abuso de Drogas), became the first permanent international body to reach an agreement on model legislation aimed specifically at dealing with money laundering.

  • Egmont Group
    What is the organization that provides a forum for financial intelligence units around the world to improve the cooperation in the fight against money laundering and financing of terrorism?

    The Egmont Group of Financial Intelligence Units

  • Key Extraterritorial Aspects of US Laws
    What is the extraterritorial aspect of section 319(b) of the Patriot Act?

    The section also allows the Secretary of the Treasury or the Attorney General to subpoena records of a foreign bank that maintains a correspondent account in the United States. The subpoena can request any records relating to the account, including records located outside the United States. If the foreign bank fails to comply with or fails to contest the subpoena, the Secretary or the Attorney General can order the US financial institution to close the correspondent account within ten days of receipt of such order. Additionally, the section also requires foreign banks to designate a registered agent in the United States to accept service of subpoenas pursuant to this section. Furthermore, US banks and securities brokers and dealers that maintain correspondent accounts for foreign banks must keep records of the identity of the 25 percent owners of the foreign bank, unless it is publicly traded, as well as the name of the correspondent bank’s registered agent in the U.S.

  • Criminal Money Laundering and Civil Forfeiture Laws
    How does the USA PATRIOT Act impact non-U.S. banks that have an account with a U.S. financial institution?

    Section 319(a) of the USA PATRIOT Act greatly strengthened the forfeiture powers over the funds of foreign persons and institutions. If the funds the United States pursues are deposited in a foreign bank that keeps an “interbank account” at a US bank, the United States may bring a case to forfeit the crime-tainted funds in the US account.

  • OFAC
    What is OFAC?

    OFAC, the Office of Foreign Assets Control, is the division of the U.S. Department of Treasury that administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and to freeze foreign assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates that are multilateral in scope and involve close cooperation with allied governments. OFAC sanction programs prohibit transactions and require the blocking of assets of persons and organizations that appear on one of a series of lists that OFAC issues periodically. OFAC has the power to impose significant penalties on those who are found to be in violation of the blocking orders within each of the sanction programs.

  • The Wolfsberg Group
    In its “AML Principles for Correspondent Banking,” what does the Wolfsberg Group indicate should be done for approval and ongoing review of higher risk correspondent bank relationships?

    Approval of higher risk Correspondent Banking relationships at the time of on-boarding and periodic review shall be subject to a higher level of approvals by business and Compliance, or relevant control function. Periodic reviews shall be conducted of all high risk Correspondent Banking relationships, at minimum on an annual basis.