Anti Money Laundering Developments
Basel Committee Andrew Le Brun, Director International and Policy Jersey Financial Services Commission
Basel guidance Protect: Safety and soundness of banks Integrity of banking system Assist Fight against money laundering and funding of terrorism
Basel guidance The Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering 1988 Core Principles for Effective Banking Supervision 1997 (elaborated 1999) Customer Due Diligence for Banks 2001
Basel guidance Shell banks, booking offices, and parallel-owned banking structures (January 2003) General guide to account opening and customer identification (February 2003) Consolidated know-your-customer risk management (expected 2003)
The Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering 1988 Identify persons conducting business Reasonable efforts to determine true identity of all customers Particular care to identify ownership of accounts Avoid transactions that do not appear legitimate
Core Principles for Effective Banking Supervision 1997 (elaborated 1999) High ethical and professional standards Policies for identification of customers and those acting on their behalf Procedures to recognise potentially suspicious transactions Clear reporting procedures
Customer Due Diligence for Banks 2001 Sound KYC procedures- critical element in management of risks Absence of procedures leads to risks: Reputational Operational Legal Concentration
Customer Due Diligence for Banks 2001 Key elements of KYC programme Customer acceptance policy Customer identification On-going monitoring Risk management
Customer acceptance policy Identify types of higher risk customers Conduct more extensive due diligence on higher risk customers Approve higher risk customers at senior management level
Customer identification Wide definition of customer to be identified Identification to be completed before relationship established Special attention to non-resident customers and private banking services
Customer identification Obtain sufficient information about existing customers as quickly as possible Regular review of existing records Transactions of significance Documentation standards change Material change in account operation
Customer identification Obtain: All information necessary to establish identity of customer Purpose and intended nature of business relationship
Customer identification Specific identification issues Trust, nominee and fiduciary accounts Corporate vehicles Introduced business Pooled accounts PEPs Non-face-to-face customers Correspondent banking
Trusts Reasonable steps to be taken to verify trustee(s), settlor(s), any protector(s), defined beneficiaries, and signatories
Corporate vehicles Understand structure Determine source of funds Identify beneficial owners and those controlling funds
Introduced business Not possible to delegate responsibility Document and assess controls of introducer Obtain and review identification documentation
Co-mingled client accounts Circumstances where it is not necessary to look beyond intermediary: Subject to same regulatory and money laundering legislation Documented and assessed controls of introducer
General Guide to Account Opening and Customer Identification Natural persons Prescribes minimum information and basis for verification Requires initial assessment of risk profile Requires additional inquiries or information to be obtained for higher risk customers
General Guide to Account Opening and Customer Identification Institutions (corporates and others) Prescribes minimum information and basis for verification Look behind institution to identify controllers Concessions for CIFs, RBFs and comingled pooled accounts
Shells and parallel structures Shell banks Should no longer be approved Existing shells to establish mind and management in jurisdiction within a year Presumption that parallel structures should not be permitted
Consolidated KYC risk management Consistency in identification and monitoring of group s customer accounts across: business lines; and geographical locations Expected third quarter 2003
Other developments Cape Town (September 2002) Support for CDD paper from regulators representing nearly 120 countries Develop standards in line with CDD paper s principles Promote home supervisor access to accounts Self assessment against CDD paper
Other developments Joint Forum (June 2003) Basel, IOSCO, and IAIS AML/CFT requirements to be tailored to each sector Need for measures and standards to be reasonably consistent (broad consistency)
Other developments New York (June 2003) Response to FATF