ANTI MONEY LAUNDERING The Fundamental Principles of The Policy Overview The internal policy of The UNBE is to prevent and combat money laundering. This includes financial monitoring, which is in conformity with FATF (The Financial Action Task Force) standards and objects. According to forty recommendations of the Commission on the financial work for combating money laundering, and in addition to the Basel committee on banking supervision (AML & KYC) is founded upon the law of Egypt. KYC (Know Your Customer) standards and AML (Anti Money Laundering) measures involve a customer acceptance policy and customer identification program that involves enhanced diligence for higher risk accounts and includes account monitoring for suspicious activities. These standards constitute an essential part of risk management by providing the basis for identifying and controlling risk exposures, which The UNBE used to protect itself and its genuine customers from the risk arising out of suspicious transactions/risky customers. The inadequacy or absence of KYC standards & AML measures can subject banks to serious customer and counterparty risks, especially reputational, operational, and legal risks. - Due diligence process is a continuous process customer service representatives (C/S Rep.) need to be aware of: Ensure that every new customer has signed a completed (KYC) form before opening any account. Update all changes concerning the customers at Customer Basic Information application. Regular contact with the customer. Monitor the behavior of customer s accounts. While establishing correspondent relations, the bank inquires whether the correspondent takes measures on prevention and counteraction of legalization (laundering) of proceeds derived from crime.
KYC (Know Your Customer) objective: 1. To comply both with the Basel committee on customer due diligence and international money laundering legislation, including the law number 80 issued on 2002, promulgating anti money laundering law, as amended by law number 78 for the year of 2003 and all its amendments. 2. To protect the assets and reputation of the UNBE by preventing the bank from either unwittingly facilitating illegal activities or becoming the victim of illegal activities. 3. To act responsibly in pursuing these objectives, but in a manner that will not disrupt the bank relationship with its customers. Customer Profile All customers relationship must be documented. This relationship profiles are used to record all the customers data, in addition to the KYC (Know Your Customer) form. In case of companies, all parties names and any signatories or intermediaries must be identified & recoded at the relationship profile. Also the customer must clearly identify which of the parties are decision makers for the account. For customers who own their own business, it is necessary for the C/S Rep. to look at evidence for a better understanding of the customer s business activities. Risk Classification: The level of money laundering risk that The UNBE is exposed to by an investor relationship depends on: type of customer and nature of business. type of product service applied by the customer. country where the customer is domiciled. Risks are classified into three types: 1. High risk. 2. Medium risk. 3. Low risk. Countries to be analyzed The Financial Action Task Force (FATF) is a group of countries around the world whose members have taken steps to establish anti-money laundering programs in their respective countries. FATF provides its members both program guidance & membership obligations. In June 2000, FATF issued a list of countries or territories determined to be noncooperative in the international fight against money laundering.
This list is annually updated in June and progress reports are issued periodically to update on the status in the country. All countries appearing on this Non Cooperative list are considered high-risk. Marketplace & supervisory analysis will be required for Compliance with the Egyptian laws & regulations. Also, enhanced monitoring actions are required for such countries. The goal of this process is to reduce the vulnerability of the financial system to money laundering by ensuring that all financial centers adopt & implement measures for the prevention, detection & punishment of money laundering according to internationally recognized standards. Shell Banks These banks are those who don t have a physical presence in any country. A physical presence means a place of business that is maintained by a foreign bank located at a fixed address (rather than the electronic address) in a country in which this foreign bank is authorized to conduct banking business. Accordingly, The UNBE is not dealing with any of these banks. Criminal Risk Where crime is prevalent, the risk of doing business with financial institutions obviously increases through the local banking system. Also, there may be additional risk for international correspondent banks where the funds are taken offshore if this is done through the international payments system. Preconditions for Effective Supervision. There are certain elements that provide a foundation for a system of supervision to be effective. These elements are as follows: Oversee the establishment of financial institutions. Ongoing supervision. Enforcement power to address compliance with the country law and regulations. Ability to carry duties independently. Sufficient resources in terms of technological capabilities and knowledge. Protection of information obtained by supervisors so that it is only used for the purpose of effective supervision. Continues training & awareness sessions to bank s staff concerning Quality Assurance & Anti Money Laundering. Reviewing all banks documents to add the necessary information declaration. Prudential Regulations and Requirements Banking supervisors should have the authority to develop & require compliance with regulations designed to address basic risks inherent in banking. These requirements should define minimum standards to provide for prudent risk management.
AML & KYC policies, suspicious, unusual transaction reporting and currency transaction reporting are considered to be important tools in assisting banks to prevent or detect involvement of the bank in criminal money laundering activity. Methods of Ongoing Supervision Effective supervision depends upon accessing and analyzing information on an ongoing basis. This information should be obtained from both regular information flows available for off-site analysis, as well as, on-site inspections. Off-site examination should be facilitated by a regular flow of information provided directly by the banks. On-site examination of banks is critical for validating flows provided directly by the banks and to better determine that the bank is operating appropriately. The scope of work should be sufficiently comprehensive & including credit risk, compliance with laws & regulations. Reports of on-site inspections could be valuable in determining whether an institution is adhering to appropriate procedures if they are produced & available. C/S Rep. should ensure that the reports are produced, available & reviewed periodically. Compliance officer s responsibilities: The compliance officer is responsible for following up activities of the bank on regular basis to ensure that business is conducted in compliance with local laws & international regulations. The compliance officer is responsible for ensuring that the banks policy and procedures regarding (AML) & (KYC) are complying with international regulations. The compliance officer is responsible for ensuring that the (AML) and (KYC) procedures are implemented at all branches. Chief compliance officer will provide senior management and audit committee with the degree of compliance in place and functioning effectively to mitigate the risk to the bank. Customer Due Diligence Guiding Principles 1. Do business only with reputable customers whose income and wealth are derived from legitimate sources. 2. Determine & record the identity, background & business of all customers. 3. Know the beneficial owners of all relationships. 4. Understand the business purposes for which bank s products & services are used. 5. From the information gathered, reasonably estimate the types & levels of the customer s anticipated transactions. 6. Determine appropriate procedures on record retention with customers information according to the Egyptian law. 7. Be alert & regularly monitor the relationship in order to identify unusual or suspicious activities.
8. Take appropriate action when questions or inconsistencies arise. 9. Paying particular attention in opening and observing PEP S accounts (Politically exposed persons). Anonymous Relationships and Concentration Accounts Under any circumstances, The UNBE should not accept anonymous relationships, for any purpose, in any line of business. For all banking relationships, accounts and any type of transaction performed by The UNBE beneficial owner information is required in accordance with this Policy and Procedures. Also, all non-proprietary transactions must be identifiable as relating to a specific customer account. Regulatory Mandates At least every 5 years, C/S Rep. must review the customers files. The purpose of this periodic review is to ensure that all the customers data at The UNBE is updated certain procedures must be implemented to update the customers data base to enhance scrutiny & ensure the existence of anti-money laundering controls. All prospective customers files must be reviewed in accordance with all The UNBE policies establishing a higher standard of scrutiny or approval. Negative List The UNBE employees are responsible for checking the negative list before opening accounts or establishing customer s relationship. For this list relates specifically to proprietary decisions, the list s contents must not be shared with any person or entity outside The United Bank. Suspicious Activities or Suspected Violations If an employee observes a transaction or activity that appears suspicious or unusual, he/she is required to report it immediately to his/her superior level who ll recheck the suspected transaction & report it to the Compliance Officer. All employees must be familiar with the AML policy to enable them to act promptly and appropriately. They also must consult the Compliance Officer regarding any questions relating to the AML policy. Reports A consistent process for activity review must be established for each branch. The method of monitoring (Either manual or automated) must take place pursuant to written procedures created & distributed locally to all staff.
Branch Compliance Officer must review daily/monthly activity reports for any out of suspicious activity. Upon detecting out-of-pattern activity, the BCO must contact the C/S Rep. to obtain an explanation on the activity in the account & if necessary establish a going on action plan. The explanation & all follow up must be documented. Unusual activity weekly report (over EGP100M or equivalent) is reviewed by the Compliance Officer at the Central Department & in case of suspecting a transaction the concerned branch head is contacted to provide compliance officer with proper documents, explanation in addition to his/her opinion concerning the customer s behavior. Red flags Tips for Reviewing Customers Activities 1. Magnitude of business or profits inconsistent with date of establishment, especially where import or export is involved. 2. Substantial turnover in an account with no evident relationship to the key party and/or his or her stated business. 3. Accumulation of balances or deposits inconsistent with knowledge of the Customer s business or his/her status or source of income. 4. Unexplained transfers to accounts in other countries or other banks. 5. An account holder who is reluctant to provide information when requested, or who provides information that is difficult or expensive to verify. 6. Multiple small deposits into different accounts, which are subsequently consolidated into one account. 7. Customers who have numerous accounts to facilitate inter-account transfers for no apparent business reason, or to obscure large cash deposits by dividing large amounts of cash among each of them. 8. Customers who appear to have accounts with several institutions in a nearby area and who consolidate those funds before requesting their transfer. 9. Deposits of large third party checks endorsed in favor of the customer. 10. Large cash transactions in a previously dormant/inactive account, or from an account which has just unexpectedly received a large credit from aboard. 11. Customers may request to use a concentration or other account perhaps to conceal the true nature of the transaction. 12. Large deposit immediately followed by withdrawal of all or most of funds. 13. Requests for loans drawn on a previously inactive account and paid to a third party. 14. Frequent or multiple wire transfers, especially in round amounts. 15. Repeated activity involving countries to which the customer has no apparent connection.