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Anti Money Laundering Flashcards

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1
Q

What does AML/CFT/CPF stand for?

A

Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing

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2
Q

What is the AML Act?

A

Anti Money Laundering Act, 2010 (VII of 2010)

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3
Q

What is a ‘beneficial owner’?

A

A natural person who ultimately owns or controls a customer or the natural person on whose behalf a transaction is being conducted; OR a natural person who exercises ultimate effective control over a legal person or legal arrangement.

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4
Q

Define ‘business relationship’ according to the AML Act.

A

A professional or commercial relationship between a reporting entity and a customer to conduct a transaction, activity, or to provide a service or product.

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5
Q

What does CDD stand for?

A

Customer Due Diligence

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6
Q

Who are ‘Designated non-financial businesses and professions’ or DNFBPs?

A

Real estate agents, dealers in precious metals and stones, lawyers, notaries, accountants, other legal professionals carrying out monetary transactions for clients, and trust and company service providers, among others notified by the Federal Government.

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7
Q

What is the meaning of ‘ML’?

A

Money laundering

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8
Q

What are ‘Politically exposed persons’ or PEPs?

A

An individual who is or has been entrusted with a prominent public function either domestically or by a foreign country, or in an international organization.

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9
Q

What does ‘Proliferation Financing’ mean?

A

The financing of proliferation of weapons of mass destruction.

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10
Q

What is a ‘reporting entity’?

A

Financial institutions and DNFBPs and any other person notified by the Federal Government.

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11
Q

What does STR stand for?

A

Suspicious Transaction Report

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12
Q

What is ‘Enhanced Due Diligence’ or EDD?

A

Taking additional CDD measures.

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13
Q

When should regulated persons conduct CDD according to the SECP Regulations?

A

When entering into a business relationship, conducting an occasional transaction above the prescribed threshold, when there is suspicion of ML/TF, or when there are doubts about the veracity or adequacy of previously obtained data.

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14
Q

How long must reporting entities maintain records of transactions and CDD information?

A

A minimum period of five years after the termination of the business relationship for CDD records and five years following the completion of the transaction for transaction records.

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15
Q

What should a reporting entity do if it cannot complete CDD requirements?

A

Not open the account, commence business relations or perform the transaction (or terminate the relationship if existing) and promptly consider filing a Suspicious Transaction Report.

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16
Q

What is prohibited regarding anonymous accounts?

A

No reporting entity shall enter into a business relationship or conduct any transaction with a customer who is anonymous or provides a fictitious name.

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17
Q

What is the purpose of a compliance program for reporting entities?

A

To implement compliance management arrangements, including appointing a compliance officer and providing training programs, considering ML/TF risks and business size.

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18
Q

What is the penalty for a natural person who fails to file an STR or gives false information?

A

Imprisonment up to five years or a fine up to five hundred thousand rupees or both.

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19
Q

What is the penalty for a legal person convicted of an offense under the AML Act?

A

A fine up to one hundred million rupees. Directors, officers, or employees found guilty are also punishable as natural persons.

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20
Q

Who are the members of the National Executive Committee?

A

Minister for Finance/Advisor to PM on Finance (Chairman), Ministers for Foreign Affairs, Law and Justice, Interior, Economic Affairs Division, Governor SBP, Chairman SECP, Director General FMU (Member/Secretary), Director General FATF Cell, and any other special invitees.

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21
Q

Who is a ‘regulated person’ according to the SECP Regulations?

A

Securities brokers, futures brokers, Insurers, Takaful Operators, NBFCs and Modarabas regulated by SECP under the administered legislation.

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22
Q

What is the primary responsibility of a regulated person regarding risk assessment?

A

To take appropriate steps to identify, assess, and understand its money laundering and terrorism financing risks for customers, countries or geographic areas, and products, services, transactions or delivery channels.

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23
Q

When can a regulated person apply Simplified Due Diligence (SDD)?

A

Only where low risk is identified through adequate analysis and commensurate with the lower risk factors, and not when there is a suspicion of ML/TF.

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24
Q

What are some measures included in SDD?

A
  • Verifying identity after establishing the business relationship
  • Reducing ongoing monitoring
  • Not collecting specific information on the purpose/intended nature of the business relationship but inferring it.
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25
When is EDD required for a regulated person?
Where a customer presents high risk of ML/TF, including business relationships/transactions with high-risk natural/legal persons, those from countries called out by FATF, and PEPs and their close associates/family members.
26
What are some measures included in EDD?
* Obtaining additional customer information * Obtaining information on the intended nature of the business relationship * Obtaining information on the source of funds/wealth * Obtaining reasons for intended/performed transactions * Getting senior management approval to commence/continue the relationship * Conducting enhanced ongoing monitoring.
27
What are the requirements for regulated persons regarding new products, practices, and technologies?
Identify and assess the ML/TF risk that may arise, and undertake risk assessment and take appropriate measures to manage/mitigate risks prior to launch or use.
28
What is 'Ongoing Monitoring' of a business relationship?
Scrutinizing transactions, obtaining information and examining complex/unusual transactions, and undertaking reviews of existing records to keep CDD information up-to-date.
29
What are the record-keeping requirements for regulated persons regarding identification data and account files?
Maintain records for a minimum period of five years after termination of the business relationship.
30
What are the record-keeping requirements for regulated persons regarding transaction records?
Maintain records for a minimum period of five years following the completion of the transaction.
31
What is the requirement for regulated persons regarding existing customers with old CNICs?
Ensure attested copies of identity documents are in the record, and block accounts without identity documents (after one-month notice) for withdrawals until the requirement is fulfilled.
32
What needs to be done to activate a dormant or in-operative account for withdrawal?
Conduct NADRA Verisys or biometric verification, obtain an attested copy of the valid identity document (if not available), and fulfill regulatory requirements.
33
What are the responsibilities of an insurer or takaful operator regarding beneficiaries of life insurance policies?
* Obtain the full name of a specifically named beneficiary * Obtain sufficient information for beneficiaries designated by characteristics/class to establish identity at payout * Verify the beneficiary's identity at payout. * Include the beneficiary as a relevant risk factor for EDD.
34
What should an insurer or takaful operator do if a beneficiary who is a legal person or arrangement presents a higher risk?
Take EDD measures and reasonable steps to identify and verify the identity of beneficial owners of the beneficiary at the time of payout.
35
What is the requirement for regulated persons regarding PEPs, their close associates, and family members?
Implement internal risk management systems to identify them, obtain senior management approval to establish or continue a business relationship, take reasonable measures to establish source of wealth and funds, and conduct enhanced ongoing monitoring.
36
What does 'tipping-off' refer to in the context of CDD?
When performing the CDD process will inform the customer that a suspicion of money laundering or terrorist financing has been formed.
37
What is the consequence of a reporting entity forming a suspicion of ML/TF and reasonably believing performing CDD will tip off the customer?
The reporting entity shall not pursue the CDD process and shall file an STR.
38
What are the requirements for a regulated person when relying on a third party for CDD?
* Remain liable for any failure to apply CDD measures * Immediately obtain required information from the third party * Ensure copies of identification data and documentation are available from the third party upon request without delay * Be satisfied the third party is supervised by an AML/CFT regulatory authority or equivalent and complies with CDD/record keeping.
39
What are the main functions of the Financial Monitoring Unit (FMU)?
* Receive STRs and CTRs * Analyze them * Disseminate information to investigating/prosecuting agencies * Maintain a database * Cooperate with foreign financial intelligence units * Represent Pakistan in international forums.
40
What is the purpose of the National Executive Committee?
To make recommendations for rules and national policy to combat ML/FT, approve/review/oversee the national strategy, seek reports from competent authorities, and discuss related issues.
41
Who appoints the Director General of the FMU?
The Federal Government in consultation with SBP.
42
What is the primary function of the General Committee?
To assist the National Executive Committee for the purposes of the AML Act. It also develops the national strategy to fight ML/FT and issues directions to various agencies.
43
What kind of reports does the FMU receive from reporting entities?
Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs).
44
What should the FMU do after analyzing STRs and CTRs?
Disseminate necessary information or material to concerned investigating or prosecuting agencies for enquiry or other action.
45
How long does the FMU have to order freezing of property believed to be involved in money laundering?
A maximum period of fifteen days.
46
What are some powers and functions of an AML/CFT regulatory authority?
* Licensing/registration of reporting entities * Imposing conditions to prevent ML/predicate offense/TF * Issuing regulations/directions/guidelines * Monitoring/supervising for compliance * Compelling production of information * Imposing sanctions/penalties.
47
What is the responsibility of regulators regarding international cooperation?
To cooperate with their foreign counterparts and make reciprocal arrangements to share, request, and receive information related to the requirements of the AML Act and regulations.
48
When must a reporting entity file a Suspicious Transaction Report (STR)?
If it knows, suspects, or has reason to suspect a transaction or pattern of transactions involves funds from illegal activities, is designed to evade the AML Act, has no apparent lawful purpose, or involves financing of terrorism.
49
How soon must an STR be filed?
Promptly.
50
How soon must CTRs be filed?
Immediately, but not later than seven working days after the transaction.
51
What is the offense of money laundering?
Acquiring, converting, possessing, using, or transferring property known to be proceeds of crime; concealing or disguising the nature, origin, location, disposition, movement, or ownership of such property; holding or possessing such property on behalf of another person; or participating in, associating, conspiring to commit, attempting to commit, aiding, abetting, facilitating, or counseling these acts.
52
Is conviction for the predicate offense required to prove the offense of money laundering?
No.
53
What is the punishment for the offense of money laundering for a natural person?
Rigorous imprisonment for a term of not less than one year and up to ten years, a fine up to twenty-five million rupees, and forfeiture of property involved in money laundering or property of corresponding value.
54
What happens to property involved in money laundering after a forfeiture order is made?
All rights and title in such property vest absolutely in the Federal Government free from all encumbrances.
55
Can civil or criminal proceedings be brought against reporting entities for furnishing information required by the AML Act in good faith?
No.
56
What is the penalty for an investigating officer who conducts a vexatious survey or search without prior court permission?
Imprisonment up to two years or a fine up to fifty thousand rupees or both.
57
What is the penalty for disclosing that an STR or CTR has been reported?
A criminal offense punishable by imprisonment up to five years or a fine up to two million rupees or both.
58
When does the AML Act not apply to fiscal offenses?
Except with prior consultation of FMU, an investigating or prosecuting agency shall not charge any person with money laundering in relation to predicate offenses punishable only under the Sales Tax Act, 1990 and the Federal Excise Act, 2005, with specific exceptions.
59
What is a 'predicate offense'?
An offense specified in Schedule-I to the AML Act.
60
Who are the AML/CFT regulatory authorities listed in the AML Act?
* SBP * SECP * Federal Board of Revenue (for specific DNFBPs) * National Savings (AML and CFT) Supervisory Board * Pakistan Post (AML and CFT) Supervisory Board * Other notified entities/authorities * Designated SRBs like ICAP, ICMAP, and Pakistan Bar Council.

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