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1

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
counterm asures.

2

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

3

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.

4

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
onfidentiality,
• Staff training, and
• Record keeping and audits.

5

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.

6

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.

7

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 toadopt 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.

8

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

9

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.

10

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.

11

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.

12

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].

13

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.

14

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.

15

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].

16

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 approachallows 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.

17

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.

18

FATF 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.

19

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.”

20

EU DIRECTIVES ON MONEY
LAUNDERING
What must EU member countries
do with the EU Directives?

EU members must transpose the Directives into law.

21

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.

22

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.

23

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.

24

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)

25

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.

26

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.

27

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.

28

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 ecurities brokers and dealers
that maintain correspondent accounts for foreign banks
must keep ecords 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.

29

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.

30

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.