Chapter - 3 Compliance Standards Flashcards Preview

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Flashcards in Chapter - 3 Compliance Standards Deck (148):
1

 

What does FATF stand for, when was it created, and by whom?

 

Financial Action Task Force.

Created in 1989.

By the Group of Seven nations.

2

 

 

Where is the FATF based?

 

 

Organization for Economic Cooperation & Development (OECD)

in Paris.

3

 

How many members, jurisdictions,

and regional organizations are there in the FATF? 

 

There are:

  • 37 members
  • 35 jurisdictions
  • 2 regional organizations (the Gulf Cooperation Council and the European Commission).

4

 

At a high level (one sentence each), what two step criteria must be met for a jurisdiction to become a member of the FATF?

  1. Fundamental criteria:
    • The jurisdiction should be strategically important.
    • Membership should enhance geographic balance.
  2. Technical and other criteria:
    • The country should provide a written committment at the political level
    • They should be a full & active member of a FATF-style regional body.
    • Satisfactory evaluation in compliance to the Recommendations.

5

 

What are five indicators of a jurisdiction's

strategic importance for membership in the FATF?

 

  • Size of gross domestic product (GDP).
  • Size of the banking sector.
  • Impact on the global financial system, including the degree of openness of the financial sector and its interaction with international markets.
  • Regional prominence in AML/CFT efforts.
  • Level of commitment to AML/CFT efforts.

6

 

What are three additional considerations in a jurisdiction's strategic importance for membership in the FATF?

 

  • Level of adherence to financial sector standards.
  • Participation in other relevant international organizations.
  • Level of AML/CFT risks faced and efforts to combat those risks.

7

 

 

List four ways a country should
provide written committment to the FATF.

 

(Membership step 2: Technical & Other critera)

The country should:

  1. Endorse and support the FATF 40 recommendations and the FATF AML/ CFT methodology.
  2. Agree to implement all FATF recommendations in reasonable time frame (3 years).
  3. Undergo a mutual assessment of compliance with FATF membership criteria using FATF methodology.
  4. Participate actively, meet all committments, and support the role and work of FATF in all relevant forums.

8

 

 

Satisfactory overall mutual evaluation of compliance with the Recommendations dealing with what seven areas is a technical criteria for membership in the FATF?

 

Compliance with the Recommendations dealing with:

  1. Money laundering and terrorist financing offences
  2. Freezing and confiscation
  3. Customer due diligence
  4. Record-keeping
  5. Suspicious transaction reporting
  6. Financial sector supervision
  7. International co-operation

 

- country should be full and active member of a relevant FATF-style regional body - overall mutual evaluation needs to be regarded as satisfactory and in particular the level of compliance w/ the recommendations dealing w/ ML

9

 

 

In determining whether the overall level of compliance is satisfactory in mutual evaluation, what flexibility may be allowed and why?
 

 

Some flexibility may be allowed with respect to Client Due Diligence due to complexity and multifaceted requirements.

The assessed country must demonstrate significant progress toward full compliance.

10

 

 

What level (rating) of compliance to FATF Recommendations
must a country achieve in a mutual evaluation?

 

  • Fully Compliant (FC) or Largely Compliant (LC) for all FATF Recommendations.

OR

  • At minimum Largely Compliant (LC) or Compliant (C) for a large majority of Recommendations, with substantial progress toward full implementation.
  • Requires ministerial committment to come into compliance within a reasonable time frame with a detailed action plan.

11

 

What three objectives does the FATF focus on?

 

  1. Establishment of global AML/ATF network.
  2. Monitoring implementation of the FATF Recommendations among its members.
  3. Reviewing money laundering trends and countermeasures (typologies).

12

 

On what three things does the FATF base its promotion
of a global AML/ATF network?
 

 

  1. Expansion of membership
  2. Development of regional AML bodies in various parts of the world
  3. cooperation with international organizations

13

 

 

Implementation of the Recommendations is monitored by the FATF in what two-pronged approach?
 

 

  1. Annual self-assessment exercise with detailed standard questionnaires. This is the basis for assessment of both individual countries and the group as a whole.
  2. A more detailed mutual evaluation through an on-site visit by a team of 3 or 6 experts in legal, financial and law enforcement fields from other governments.

14

 

Since the FATF has no power to impose fines on non compliant countries, name and describe the method for dealing with those nations.

 

A graduated "Peer Pressure" model is used. Steps include:

  1. Require the country to deliver a progress report at plenary meetings.
  2. Deliver a letter from the FATF president or a visit from a high-level mission.
  3. Issue a statement calling FI's to give special attention the business & transactions domiciled in that country.
  4. Suspension of membership.

15

 

A a high-level view, what are "Typology" exercises
issued by the FATF?

 

  • Reviews of money laundering trends and countermeasures in order to stay up to date.
  • Criminal organizations do not know geographic or chronological limitations and is constantly searching for new vulnerabilities.

16

 

What are the FATF's three main activities?

 

  1. Standard setting
  2. Ensuring effective compliance with these standards
  3. Identifying money laundering and terrorist financing threats 

17

 

 

What are the FATF 40 recommendations?

 

 

  • The world's blueprint for effective AML/CTF controls
  • Recognized as the standard by IMF and World Bank.
  • Originally written in 1990.
  • Revised in 1996, 2003, and 2012.

18

 

 

What do the FATF 40 Recommendations cover?
 

 

 

  1. Identification of risks & appropriate policies.
  2. The criminal justice system and law enforcement.
  3. The financial system and it's regulation.
  4. Transparency of legal persons and arrangements.
  5. International cooperation

19

 

Why are the FATF 40 Recommendations not meant to be identically implemented in all countries?

 

  • Countries have different legal and financial systems so can't have identical measures.
  • FATF Recommendations set minimum standards of action for countries to implement according to their particular circumstance

20

 

The 2003 revisions of FATF 40 Recommendations introduced substantial changes. Name the six most important revisions.

  1. Expanded coverage to include terrorist financing.
  2. Widened categories of business that should be covered by national laws to include:
    • real estate agents
    • accountants
    • lawyers
  3. Specified compliance procedures on:
    • customer identification
    • due diligence
    • enhanced due diligence for high risk transactions & customers
  4. Adopted clearer definition of predicate offenses.
  5. Encouraged prohibition of shell banks and transparency of legal persons.
  6. Encouraged stronger international cooperation, especially for TF.

21

 

 

The 2012 revisions of FATF 40 Recommendations introduced Nine Special Recommendations. Name the six most important revisions.

Created Recommendations regarding:

  1. Assessing risk with a risk based approach.
  2. Targeted financial sanctions related to proliferation of weapons of mass destruction.
  3. Attention on domestic PEPs.
  4. Assessment of risks of new products prior to launch.
  5. Required FI group-wide AML/CFT program, with information in the group.
  6. Including tax crimes within in the scope of offense categories

22

 

List the seven topic groupings of the
FATF 40 Recommendations

  1. AML Policies & Coordination (1-2)
  2. Money Laundering and& Confiscation (3-4)
  3. Terrorist Financing & Financing of Proliferation (5-8)
  4. FInancial & Non Financial Institution Preventative Measures (9-23)
  5. Transparency & Beneficial Ownership of Legal Persons & Arrangements (24-25)
  6. Powers & Responsibilities of Competent Authorities and other Institutional Matters (26-35)
  7. International Cooperation (36-40)

23

 

Name the eleven top-level highlights
of the 40 Recommendations.

  1. Risk Based Approach
  2. Designated Categories of Offenses
  3. Terrorist Financing & Financing of Proliferation
  4. Knowledge & Criminal Liability
  5. Customer Due Diligence measures
  6. Additional Due Diligence on Specific Customers & Activites
  7. Suspicious Transaction Reporting
  8. Expanded Coverage of Industries
  9. Transparency & Beneficial Ownership of Legal Persons
  10. Powers & Responsibilities of Competent Authorities
  11. International Cooperation

24

 

What are the two simple components of a
Risk Based Approach to ML/TF?

 

(Highlights of 40 Recommendations: Risk Based Approach)

 

  • Identify, assess, and understand ML/TF risks.
  • Take appropriate measures to mitigate identified risks.

25

 

What are two benefits of a
Risk Based Approach to ML/TF?

 

(Highlights of 40 Recommendations: Risk Based Approach)

 

  1. Allows countries/institutions to target limited resources to their own circumstances.
  2. Increases efficiency of preventative measures.

26

 

What are does "Designated Categories of Offences" mean?

 

(Highlights of 40 Recommendations: Designated Categories of Offences)

 

  • Criminal predicates to Money Laundering.
  • Crimes which, in trying to conceal them through financial subterfuge, would constitute criminal ML.
  • Countries should give provisions allowing the confiscation of the proceeds of crime to prevent criminals access to funds.

27

 

List three general highlights regarding the
Recommendations on 
Terrorist Financing and Financing of Proliferation.

 

(Highlights of 40 Recommendations: Terrorst Financing)

  • Even if no terrorist activity is directly attritubuted to it, criminalize terrorist financing to:
    • terrorist acts
    • organizations
    • individual terrorists
  • Impose sanctions freezing assets of persons with involvement in terrorism or proliferation of WMDs.
  • Establish controls to mitigate misuse of non-profits to provide support to terrorists.

28

List 3 general highlights regarding
Knowledge & Criminal Liabilities
in the 40 Recommendations.

 

(Highlights of 40 Recommendations: Knowledge & Criminal Liabillities)

 

  • "Knowledge" of the offence of Money Laundering may be inferred from objective factual circumstances.
  • Also called willful blindness.
  • Criminal or civil liability should apply to legal persons also.

29

 

When should Financial Institutions conduct
Client Due Diligence?

 

(Highlights of 40 Recommendations: Customer Due Diligence measures)
 

When they:

  1. Establish business relations.
  2. For occasional transactions/wire transfers above the specified threshold.
  3. There's a suspicion of ML or TF.
  4. Have doubt customer identification on file.

30

 

Name five ways in which Financial Institutions
should apply the Risk Based Approach
to Client Due Diligence.

 

(Highlights of 40 Recommendations: Client Due Diligence)
 

  1. Identify customer and verify identity with reliable, independent source documents. (No anonymous/ fictitious names).
  2. Identify the beneficial owner and verify identity. (Legal persons should include ownership & control structure).
  3. Understand & obtain information on intended nature of the business relationship).
  4. Conduct ongoing due diligence, including scrutiny of transaction history for consistency with relationship.
  5. Maintain records of customer information/ transactions to comply with legal authorities.

31

List five customer types and activities which should require Additional Due Diligence.

 

(Highlights of 40 Recommendations: Client Due Diligence)
 

 

  1. Politically Exposed Persons.
  2. Cross-border correspondent banking.
  3. Money or Value Transfer Services (MVTS)
  4. New Technologies
  5. Wire Transfers

32

 

What four steps should be taken for
Additional Due Diligence with
Politically Exposed Persons?

 

(Highlights of 40 Recommendations: CDD)
 

Steps should be taken to:

  1. Identify PEPs.
  2. Obtaining senior management relationship approval.
  3. Establishing source of wealth & funds.
  4. Conduct ongoing monitoring.

33

 

What five additional steps should be taken for
Additional Due Diligence with
Cross-Border Correspondent Banking?
 

(Highlights of 40 Recommendations: CDD)
 

Steps should be taken to:

  1. Understand the institution's:
    • business
    • reputation
    • supervision
    • AML controls
  2. Obtain management approval of relationship.
  3. Document responsibilities of each institution.
  4. Make controls against Payable Through accounts.
  5. Ensure accounts aren't established for shell banks.

34

 

What two steps should be taken for
Additional Due Diligence with
Money or Value Transfer Services (MVTS)?

 

(Highlights of 40 Recommendations: CDD)
 

 

Steps should be taken to ensure MVTS are:

  • Licensed or registered.
  • Subject to appropriate AML requirements.

 

35

What four steps should be taken for Additional Due Diligence with New Technologies?

 

(Highlights of 40 Recommendations: CDD)

 

Prior to launch, steps should be taken to identify and mitigate risks with new:

  • products
  • business practices
  • delivery mechanisms
  • technology

36

 

What two steps should be taken for
Additional Due Diligence with Wire Transfers?
 

(Highlights of 40 Recommendations: CDD)     
 

Steps should be taken to:

  • require FI's obtain & send with wires: 
    • originator
    • intermediary
    • beneficiary information
  • Monitor wires for:
    • incomplete information
    • parties subject to UN sanctions

37

 

List three general highlights regarding
the Recommendations on 
Suspicious Transaction Reporting.

 

(Highlights of 40 Recommendations: STRs)

 

  • FIs must report to FIU when they have reasonable grounds to suspect funds are proceeds of crime or related to TF.
  • The employee reporting transaction should be protected from liability.
  • Employees should be prohibited from disclosing reporting to customers.

38

 

List five industries, institutions and professions 
the FATF recommends be subject to AML regulations
in certain situations.

 

(Highlights of 40 Recommendations: Extended Coverage of Industries)

 

  1. Casinos when transactions hit designated threshold.
  2. Real Estate agents when buying/ selling property.
  3. Dealers of Precious Metals & Stones for cash transactions when they hit a designated threshold.
  4. Lawyers, notaries, accountants, and independent legal professions.
  5. Trust & Company Service Providers.

39

 

In what situations do the
40 Recommendations suggest Casinos
be subject to AML regulations?

(Highlights of 40 Recommendations: Extended Coverage of Industries)

 

  • When transactions hit a designated threshold.
  • And at a minimum should:
    • Be licensed.
    • Prevent criminals from operations.
    • Be supervised for compliance to AML requirements.

40

 

In what situations do the
40 Recommendations suggest Real Estate Agents
be subject to AML regulations?

(Highlights of 40 Recommendations: Extended Coverage of Industries)

 

When they are involved in the
sale and purchase of properties.

41

 

In what situations do the 40 Recommendations
suggest Dealers in Precious Metals & Stones 
be subject to AML regulations?

(Highlights of 40 Recommendations: Extended Coverage of Industries)


When cash transactions hit a designated threshold.

42

 

In what situations do the 40 Recommendations
suggest Dealers in Legal Professionals & Accountants
be subject to AML regulations?

(Highlights of 40 Recommendations: Extended Coverage of Industries)


When they are involved in client transactions including:

  • Sale/purchase of property.
  • Sale/purchase of businesses.
  • Managing client money, security, assets.
  • Establishing/managing banks, savings, securities accounts.
  • Creating/managing companies & legal persons.

43

 

In what situations do the 40 Recommendations
suggest Dealers in Trust & Company Service Providers
be subject to AML regulations?

(Highlights of 40 Recommendations: Extended Coverage of Industries)


When they are involved in setting up or acting as:

  • Formation agent of legal persons.
  • Director or secretary of a company.
  • Trustee of an express trust.
  • Nominee shareholder for another person.

44

List two general highlights regarding the 
Recommendations on transparency and
beneficial ownership of
legal persons and arrangements

 

 

(Highlights of 40 Recommendations: Transparency & Beneficial Ownership)

 

 

Countries should take appropriate measures to:

  • Prevent misuse of legal persons for ML/TF
  • Ensure beneficial ownership of legal persons is available to authorities - ex. bearer shares, nominee shareholders.

45

List five general highlights regarding the
powers and responsibilities of the authorities in the
40 Recommendations.

 

(Highlights of 40 Recommendations: Powers & Authorities of competent authorities)

Countries should:

  • Supervise FI's & designated non-financial businesses to ensure:
    • implementation of 40 Recommendations
    • they're not owned by criminals
  • Establish FIU's.
  • Provide authorities & resources to investigate & sieze assets.
  • Implement measures to detect cross border movement of currencies & negotiatble instruments.
  • Provide statistics, guidance & feedback.

46

List two general highlights regarding 
International Cooperation 
in the 40 Recommendations.
 

(Highlights of 40 Recommendations: International Cooperation)

Countries should:

  • Ratify UN conventions against signficiant crimes & terrorism.
  • Provide mutual legal assistance in:
    • Investigating ML/TF.
    • Freezing and confiscating criminal proceeds
    • Extradition.

 

47

 

How did the FATF deal with non-cooperative
countries and territories (NCCT)?

 

  • With a practice of naming and shaming.
  • It assessed jurisdictions in 25 distinct areas to seek critical weaknesses in their AML systems.

48

 

What four broad areas did the FATF cover in their 25-criteria reviews of countries to identify NCCTs?

 

  1. Loopholes in financial regulations.
  2. Obstacles raised by other regulatory requirements.
  3. Obstacles to international cooperation.
  4. Inadequate resources for preventing and detecting money laundering activities.

49

 

List five loopholes in financial regulations that the
FATF assessed countries for in identifying NCCT.

 

(NCCT 4 broad areas)

 

  1. No or inadequate regulations or supervision of FIs.
  2. Inadequate rules for licensing FIs, including backgrounds of managers & beneficial owners.
  3. Inadequate customer identification requirements.
  4. Excessive secrecy provisions.
  5. Lack of efficient suspicious transaction reporting.

50

 

Name two obstacles in other regulatory requirements
(not financial)
that the FATF assessed countries for in identifying NCCT.

 

(NCCT 4 broad areas)

 

  1. Inadequate commercial law requirements for registration of business/legal entities
  2. Lack of identification of beneficial owners of legal/ business entities

51

 

Names two obstacles to
international cooperation 
that the FATF assessed countries for in identifying NCCT.

 

(NCCT 4 broad areas)

 

Obstacles to international cooperation from:

  1. administrative authorities
  2. judicial authorities

52

 

Name two inadequate resources for preventing and detecting money laundering activities 
that the FATF assessed countries for in identifying NCCT.

 

(NCCT 4 broad areas)

 

  1. Lack of resources in public and private sectors.
  2. Absence of a FIU or equivalent mechanism.

53

 

What was the goal of the FATF's
NCCT Process?

 

To reduce the vulnerability of the financial system to ML by: ensuring all financial centers

  • adopt and 

  • implement measures 

for the prevention, detection, and punishment
of ML according to recognized international standards

54

 

When,
by whom,
and why
was the Basel Committee on Banking Supervision created?

 

 

 

  • When: 1974
  • By: G10 countries' Central Bank governors
  • To: promote sound supervisory standards worldwide

55

 

The Basel Committee on Bank Supervision
secretariat is provided by the 
Bank for International Settlements (BIS).

What is BIS?
To whom does it provide service?

 

  • BIS is an international organization that fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability.
  • BIS exclusively provides services to central banks and international organizations.

56

 

What role do Banking Supervisors
have regarding ML?

 

(Basel Committee)

 

Banking Supervisors have a role to:

  1. Ensure banks have procedures in place to avoid involvement with criminarls.
  2. To promote high ethical & professional standards in the financial sector.

57

 

What six principles
did the Basel Committee set out in their 1988 statement of principles called "Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering"?

 

(Basel Committee)

The six principles for banking supervisors are:

  1. customer identification
  2. compliance with laws
  3. conformity with high ethical standards and local laws and regulations
  4. full cooperation with national law enforcement to the extent permitted without breaching customer confidentiality
  5. staff training
  6. record keeping and audits

58

 

Why did the Basel Committee's 
1988 statement of principles
stress cooperation within the confines of confidentiality?

 

(Basel Committee)

 

Because the principles preceded AML legislation allowing protection from civil suites for breach of confidentiality when disclosing to enforcement agencies.

59

What is the purpose of the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”

 

 

(Basel Committee)

 

To provide guidance to minimum standards for worldwide implementation of KYC practices, including enhanced due diligence.

60

Name the five sections of the
Basel Committee's 21 page 2001 paper called
“Customer Due Diligence for Banks”

 

(Basel Committee)

 

  1. Introduction
  2. Importance of KYC standards for supervisors and banks
  3. Essential elements for KYC standards
  4. The role of supervisors
  5. Implementation of KYC standards in a cross-border context

61

In the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
what else should banks do besides establish the indentity of its customers? 


(Basel Committee)

 

Banks should also monitor account activity to identify transactions that do no conform with normal or expected transaction for that customer or account type.

  • when significant transactions occur
  • when documentation standards change
  • when there is a change in way the account is operated

62

How does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
view numbered accounts?
 

(Basel Committee)

Numbered accounts should:

  • be treated to same KYC procedures as other customer accounts
  • provide customer identity to be known by adequate number of bank staff
  • should not be used to hide customer identity from banks compliance function or supervisors

63

What seven specific customer identification issues
does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
identify?
 

(Basel Committee)

  1. Trust, nominee, and fiduciary accounts
  2. Corporate verhicles, i.e. companies with nominee shareholders or bearer shares
  3. Introduced businesses
  4. Client accounts opened by professional intermediaries (pooled accts, i.e. mutual funds, pension funds, money funds)
  5. PEPs
  6. Non face to face customers
  7. Correspondent banking

64

What policies does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
suggest for identifying an acceptable customer?

 

(Basel Committee)

Policies and procedures describing acceptable customers based on:

  • customer background
  • country of origin
  • business activity
  • and other risk indicators 

65

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
say about Private Banking accounts?

 

(Basel Committee)

 

Private banking accounts should under no circumstances escape KYC policies.

66

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
say about corporate accounts?

 

(Basel Committee)

 

  • Identify corporations that operate accounts
  • When professional intermediaries are involved, verify the relationship between the owners and intermediary

67

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
say about non face to face customers?

 

(Basel Committee)

 

Banks should uses normal identification procedures
and should 
never open accounts for persons adamant about anonymity.

68

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
say about bank employees?

 

(Basel Committee)

 

That there should be 

  • periodic bank wide employee training explaining KYC policies/ AML requirements.
  • internal auditors monitoring staff performance and adherence to KYC procedures.

69

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
say about high risk accounts?

 

(Basel Committee)

 

That compliance personnel should monitor high risk accounts to:

  • obtain greater understanding of customers normal activities.
  • enable updating identification papers and detection of suspicious transaction patterns

70

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
say bank regulators should do?

 

(Basel Committee)

Bank regulators should:

  • ensure bank staff follow KYC customers
  • review customer files and a sampling of accounts
  • take appropriate action against officers who fail to follow KYC procedures

71

What does the Basel Committee's 21 page
2001 paper called
“Customer Due Diligence for Banks”
see as the four key elements of KYC?

 

(Basel Committee)

 

  1. Customer identification
  2. Risk management
  3. Customer acceptance
  4. Monitoring

72

What does the Basel Committee's 
2004 paper called
“Consolidated KYC Risk Management”
examine?

 

(Basel Committee)

It complements their 2001 CDD paper and examines:

  • critical elements for effective management of KYC risk throughout a banking group.
  • the need for banks to:
    • adopt a global approach
    • apply elements for sound KYC program to both parent bank and subsidiaries
  • sees the elements of sound KYC programs as:
    • risk management
    • customer acceptance
    • identification policies
    • ongoing monitoring of high risk accts

73

What is the fuller name of the EU Directives?

 

The European Union Directives on the
Prevention of the Use of the Financial System
for the Purpose of
Money Laundering and Terrorist Financing.

74

Why are the European Union's Directives important in comparison to the FATF or Basel Committee?

 

(EU Directives)

  • They required members to enact legislation to prevent their domestic financial systems from being used for ML.
  • European law prevails over national laws in the case of directives.
  • As such they have more weight than the voluntary standards of the Basel Committee or FATF?

75

When was the Eurpoean Union First Directive adopted, and
what did it focus on?

 

(EU Directives)

  • Adopted in 1991
  • Focused on drug trafficking as defined by 1988 Vienna convention
  • Encouraged member states to extend the predicate offenses to other crimes

76

What was the key feature
of the 2001 Second Directive
in regards to scope?

 

(EU 2nd Directive key features)

  • It extended the scope of the First Directive beyond drug-related crimes.
  • It expanded the definition of “criminal activity” to include all serious crimes, including corruption and fraud against the financial interests of the European Community.
  • It explicitly brought bureaux de change and money
    remittance offices under AML coverage.

77

What was the key feature
of the 2001 Second Directive
in regards to criminal conduct?

 

(EU 2nd Directive key features)

 

Knowledge of criminal conduct can be inferred from objective factual circumstances.

78

What 4 things did the 2001 Second Directive
include in the definition of money laundering?
 

(EU 2nd Directive key features)

  1. The conversion or transfer of property with the knowledge that's it's derived from criminal activity.
  2. Concealing or disguising the nature, source, location, etc. of property knowing it's derived from criminal activity.
  3. Acquisition or possession of property, knowing it's derived from criminal activity.
  4. Participation in any way to the commission of any of the above.

79

What six professions did the 2001 Second Directive
obligate to begin reporting when they participate in the movement of money?
 

(EU 2nd Directive key features)

Businesses and professions including

  • auditors
  • accountants
  • real estate agents
  • tax advisors
  • legal professionals

80

Why was the 2001 Second Directive

considered a leap forward?

 

(EU 2nd Directive key features)

  • It included many of the important financial centres of the world.
  • It went well beyond similar standards of the UN, the FATF, and in many respects the USA.

81

 

What year was the EU Third Directive adopted?


(EU 3rd Directive)

 

 

Adopted in 2005.

82

How did the EU Third directive
handle the relationship of
Money Laundering and Terrorist Financing?


(EU 3rd Directive)

The 3rd Directive:

  • Treats ML and TF as separate crimes.
  • Expanded to cover not just proceeds of crime but collection of money or property for terrorist financing.

- extend customer identification and SAR reporting to trusts, company service providers, life insurance intermediaries, dealers selling good for cash payments of more than 15 euros

83

To what four business segments did the
EU Third directive extend 
customer identification & STR obligations?


(EU 3rd Directive)

  1. trusts
  2. company service providers
  3. life insurance intermediaries
  4. dealers selling goods for cash payments of more than 15,000 Euros.

84

What is the Risk Based approach
to customer due diligence
laid out in the EU Third directive?


(EU 3rd Directive)

The requirement for
Simplified or Enhanced Due Diligence
is based on the risk of ML or TF posed by the customer.

85

How did the EU Third directive
protect reporting employees?

(EU 3rd Directive)

The 3rd Directive privides protection of employees who report suspicions of money laundering or terrorist financing. It 
instructs member states to “do whatever is in their
power to prevent employees from being threatened.”

86

How did the EU Third directive
handle reporting statistics?


(EU 3rd Directive)

Obligates member states to keep comprehensive stats regarding the use and result obtained from STRS, including:

  • number of STRs filed
  • follow up given to those reports
  • annual number of cases investigated
  • persons prosecuted
  • persons convicted

87

How did the EU Third directive
handle beneficial owners?


(EU 3rd Directive)

The 3rd Directive:

  • Requires financial institutions to identify and verify the beneficial owner of all accounts held by legal entities/ persons
  • Defines "beneficial owner: as the natural person who directly/ indirectly controls more than 25%.

88

What ten professions and institutions 
does the EU Third directive
apply to?

(EU 3rd Directive)

  • credit institutions
  • financial institutions
  • auditors
  • external accountants
  • tax advisors
  • legal professionals
  • trust/ company service providers
  • estate agents
  • high value goods dealers who trade in cash over 15K Euros
  • casinos

89

In what three ways did the scope of the
EU Third Directive
differ from the Second Directive?


(EU 3rd Directive)

  1. Specifically includes the category of trust/company service providers.
  2. Covers all dealers trading in goods who handle cash over 15,000 Euros.
  3. The definition of financial institutions includes certain insurance intermediaries.

90

What are the three main
points of contention regarding the
EU Third directive?


(EU 3rd Directive)

  1. The definition of PEPs.
  2. The requirement of lawyers to report suspicious activity.
  3. Implementation of a "comitology committee" (EU system that oversees implementation of acts proposed by the European Commission).

91

How did the EU Third directive
define PEPs?


(EU 3rd Directive)

“Politically exposed persons” means

  • natural persons who are or have been entrusted with prominent public functions
  • immediate family members,
  • individuals known to be close associates (when relationship is publicly known or FI suspects there is a relationship).
  • no longer PEPs one year after not being in a prominent position.

92

Name the eight regional bodies and
FATF Associate Members
that have a similar form & function to the FATF.


(Regional & Othe Intl Initiatives)

  1. Asia/Pacific Group on Money Laundering (APG).
  2. Caribbean Financial Action Task Force (CFATF).
  3. Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL) (formerly PC-R-EV).
  4. Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).
  5. Eurasian Group (EAG).
  6. Financial Action Task Force of South America against Money Laundering (GAFISUD – Grupo de Acción Financiera de Sudamérica)
  7. Intergovernmental Action Group against Money-Laundering in West Africa (GIABA – Groupe Intergouvernemental d’Action contre le Blanchiment d’Argent en Afrique de l’Quest)
  8. Middle East and North Africa Financial Action Task
    Force (MENAFATF)

93

What is the goal of the
Egmont Group of
Financial Intelligence Units?

 

(Other AML Intiatives)

To provide a forum for FIUs around the world to improve cooperation in AML/ATF and to
foster implementation of domestic programs.

 

Named for the first meeting place in the
Egmont-Arenberg Palace in Brussels.

94

What five types of support does the
Egmont Group of
Financial Intelligence Units include?

 

(Other AML Intiatives)

  1. Expanding and systemizing cooperation in reciprocal exchange of information.
  2. Increase effectiveness of FIUs by offering training and promoting personnel exchanges to -
  3. Fostering better & secure communication between FIUs through technology (e.g. Egmont Secure Web - ESW).
  4. Promoting operational autonomy of FIUs.
  5. Promoting the establishment of FIUs.

95

What three elements are in the 
Egmont Group of Financial Intelligence Units
definition of an FIU?

 

(Other AML Intiatives)

 

  1. A central, national agency responsible for disclosures of financial information including :
    • receiving
    • analyzing
    • disseminating to competent authorities;
  2. Concerning suspected proceeds of crime and potential financing of terrorism;
  3. Required by national legislation or regulation to combat ML and TF

96

What is the Egmont Group's web address?


(Other AML Intiatives)

The Egmont Group’s homepage is

http://www.egmontgroup.org/

97

What is The Wolfsberg Group
and its aim?


(Other AML Intiatives)

The Wolfsberg Group is

  • An association of 11 global banks.
  • Aims to develop financial services industry standards and related products for:
    • KYC policies
    • AML and CTF policies
  • Named for its first meeting at the Wolfsberg Castle in Switzerland.
  • Came together in 2000.

98

What topic area does 
The Wolfsberg Group focus on?

What is the legal nature of its recommendations?


(Other AML Intiatives)

  • Focus is on AML guidelines for Private Banking.
  • Marks an unprecedented private-sector assault on corruption proceeds.
  • Group was accompanied by representatives from Transparency International.
  • Recommendations hold no force of law and carry no penalties.

99

What range of recommendations does
The Wolfsberg Group's 2000
"AML Principles for Private Banking" take?


(Other AML Intiatives)

Recommends controls for private banking ranging from:

  • basic customer identification
  • to EDD
  • to heightened scrutiny of individuals who hold positions of public trust

100

In what theme does the Wolfsberg Group's 2000
"AML Principles for Private Banking" 
reccommend banks only accept PB clients whose
source of wealth can be
reasonably established to be legitimate?


(Other AML Intiatives)

To establish legitimacy of wealth, banks should:

  • Identify beneficial owners for all accounts when the person is someone other than the client.
  • Perform due diligence on money managers & similar intermediaries.
  • Have at least one person other than the private banker to approve new clients and accounts.

101

What three situations or activities
does the The Wolfsberg Group's 2000
"AML Principles for Private Banking"
suggest need further due diligence?


(Other AML Intiatives)

  1. Public officials or positions of public trust
    • past or present
    • including families or close associates
  2. High risk countries
    • inadequate AML standards
    • or high risk for crime & corruption
  3. High risk activities, or sources of wealth known to be susceptible to ML

102

What policies does does
The Wolfsberg Group's 2000
"AML Principles for Private Banking"
suggest banks should write?


(Other AML Intiatives)

Have written policies on:

  • Identification & follow up of unusual/ suspicious activities.
  • A definition of suspicious activity with examples.
  • A monitoring system that uses private bankers knowledge of types of activities that are suspicious for particular clients.
  • Mechanisms to identify suspicious activities, including meetings & in-country visits with clients. 
  • Steps to take when suspicious activities are identified.

103

Beyond identification of suspicious activity, 
what five additional areas does
The Wolfsberg Group's 2000
"AML Principles for Private Banking" address?


(Other AML Intiatives)

  1. Reporting ML issues to management.
  2. AML training.
  3. Retention of relevant documents.
  4. Deviation from policy.
  5. Creation of an AML department and an AML policy

104

What area did The Wolfsberg Group's
2002 revision of
"AML Principles for Private Banking" 
add?


(Other AML Intiatives)

It added prohibiting use of internal non-client accounts (i.e. concentration accounts) to keep clients from being linked to movement of funds on their behalf.

105

In what six areas do the recommendations from
The Wolfsberg Group's 2002 
"Suppression of the Financing of Terrorism” outline?


(Other AML Intiatives)

  1. Providing official lists of suspected terrorists on a
    globally coordinated basis by relevant authorities.
  2. Including adequate information in the lists to help
    institutions search customer databases efficiently.
  3. Providing prompt feedback to institutions following
    circulation of the official lists.
  4. Providing information on the manner, means and
    methods used by terrorists.
  5. Developing government guidelines for business
    sectors and activities identified as high-risk for
    terrorism financing.
  6. Developing uniform global formats for funds transfers
    that assist in the detection of terrorism financing.
  7. Outline roles of FIs in fight against ML and TF.

106

What does the "safe harbor immunity" recommendation from
The Wolfsberg Group's 2002 
"Suppression of the Financing of Terrorism”
meant to encourage?


(Other AML Intiatives)

To encourage FIs to share information and report to authorities by protecting the institutions.

107

List seven business relationships for which
The Wolfsberg Group's 2002 
"Suppression of the Financing of Terrorism”
recommended EDD steps.


(Other AML Intiatives)

Business relationships with:

  1. Remittance businesses.
  2. Exchange houses.
  3. Casas de Cambio.
  4. Bureaux de change.
  5. Money transfer agents.
  6. Undreground banking businesses.
  7. Alternate remittance systems

108

To what kind of correspondent relationships does 
The Wolfsberg Group's 2002 
“Anti-Money Laundering Principles for Correspondent Banking”
extend their 14 recommendations?


(Other AML Intiatives)

All correspondent relationships including those with:

  • banks
  • broker-dealers
  • mutual funds
  • money services  businesses
  • hedge funds
  • credit card issuers

109

Name five of the more notable recommendations from 
The Wolfsberg Group's 2002 
“Anti-Money Laundering Principles for Correspondent Banking.”


(Other AML Intiatives)

  1. Due diligence should be risk based depending on location, type of business, ownership, customer base, regulatory status, correspondent's AML controls.
  2. Offer no products/ services to shell banks.
  3. Generally exclude principles to central banks and monetary authorities of member countries of FATF, or multinational institutions (i.e. IMF or World Bank).
  4. All correspondent banking client information should be reviewed and updated periodically based on risk factors.
  5. The principles should be part of FI's larger AML program.

110

Describe the
Due Diligence Repository
developed by the Wolfsberg Group and
Bankers Almanac starting in 2004.


(Other AML Intiatives)

  • Initiative to standardize due diligence info saving time & cost.
  • Includes copies of:
    • company by-laws
    • relevant licenses
    • extracts from commercial registers
    • certificates of incorporation
    • recent annual reports
    • shareholder info >5% ownership
    • bios of board members & senior managers
    • info about AML policies & procedures

111

What does the Wolfsberg Group's 2003
“Monitoring, Screening and Searching Wolfsberg Statement”
discuss?

(Other AML Intiatives)

  • The need for appropriate monitoring of transactions and customers to:
    • identify potential unusual or suspicious activity and transactions
    • report these activities to competent authorities
  • Iissues related to risk-based processes for monitoring, screening and searching transactions and customers.

112

Name as many of the 9 Wolfsberg Standard documents as possible that are listed on their webpage.

(http://www.wolfsberg-principles.com/standards.html)
as of August 2017 - some papers removed from site for updating.


(Other AML Intiatives)

  1. Wolfsberg Guidance on PEPs (May 2017)
  2. Trade Finance Principles (2017)
  3. SWIFT RMA [Relationship Mgmt App] Due Diligence
  4. Wolfsberg CB [Correspondent Banking] Principles (2014)
  5. Wolfsberg Group MIPS [Mobile & Internet Payment Services] Paper (2014)
  6. Wolfsberg Guidance on Prepaid & Stored Value Cards (2011)
  7. Wolfsberg Guidance on Credit/Charge Card Issuing & Merchant Acquiring Activities (2009)
  8. Clearing House Statement on Payment Messages Standards (2007)
  9. Guidance on a Risk Based Approach for Managing Money Laundering Risks (2006)

113

Since 2001, how have the World Bank
and International Monetary Fund
supported the FATF to address resistance
from certain nations to joining the fight against ML?


(Other AML Intiatives)

  • By requiring countries that benefit from their financial and structural assistance programs to have effective money laundering controls.
  • By integrating ML & financial crimes into its surveillance exercises and programs.

114

Describe four ways the
World Bank and International Monetary Fund
have become more active in combating ML since
their 2001 background paper, 
“Financial System Abuse, Financial Crime
and Money Laundering.”


((Other AML Intiatives)

 

  1. Concentrating on ML over other forms of financial abuse.
  2. Helping strengthen financial supervision & regulation in countries.
  3. More closely interacting with OECD and Basel Committee on banking supervision.
  4. Insisting on the application of international AML standards in countries that ask for financial assistance.

115

What action did the World Bank and
International Monetary Fund take that
put an end to the FATF practice of publicizing NCCT?


(Other AML Initiatives)

By permanently adopting a program that assesses a nation's compliance with international AML and ATF standards, using a single global methodology 

116

Provide a brief overview
of the USA Patriot Act


(US Legislation Applying Internationally)

  • "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act."
  • Motivated by September 11, 2001 attacks.
  • Has implications on US institutions and Non-US institutions that do business in the USA.
  • Premise is that international access points to the US financial system must be controlled.

117

What is the title of
Section 311 of the USA Patriot Act?


(US Legislation Applying Internationally)

 

"Special Measures for Primary Money Laundering Concerns"

118

What is the general purpose of
Section 311 of the USA Patriot Act?


(US Legislation Applying Internationally)

To give the US Treasury Department with the authority to apply graduated, proportionate measures against a foreign:

  • jurisdiction
  • financial institution
  • type of international transaction
  • type of account 

by forcing US Banks to halt many financial dealings with those designated "primary money laundering concerns."

119

Once a country or FI is designated a
primary money laundering concern
under Section 311 of the USA Patriot Act,
what are the five special measures that the Treasury Department can require US FI's to follow?


(US Legislation Applying Internationally)

  1. Keep records & file reports on certain financial transactions including:
    • description of transactions
    • identities & addresses of participants
    • identities & addresses of the beneficial owners
  2. Obtain beneficial ownership info of any accounts opened or maintained in US by foreign person or representative.
  3. Identify customers permitted to use or routed through foreign banks' payable through accounts.
  4. Identify customers permitted to use or routed through foreign banks' correspondent accounts.
  5. Close certain payable-through or correspondent
    accounts.

120

What steps must the Treasury Department take
in order to designate a
"primary money laundering concern"
under Section 311 of the USA Patriot Act?


(US Legislation Applying Internationally)

The Secretary of the Treasury must consult with 

  • the Secretary of State
  • the Attorney General

121

Name five countries designated 
"primary money laundering concerns"
under Section 311 of the USA Patriot Act.


(US Legislation Applying Internationally)

  1. The country of Myanmar (formerly Burma);

    and specific banks in:
     
  2. Latvia
  3. Syria
  4. Macau
  5. Myanmar

122

What is the title of
Section 312 of the USA Patriot Act?


(US Legislation Applying Internationally)

Correspondent and Private Banking Accounts

123

What is the general purpose of
Section 312 of the USA Patriot Act?


(US Legislation Applying Internationally)

Requires due diligence and in certain situations EDD for:

  • Foreign correspondent accounts (including virtually all account relationships that FIs can have) 
  • Private banking accts for non US persons.

124

To what US institutions does
Section 312 of the USA Patriot Act apply?


(US Legislation Applying Internationally)

The following institutions in the USA:

  • banks
  • credit unions
  • thrift institutions
  • trust banks
  • broker-dealers
  • futures commissions merchants
  • introducing brokers in commodities and mutual funds
  • US-based agencies and branches of foreign banks

125

To what foreign FI's does
Section 312 of the USA Patriot Act apply?


(US Legislation Applying Internationally)

The following foreign FIs:

  • foreign banks

  • foreign branches of US banks

  • foreign businesses considered broker-dealers

  • futures commission merchants & introducing brokers in commodities or mutual funds if they operate in the USA

  • money transmitters/ currency exchangers organized in a foreign country

126

What three measures
must a due diligence program address
under Section 312 of the USA Patriot Act?

(US Legislation Applying Internationally)

  1. Determine if EDD is necessary.
  2. Assess ML risk presented by a correspondent account.
  3. Apply risk-based procedures and controls reasonably designed to detect and report suspected ML.

127

Under Section 312 of the USA Patriot Act,
enhanced due diligence procedures must be applied to a correspondent account established by a foreign FI operating under what three types of licenses?


(US Legislation Applying Internationally)

  1. An offshore banking license.
  2. A license issued by a foreign country designated as non-cooperative by an international organization & the Treasury Secretary agrees with the designation.
  3. A country designated as a "primary money laundering concern" under Section 311 of the USA Patriot Act.

128

When required under Section 312 of the USA Patriot Act,
what three enhanced due diligence procedures
must be applied to a correspondent account
established by a foreign FI?


(US Legislation Applying Internationally)

  1. Conduct enhanced scrutiny for possible ML and suspicious transactions by:
    • Obtain info relating to foreign bank's AML program.
    • Monitoring transactions in and out of correspondent account.
    • Obtaining info about correspondent account being used as a Payable Through Account.
  2. Identifying & mitigating risks of correspondent account being used by other foreign FI's that have a correspondent relationship with that bank.
  3. Identifying identities of FI owners who have >=10% of any class of shares, with the nature & extent ownership interest.

129

How does Section 312 of the USA Patriot Act define a Private Banking account?


(US Legislation Applying Internationally)

An account:

  • with a minimum aggregate deposit of >= $1 million
  • for one or more non-US persons
  • assigned to a bank employee managing the relationship with the non-US person.

130

What four reasonable steps must be taken
under Section 312 of the USA Patriot Act
for applicable Private Banking accounts?


(US Legislation Applying Internationally)

  1. Ascertain the identity of all nominal and beneficial owners of the account.
  2. Ascertain whether any such owner is a "senior foreign political figure."
  3. Ascertain the source of funds in the account and the purpose and expected use of the account.
  4. Monitor account activity for consistency with info povided on source of funds & expected use of the account.

131

How is a "senior political figure" defined 
under Section 312 of the USA Patriot Act
for applicable Private Banking accounts?


(US Legislation Applying Internationally)

Reasonable steps must be taken to determine if the person is currently or formerly a senior official in the following branches of foreign governments:

  • Executive 
  • Legislative 
  • Administrative
  • Military
  • Judicial

Or in a:

  • Political party
  • Government owned commercial enterprise
  • Their immediate family members
  • Those widely & publicly known to be close associates

132

What is enhanced scrutiny of a
"senior political figure's" account trying to detect
under Section 312 of the USA Patriot Act
for applicable Private Banking accounts?


(US Legislation Applying Internationally)

Trying to detect:

  • If funds may involve proceeds from foreign corruption.
  • Includes assets or property obtained through:
    • misappropriation
    • theft
    • embezzlement of public funds
    • unlawful conversion of property of a foreign government
    • bribery
    • extortion

133

What is the title of
Section 313 of the USA Patriot Act?


(US Legislation Applying Internationally)

Prohibition on correspondent accounts for foreign shell banks.

134

What is the definition of a foreign shell bank under 
Section 313 of the USA Patriot Act?


(US Legislation Applying Internationally)

  • Unregulated banks with no physical presence anywhere.
  • Physical presence is defined as including:
    • a place of business where it is authorized to conduct banking activities
    • employs one or more individuals on a full time basis at that location
    • maintains operating records at that location
    • is subject to inspection by the banking authority which licensed it at that location
  • Does not include a solely electronic address in a location. 

135

What steps does Section 313 of the
USA Patriot Act require FI's to take to ensure
foreign banks with correspondent accounts do not themselves allow foreign shell banks to access that account?


(US Legislation Applying Internationally)

Banks & securities dealers:

  • can use a certification form to comply with the rule
  • must collect certification at least once every three years that foreign FIs:
    • are not themselves shell banks
    • they do not permit shell banks access to the US correspondent account through a nested correspondent relationship

136

What is the title of
Section 319(a) of the USA Patriot Act?


(US Legislation Applying Internationally)

Forfeiture from US correspondent account.

 

acct - funds deposited into foreign bank, permits gov to seize funds in the same amount from a correspondent bank acct in the US that has been opened and maintained by the foreign bank - not required to trace funds - as they have been deposited into a correspondent acct

137

What is the purpose of
Section 319(a) of the USA Patriot Act?


(US Legislation Applying Internationally)

  • Allows the US Government to seize funds from a correspondent account which were deposited with a foreign bank.
  • US Government does not have to trace the funds as they were deemed to have been deposited into the correspondent account.
  • The owner of the funds may contest the seizure order.

138

What is the title of
Section 319(b) of the USA Patriot Act?


(US Legislation Applying Internationally)

Records relating to Correspondent Accounts for Foreign Banks

139

What does Section 319(b) of the USA Patriot Act allow appropriate Banking agencies to do?


(US Legislation Applying Internationally)

To require an FI to produce within 120 hours (5 days) any information related to:

  • the institution's AML compliance
  • a customer of the institution
  • any account opened, maintained, administered, or managed in the US by the FI

140

What does Section 319(b) of the USA Patriot Act
allow the Secretary of the Treasury
or the Attorney General to do?


(US Legislation Applying Internationally)

  • To subpoena records of a foreign FI that maintains a correspondent account in the US, relating to:
    • the account
    • including records located outside the US
  • If foreign FI fails to comply with or contest the subpoena, the Secretary of Treasury or Attorney General can order US FI to close the correspondent account within 10 days.
  • A foreign bank must have a registered agent in the US to accept service of subpoenas pursuant to this section.

141

What does Section 319(b) of the USA Patriot Act require US banks and securities brokers & dealers to do?


(US Legislation Applying Internationally)

  • To keep records of the identity of the 25% owners of the foreign FI unless it is publicly traded.
  • This is generally collected on the certification form for Section 313 and must be updated every 3 years, or when the information is no longer correct.

142

Under the US Criminal ML and Civil Forfeiture Laws,
what property is covered?


(US Legislation Applying Internationally)

  • Only property in the financial transaction which represents the proceeds of at least one designated underlying crime or specified unlawful activity (SUA).
  • Also reaches foreign individuals & FI's if:
    • the financial transaction occurs in whole or in part in the US.
    • the foreign FI maintains a bank account at a US financial institution.

143

What "specified unlawful activity" is included in the criminal money laundering law of the United States?

 

(US Legislation Applying Internationally)

Specified unlawful activity (SUA) includes virtually any US crime that produces economic advantage, such as:

  • aircraft piracy
  • wire fraud
  • bank fraud
  • copyright infringement
  • embezzlement
  • export violations
  • illegal gambling
  • narcotics offenses
  • racketeering
  • and even some environmental crimes.

144

Under the US Criminal ML and Civil Forfeiture Laws,
what must the prosecution prove?


(US Legislation Applying Internationally)

The prosecution must prove:

  • the existence of an SUA (specified unlawful activity)
  • that the defendent knew funds came from some form of illegal activity
  • but not that the accused knew the exact source of funds.

145

Under the US Criminal ML and Civil Forfeiture Laws,
how have the courts ruled
regarding Willful Blindness?


(US Legislation Applying Internationally)

Willful Blindness:

  • is defined as the deliberate avoidance of knowledge of the facts
  • is the equivalent of actual knowledge
  • may be proven by circumstances surrounding the transaction and defendant's conduct

146

What does "OFAC" stand for?

 


(US Legislation Applying Internationally)

Office of Foreign Assets Control

147

What is the general role of the the
Office of Foreign Assets Control (OFAC)?


(US Legislation Applying Internationally)

  • Administers and enforces economic and trade sanctions based on US foreign policy and national security goals against:
    • targeted countries
    • terrorists
    • narcotics traffickers
    • WMD proliferation
  • Can impose controls on transactions and freeze foreign assets under US jurisdiction
  • Often operates with the close cooperation of allied governments.

148

How are persons identified by the 
Office of Foreign Assets Control (OFAC)?


(US Legislation Applying Internationally)

  • Persons and organizations that appear on a series of lists that OFAC issues periodically are subject to blocking of assets.
  • All US persons (citizens & permanent resident aliens) must comply with OFAC regulation, regardless of where they are located:
    • all persons & entities within the US
    • all US incorporated entities and their foreign branches
    • in some cases (Cuba & North Korea), all foreign subsidiaries owned or controlled by US companies must comply.
    • some foreign persons in possession of US-origin goods must comply.