Leveraging the Revised FATF Recommendations to Fortify Your Customer Due Diligence (CDD)

Transcription

1 Leveraging the Revised FATF Recommendations to Fortify Your Customer Due Diligence (CDD) Controls 10 December Moderator: Pattison Boleigha, CAMS, Head, Group Compliance & Internal Control, Access Bank Plc Presenters: Nathaniel Cole, CAMS, Chief Executive Officer, Forensics & Compliance Institute Edwin Tettey Langmer, CAMS, Department Head, Compliance & Control, UT Bank Limited Dr. 'Buno Emmanuel Nduka, CAMS, Director of Programme and Projects, Inter- Governmental Action Group against Money Laundering in West Africa (GIABA)

2 Leveraging the Revised FATF Recommendations to Fortify Your Customer Due Diligence (CDD) (General Framework) 10 December Buno E. NDUKA (P.hD; CAMS) Director of Programs and Projects Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)

3 Discussion Points Brief on the Revised FATF Recommendations AML/CFT Preventive Measures CDD as preventive measure Benefits of CDD Issues and key elements of CDD FATF R10 and other Recommendations Implementing FATF Recommendation 10 Special CDD Issues on Recommendation 12 PEPs Effectiveness Issues in CDD 3

4 The Revised FATF Standards aka: Recommendations. set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing as well as the financing of proliferation of weapons of mass destructions (FATF, 2012). 4 4

5 Elements of the Revised FATF Standards Risk identification, policies development and domestic coordination; Combat ML, TF and Proliferation financing; Application of preventive measures for FIs, and other designated sectors; Expansion of powers and responsibilities of the competent authorities; Investigative ; Law enforcement and Supervisory authorities Enhancement of the transparency and availability of beneficial ownership information of legal persons and arrangements; and Facilitation of wider international cooperation Organized into 7 Sections as against 5 Sections in the previous set of Recommendations. Now 21 categories of predicate offences 5 5

6 Component Recommendations 1. Description

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8 FATF Standards: Preventive Measures Preventive measures consist of obligations by accountable institutions (financial institutions; DNFBPs; others) that ensure the existence of robust AML/CFT regime in a country and/or jurisdictions Consists 15 Recommendations (R.9 R.23) out of the FATF 40 Recommendations The revised FATF Standards preventive places unique emphasis on certain obligations such as: 8

9 THE FATF PREVENTIVE MEASURES (1) Rec No. Description R.9 FI Secrecy Law R.10 CDD - FIs R.11 Record Keeping R.12 PEPs R.13 Correspondent Banking R.14 Money or Value Transfer Services R.15 New Technologies R.16 Wire Transfers 9 9

10 THE FATF PREVENTIVE MEASURES (2) Rec No. Description R.17 Reliance on Third Parties R.18 Internal Control, Foreign Branches and Subsidiaries R.19 High Risk Countries R.20 STR R.21 Tipping-off and confidentiality R.22 DNFBPs CDD R.23 DNFBPs Other measures (R.18 R.20)

11 Essence of Preventive Measures (1) Ensures reduction in ML/TF activity within the accountable institutions Guarantees the integrity and soundness of the accountable institutions Increases operational efficiency in terms of resource optimization and service delivery Institutionalize AML/CFT compliance culture Promotes financial inclusion Promotes good corporate governance 11

12 Consequences of Poor Application of Preventive Measures (1) FIs and DNFBPs become highly vulnerable to risks of ML/TF High cost of non-compliance (payments of penalties and sanctions) Increases operational and regulatory risks Likelihood of business liquidation (ie. Withdrawal of operating license; etc.) Poor ratings in ME on both Technical and Effectiveness compliance (Placement on enhanced FU process; issuance of public statement; referral to ICRG; etc.) 12

13 Consequences of Poor Application of Preventive Measures (2) Risk to correspondent banking relationships, particularly involving US Dollar business; More scrutiny of international transactions, delays and more questions/documentation; Increasing risk that existing relationships will be cancelled, for fear of reputational contagion. Wealthy citizens may prefer to keep their wealth outside their country of origin loss of domestic business & investment. 13

14 Consequences of Poor Application of Preventive Measures (3) Likely isolation for country s financial system as a result of application of counter-measures by the international community Most correspondent relationships likely to be terminated; Foreign-owned financial institutions likely to consider withdrawal from country. Substantial loss of business. Substantial increase in cost of doing business that would remain. 14

15 Main Messages of the Revised FATF Standards The FATF Recommendations set out minimum requirements for measures that countries, and FIs should implement in the fight against ML & FT Effective implementation of the FATF Recommendations provides an effective framework to combat ML & FT As terrorists and other criminals will always exploit the weakest link, thus, consistent implementation by all countries is needed. Countries and accountable institutions are best placed to judge the risks of ML & FT that affect them, and should ensure that their implementation of AML/CFT measures adequately addresses those risks. Emphasis is on EFFECTIVENESS which entails rigorous process in the next round of mutual evaluation (GIABA MS commences in 4qtr of 2015)

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17 What is CDD? Since the 1980s, there has been calls on Fis and DNFBPs through regulatory oversight to ensure proper due diligence Customer Due Diligence is. the prevention of criminals from operating anonymously or under false identities by accurately identifying customers and knowing enough about their business to be able to differentiate between legitimate business and criminal activity (FATF, 2007)

18 What is CDD? process that FIs and DNFBPs undertake to ascertain whether or not to do business with a person or an entity an attempt to prevent the proceeds of crime from entering the financial systems is at the fore of AML/CFT regulation. An AML/CFT is effective if it has a robust CDD component 18 18

19 What is CDD? CDD is more than simple customer identification i.e. more than taking the name of the customer CDD is: a)identifying the customer & verifying customer s identity from independent sources b)identifying and verifying beneficial ownership and control c)establishing intended purpose and nature of the business relationship d)conducting ongoing due diligence and scrutiny of the relationship and transactions & keep records up to date 19 19

20 Questions answered by CDD? Who is this customer? Can they prove who they say they are? How did they make their money? Therefore, CDD implies Know Your Customer (KYC) 20 20

21 Benefits of CDD? CDD extends to ensuring that the customer is who he/she claims to be; Establishes that the customer actually does own and control the funds; and gaining an understanding of why the relationship is being established and how it will be used in the future. Used to monitor the relationship to ensure that the original understanding of the customer s identity and business remains accurate. CDD provides the basis for both preventive measures in keeping criminal out of the financial systems, and also for investigative measures when trying to identify suspicious transactions

22 Benefits of CDD? helps to protect the reputation and integrity of FIs and DNFBPs Reduces the vulnerabilities of the FIs and DNFBPs to financial crimes forms essential part of sound risk management by providing the basis for identifying, limiting and controlling risk exposures in assets and liabilities Without adequate CDD, FIs and DNFBPs are likely to experience the following types of risks: reputational, operational, legal and concentration 22 22

23 Type of CDD (Simplified or reduced and Enhanced) Application of CDD to legal persons and arrangements Reliance on identification and verification already performed Issues of CDD Timing of verification Requirement to identify existing customers CDD and Tipping Off buno

24 Customer Acceptance Policy Customer Identification Procedures Key Elements of CDD Transaction Monitoring Risk Management 24 24

25 FATF R10 - CDD and other Recs R24 R23 R1 R2 R8 R9 R3; R4; R5; R26; R27; R28; R32; R33 R34; R35 R22 R21 CDD (R10) R11 R12 R20 R16 R14 R15 R

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27 When is CDD Necessary? (criterion 10.2) Generally, CDD is necessary when: establishing an on-going business relationship conducting an occasional transaction (or linked transactions) above the applicable threshold (US$/ 15,000) carrying out a wire transfer as an occasional transaction (R16) there is a suspicion of ML/FT regardless of any exemption or threshold there are doubts about the veracity or adequacy of information previously obtained about the customer 27 27

28 Core Identification Measures (criteria ) General principle is to establish customer s identity using reliable, independent source documents, data or information (which will vary from country-tocountry) (C.10.3) For natural persons, typically obtain: Name, date of birth and nationality Address and other contact details from reliable source For legal persons or arrangements, obtain: Proof of incorporation/creation Identity of signatories, directors, trustees Legal authority of signatories to act 28 28

29 Beneficial Ownership (1) (criterion 10.5) Financial institutions should identify and take reasonable steps to verify the beneficial owner Beneficial owner refers to the natural person(s) who ultimately owns or controls the customer and/or the person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate, effective control over a legal person or arrangement What constitutes reasonable steps will depend on risk policy of institution 29 29

30 Beneficial Ownership (2) (criterion 10.5) Three primary scenarios: o Individuals behind legal persons (concepts of ultimate ownership/control and mind and management ) o Parties linked to legal arrangements (e.g. settlor/trustee/protector/beneficiary of trust) o Person on whose behalf account is held or transaction conducted (but who is not the declared account holder customer) It is not necessary to establish beneficial ownership of listed public companies that are subject to regulatory disclosure requirements (i.e. stock exchange) 30 30

31 Ongoing Due Diligence (criterion 10.7) Ongoing due diligence requires procedures to ensure that institution s knowledge of the customer and of the business relationship remains current to develop and maintain customer risk profile to monitor transactions to ensure they are consistent with customer financial profile to undertake regular reviews to ensure that documents, data and information on customers is kept up to date and relevant Requirement must be explicit: it is not sufficient to infer from other obligations, for example R20 to identify and report suspicious transactions 31 31

32 Timing of Verification (criteria ) Basic rule Verify identity before or during establishment of relationship or undertaking a transaction Exception Delayed verification permissible when essential not to interrupt business, but only when: ML risk is controlled through specific, applied measures Verification takes place as soon as possible 6 months is too long Adopt risk mgt procedure for customer utilization of biz relationship prior to verification 32 32

33 Existing Customer (criteria 10.16) CDD to be applied to existing customer On the basis of materiality and risk; Timely conduct of due diligence Need to ascertain previous CDD measures taken and adequacy of data obtained 33 33

34 Risk-Based Approach (criteria ) Enhanced due diligence required where risk is perceived to be high Adequate analysis of risk before applying exemptions Simplified CDD taken if and only if measures are commensurate with lower risk factors Note: Application of simplified CDD not acceptable where there is suspicion of ML/TF or specific higher-risk scenarios apply 34 34

35 Unsatisfactory CDD and Tipping-Off (Criteria ) Inability of FIs and DNFBPs to comply with relevant CDD measures: Do not enter into business relationship for new customer Terminate biz relationship for existing customer Submit STR on the customer to the FIU Where CDD will lead to tip-off, then discontinue and submit STR on customer to FIU 35 35

36 Special CDD Issues: R.12 (Politically Exposed Persons) - 1 Main goal of R.12: to fight against the laundering of the proceeds of corruption related offences R.12 aims to make sure that FIs apply enhanced measures and scrutiny over the specific category of PEPs (both international and domestic) PEPs defined as persons who have been entrusted with prominent public functions in a foreign country (but countries encouraged to include domestic PEPs) In addition to normal due diligence required by Rec. 10, FIs must take several additional initiatives 36

37 Politically Exposed Persons (2) In addition to normal due diligence, financial institutions must also: Have appropriate risk management systems to determine whether the customer is a PEP Obtain senior management approval for establishing a business relationship with a PEP Take reasonable measures to establish the source of wealth and of funds Conduct enhanced ongoing monitoring of the business relationship 37

38 Typical Challenges for Rec. 12 PEPs are broadly defined and not easy for all relevant PEPs to be captured by FIs Definition and extension of enhanced procedures to family members of such persons Challenge of: Establishing source of wealth, Determining the origin of funds of customers identified as PEPs, Establishing the PEPs behind legal entities 38 38

39 A Recommendation 10 Matrix CRITERIA ACT TIVITY A B C D E F G H I J K L M 39

40 Effectiveness Issues in CDD 1. Adequate risk assessments leading to how exemptions or simplifications are to be applied where there is proven low risk 2. CDD requirements to be set in law while specific requirement may be set out in OEM 1. ID Documents to be sufficiently reliable and to promote financial inclusion 2. Adequate measures for existing customers

41 Effectiveness Issues in CDD 5 Beneficial ownership to be fully covered including clear definition of PEPs 6 High risk obligation for enhanced CDD to be incorporated 7 Staff protection to avoid tipping off CDD is one of the five Critical Recommendations (R3; R5; R10; R11 and R20) for assessing Technical Compliance in the next round of MEs 41 41

42 END OF PRESENTATON

43 Leveraging On Revised FATF Recommendations to Fortify Your CDD Obtaining sufficient customer information to perform CDD and ascertain customers risk levels & Analysis of customers behavior, business and background Nathaniel Cole, CAMS, CPA, FCA, CFE, FCA, CFC, Cr.FA, CFF, SIRM CEO, Forensics & Compliance Institute Regional Director Nigeria- Professional Risk Managers International Association (PRMIA)

44 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Revised FATF Recommendations The new FATF Recommendations contain significant restatement of the previous 40+9 Recommendations. However, the interpretative notes seem to indicate FATF s preference for a systematic approach in countering AML/CFT threats. This is currently considered as the most effective way to address threats posed by criminals that abuse the financial system to launder their ill-gotten gains. In leveraging on the Revised FATF Recommendations we will address its impact on conducting Customer Due Diligence (CDD) and issues relating to customer behavior that we need to factor into our risk based analysis. The Revised FATF recommendations address old and new challenges facing the international community such as tightening sanctions in respect of countries involved in proliferation of weapons of mass destructions. 44

45 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Additional Threats To Consider The Proliferation of weapons of mass destructions is now considered one of the key threats that could cripple the financial system. In view of this, FATF adopted new recommendations aimed at ensuring that there is consistent and effective implementation of actions targeting financial transactions relating to this threat when the United Nations Security Council calls for these. The unexpected Arab Spring created a set of new challenges for the global financial community. In addition, FATF acknowledges the ability of the criminals and corrupt officials to circumvent the previous approach to combating AML/CFT. Member countries are now required to step up their AML/CFT controls by introducing and implementing tougher controls to combat AML/CFT and reinforce their fight against AML/CFT with increasing cooperation among various jurisdictions and countries. Sanctions are mostly not addressed in the African context as this is considered an area where they lack expertise and most do not have the infrastructure and procedures to deal with the threat posed. 45

46 Leveraging On Revised FART Recommendations to Fortify Your CDD Controls FATF Recommendation 1: Risk Based Approach (RBA) The first Recommendation in the Revised deals with Risk Based Approach (RBA) and sees such as an effective way to combat ML and TF. It is now agreed that the Risk-Based Approach (RBA) is a more effective way to combat ML and TF. Discretion and responsibility are now passed on to Financial Institutions (FIs) because these organizations or their sectors have greater AML/CFT capacity and experience. However, this does not exempt them from applying Enhanced Measures should they identify situations where there are higher risk scenarios. In adopting a RBA, FIs must still ensure that there are measures in place to mitigate or prevent ML/TF and these should be commensurate with the risks identified as such will allow FIs to make decisions in respect of efficiently allocating their resources in the most effective way. Countries are now required to ensure that their financial institutions and designated non-financial businesses and professions (DNFBPs) identify, assess and take effective action to mitigate their ML and TF Risks. This approach should be the main foundation for efficient allocation of resources across the AML/CFT Program and the implementation of Risk Based measures 46

47 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Implementing RBA In implementing RBA, FIs and DNFBPs must have in place in respect of ML and FT Risks the processes to perform the following : (a) Identify (b) Assess (c) Monitor (d) Manage (e) Mitigate For those that do not have any of these processes in place, now is the right time to have such in place as required by the Revised FATF Recommendations. FIs should not wait for regulators to request for such or wait until it is in their country or jurisdiction regulations. 47

48 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Pairing Risks and Useful Customer Information The Revised Recommendations and the Interpretative Notes provide a framework whereby information collected about a customer should be paired with the risks they may pose, such as pairing the information with: -Country -Political Position -Expected Transactions Activity -Connection to Sanctioned names FIs should ensure that the customer information obtained will assist the FIs to perform the following: a. Recognize and Report Suspicious Activities b. To be used as part of the monitoring process c. Assist to quickly identify and trigger risk inquiries d. Trigger request for additional information e. Allows FIs to determine if the risks posed by such customers is worth taking 48

49 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Risk Assessment and Documentation In assessing risks, financial institutions should take appropriate steps to identify and assess their ML and TF risks for their customers, for the following: a. countries, geographic areas, b. types of products, c. services d. transactions or e. delivery channels. FIs should document their risk assessments in order to demonstrate their basis and these also must be kept up to date. Documentation will ensure FIs have appropriate mechanism to provide risk assessment information to competent authorities. 49

50 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Managing and Mitigating AML/CFT Risks FIs should have AML/CFT policies, controls, and procedures that will enable them to manage and mitigate effectively the risks identified by either country or FI. FIs are should have a system to monitor the implementation of the controls and if required enhance these controls as necessary at appropriate times. The general principle of a RBA is where there are higher risks, countries should require FIs and DNFBPs to use enhanced measures to manage and mitigate those risks and correspondingly, where the risks are lower, simplified measures may be allowed. Simplified measures should not be allowed whenever there is suspicion of ML or TF. 50

51 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Transparency and Beneficial Owner FAFT has strengthened the transparency requirements in the areas of ownership and control of legal persons and legal arrangements, or requirements about parties involved in wire transfers. This requires that there is reliable information about the beneficial owner and control of companies, trusts, and other legal persons or legal arrangements. It requires more details about information that must accompany wire transfers. In respect of the new procedures for CDD, governments should have beneficial ownership national registry for newly formed entities or require a person to be named in a company with exact knowledge of the beneficial owners and a duty to disclose that information. This is a different concept and approach that FAFT has now introduced. 51

52 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Expansive CDD CDD is not new in respect of FATF Recommendations but now we have a new and more expansive interpretation of CDD Recommendations. Organizations should now have similar coordination at both the program level and branches level within the various entities and/or for global institutions and this should be driven by the organization central supervising group. When FIs in the course of establishing a customer relationship or maybe when conducting an occasional transaction have reasons to suspect that the transactions relate to ML or TF then such FI should identify and also verify the ID of the customer and the beneficial owner. In addition, regardless of any threshold requirement an STR must be filed 52

53 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Caution Regarding Tipping Off and Authority To Act FIs directors, officers and employees are not allowed to disclose the fact that an STR has been filed on any customer and this could be taken as intentional tipping off which most countries must now classify as illegal. There is the risk of unintentional tipping off when the FI is seeking to perform CDD that may tip off the customer and jeopardize future efforts to conduct a meaningful investigation of suspected ML or FT operations. Therefore, if an FI suspects that there is good possibility of tipping off the customer in the process of conducting its CDD it should just go ahead to file an STR and its employees must be aware of this procedure. FIs should now verify that any person claiming to act on behalf of another is duly authorized to act and such person s ID should be identified and verified. 53

54 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls CDD Measures for Legal Persons FIs should perform the following CDD measures in respect of legal persons or legal arrangements including trusts : 1. Identify the ID of the customer and the beneficial owner 2. Verify the ID of the customer and the beneficial owner 3. Understand the nature of the customer s business, its ownership and control structure 4. Have sufficient understanding of the customer to properly assess the ML and FT Risks 5. Take steps to mitigate the ML and FT risks of such customer Some of the types of information that should be obtained include the following: - Full name - Legal Form - Proof of existence e.g. certificate of incorporation, deed of trust etc. - Powers that bind them and regulate the legal person or arrangement - Address of the registered office or principal place of business 54

55 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Identifying Beneficial Owners For Legal Persons and Arrangements 1. For Legal persons i. Identify the natural persons if any that exercise control of the legal person or arrangement ii. If there is doubt as to (i) above, use other means to identify the natural persons exercising control on the legal person or arrangement 2. For Legal arrangements i. For Trusts- identify the settler, the trustees, the protector (if any), the beneficiaries or any other person excising ultimate effective control over the trust. ii. For other types of legal arrangements- the ID of persons in similar positions. 55

56 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls CDD Measures for Beneficial Owner of Life Insurance or Other Related Investment In addition to the regular CDD measures for the customer and the beneficial owner, additional measures are now required. For beneficiaries identified such as the named natural or legal persons or arrangements; the name of the person should be obtained and documented. For beneficiaries that are designated by characteristics or class, sufficient information should be obtained to ensure that the FI is satisfied as to the identity of the beneficiary at the time of payout. Information collected should be kept in accordance with the record keeping requirements. Beneficiaries of life insurance policies must be included as a relevant risk factor When the FI is unable to do any of the foregoing it should consider making a suspicious transactions report. 56

57 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Timing and Risk Management Timing of verification of customer or beneficial owner ID may vary depending on the circumstances. Such as non-face transactions or where intermediaries are used. FIs must adopt a risk management system and procedures concerning certain conditions under which a customer may utilize the business relationship prior to verification. For existing customers CDD should be performed based on materiality and risk. 57

58 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Higher Risks Factors For Higher Risks, FIs should consider the following risk factors: The business relationship if conducted under unusual circumstances Non-resident customers Legal persons or arrangements that are personal asset holding vehicles Companies that have nominee shareholders Cash intensive business Complex or unusual ownership structures 58

59 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Country or Geographic Risk Factors Countries identified by credible sources as not having adequate AML/CFT systems. Countries subject to sanctions, embargoes or similar measures e.g. UN Sanctions. Countries identified as credible sources as having significant levels of corruption or other criminal activity. Countries or geographic areas identified by credible sources as funding or supporting terrorists activities. 59

60 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Product or Delivery Channel Risk Factors For FIs Life insurance where the premium is low e.g. annual premium is less than $1,000 Euro or $2,500 or Euro in a single premium. Insurance policies for pension scheme with no early surrender option and policy cannot be used as collateral. Pension superannuation or similar schemes that do not allow the assignment of a member s interest under the scheme. Financial products or services that provide defined and limited services to certain types of customers to increase access for financial inclusion purposes. 60

61 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Country Risk factors Countries identified by credible sources as having effective AML/CFT systems. Countries identified by credible sources as having a low level of corruption or other criminals activity. Conversely, countries identified by credible sources as having a high level of corruption or other criminals activity. 61

62 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Risk Variables Based on each risk category the FI Should take into account risk variables relating to each risk category and the variables include: a. The purpose of an account relationship b. The level of assets to be deposited by a customer c. The size of transactions d. The regularity or duration of the business relationship 62

63 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Enhanced CDD Measures FIs should take reasonable steps to determine whether a customer or beneficial owner is a domestic PEP or a person who has been entrusted with prominent function by an international organization. In cases of a higher risk business relationship the steps mentioned in subsequent slides for higher risks customers are applicable in respect of conducting enhanced CDD measures. 63

64 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Steps That Could Be Taken When Dealing With Higher Risk Customer a. Obtain additional information on the customer b. Obtain additional information on the intended nature of the business relationship c. Confirm source of funds or source of wealth d. Reasons for intended or performed transactions e. Conducting enhanced monitoring of the business relationship f. Require that the first payment be made through a bank account with the customer s name with a bank subject to similar CDD standards. 64

65 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Simplified CDD Measures Verify the ID of the customer or beneficial owner after establishment of the business relationship. Reduce frequency of customer identification updates Reduce the degree of on-going monitoring and scrutinizing transactions based on a reasonable monetary threshold Note that Simplified CDD is not acceptable whenever there is suspicion of money laundering or where higher risk scenarios apply 65

66 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Threshold for Occasional Transactions and Updating Information The designated threshold for occasional transactions under recommendation 10 is USD/Euro 15,000 for a single transaction or linked transactions. This FATF threshold may be relatively too high for African countries and they may need to consider lowering the threshold despite this FATF recommendation. FIs should ensure that documents, data or information collected under the CDD process should be up to date and relevant. Undertake at intervals reviews of existing records particularly those of higher risk categories customers. 66

67 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Customer Behavior Observation of customer behavior and attitude towards transactions where charges are involved should be considered in determining the risk category a customer should be placed. Other types of behavior that may be considered in determining risk category. 67

68 Leveraging On Revised FATF Recommendations to Fortify Your CDD Controls Challenges Faced By African Countries in Leveraging on the Revised FATF Recommendations Lack of Centralized Data Base Customer ID Verification Lack of Qualitative and Quantitative Data Need to understand Key Risk Indicators, Inherent Risks and Residual Risks Lack of understanding in Developing Risk Management AML/CFT Issues as a only a compliance issue not risk Management Lack of Guidance from regulators in the performance of Risk Assessments Inadequate understanding of relationship between inherent risks and residual risk. Shortage of Human Capacity Lack of Political Will Inadequate Cooperation Among Stakeholders Employee Risk Factors Lack of coordination within organization 68

69 QUESTIONS? 69

70 LEVERAGING THE REVISED FATF RECOMMENDATIONS TO FORTIFY YOUR CDD Edwin Tettey Langmer, CAMS Department Head, Compliance & Control, UT Bank

71 GUIDELINES FOR CDD AND TRANSACTIONAL INFORMATION TRIGGERS. Recommendation 12 (d) requires financial institutions to conduct enhanced on going monitoring of all business relationships. Transactional monitoring provides the earliest warning or alert of change in customer profile or trigger. This requires a robust monitoring mechanism that will ensure a prompt and well directed feedback. Need for training and awareness among frontline staff. Adequate systems with parameters regularly reviewed. Clear procedures on review processes. 71

72 PERFORMING PERIODIC REVIEWS OF PEPS AND HIGH RISK CUSTOMERS. Interpretative note to Recommendation 26 requires assessments to be made periodically and when there are major events. Position yourself to obtain relevant information from every source possible. Make use of available search engines e.g. KYC 360, World Check, World Compliance and Google search. Collaboration with other institutions. Regular reviews of status e.g. Quarterly. 72

73 THANK YOU 73