Money laundering and the financing of Terrorism and serious crime

Banks and credit companies are subject to criminal liability provisions of the law when they participate in certain financial transactions for one client. The new legislation provides for changes in a number of respects, including those relating to customer due diligence, providing information, compliance and enforcement.

Money laundering legislation is important and difficult to apply. The Act imposes obligations that must be observed by all concerned with or working with customers and money transactions in a company's business. It is important to work to prevent the Company and its business used for money laundering and terrorist financing and other serious crimes all the time is.

The purpose of the policy and the instructions are to ensure that the company's anti-money laundering and terrorist financing and other serious crime is always adequate, appropriate and in accordance with current standards.

Under money-laundering legislation there are essentially four obligations:

  1. To identify and verify their customers (due diligence)
  2. To review transactions that could reasonably be expected to constitute or be aimed at money laundering
  3. To report suspected cases of money laundering

Background

The Financial Action Task Force, FATF (Financial Action Task Force Against Money Laundering), was formed in 1989 by the G7 countries and is active. FATF currently has a mandate to continue its operations in 2012. The organization publishes on its website information on money laundering and its activities (www.fatf-gafi.org). There is such the 40 recommendations forming the basis for much of the regulation concerning measures against money laundering, as well as updates to the lists of non-cooperative countries and territories (Non-Cooperative Countries and Territories, NCCT).

Money laundering refers to measures taken to conceal or convert the proceeds of a crime, i.e. it is about action to "launder black money white." There is thus a prerequisite to money or other assets that are laundered profits from criminal activity (such as drug offenses, robbery, theft, fraud, criminal breach of trust, fraud, corruption, etc.)

Money laundering usually schematically described as a process consisting of three stages:

  1. Placement stage is the placement of money in such bank or other financial products.
  2. Outline stage - transactions in order to break or hinder the links with the criminal origin.
  3. Integration stage - money (or what has come in its place) integrated into the legal economy.

Financing of Terrorism

Terrorist financing is usually named as among the "reverse money laundering" by profits from crime / or legal action is used to fund a future terrorist. Financing of terrorism is to financially support terrorism. This means not only to make direct contributions to terrorism, but also to collect, provide or receive money or other assets to finance terrorism. The International Working Group on Financial Action Task Force (FATF) in October 2001 expanded its activities to include combating terrorist financing.

Tougher and more flexible due diligence and verification based on a risk-based approach (risk-based approach), including in the case of beneficial owner (beneficial ownership), people in vulnerable political position known as politically exposed person (PEP), and expanded documentation requirements.

Requirements for ongoing monitoring of customer relations (monitoring) for the risk assessment based on the risk profile of the client.

Generally, with money laundering referred to measures taken to conceal or convert the proceeds of a crime, i.e. it is about action to "launder black money white." There is thus a prerequisite to money or other assets that are laundered profits from criminal activity (such as drug offenses, robbery, theft, fraud, corruption, etc.)

Customer Due Diligence

Customer Due Diligence will be achieved by a risk-based assessment, so-called "risk-based approach", which means that most resources should be where they are most needed, i.e. in situations where their money laundering risk is greatest. Clients should therefore in certain situations are more accurate than before, while less rigorous controls are needed in other cases.

Mainly based risk assessment of factors such as who the customer is and what activities he engaged in, which kind of service / product the customer demand and customer's residence and the country in which a transaction is carried out when some countries regarded as "high risk" countries.

Due diligence be achieved also in the occasional transactions amounting to a sum equivalent to 15 000 € or more. The rule is to come with regard to banks and other financial institutions are clients of various natures, and those who initiate more long-lasting relationships such as open deposit accounts, and other more occasional customers, such as exchange transactions.

Risk assessment

Type of customer, business relationship, product or transaction should determine the scope of the measure on a risk-based analysis. Completed actions will be appropriate in relation to the risk:

  • Customer groups
  • Type of business relationship
  • Products / Services
  • Distribution channels

Procedures should reflect the need and desirability to a high risk involves an extended process of due diligence and a low risk means may involve a simplified process for due diligence. The basis for the work on action against money laundering and terrorist financing and other serious crime is good due diligence.

Basic due diligence

To achieve the basic due diligence is also information about the customer order and end the business relationship sought. The reason for this is that the company should have a clear picture of what the company should provide and what the client's business is about. Often shows the object and purpose in a natural way already in the initial contacts with customers, but because of the risk-based approach to be used in our business, more basic information need to be gathered to assess the risks of money laundering and terrorist financing. In any case, a check of the accuracy of the customer's claim on the object and purpose carried out so that the claim can be established as credible and accurate.

High risk can be assumed:

  • When data on the customer's identity is insufficient or not deemed to be reliable
  • When ambiguities for basic due diligence remains
  • When suspicions of money laundering or terrorism financing exists
  • When the business relationship includes transactions, services or products that may favor anonymity (e.g. use of cash)

If the customer is a politically exposed person, called PEP, which is resident abroad. A PEP (politically exposed persons) is a politically exposed person who has or had (normally in the past year) with prominent public functions. These are public functions at the highest levels in a single country or at European or international level, such as Heads of State and government, ministers, etc.

In addition, counts as PEP such persons close relatives such as spouse, partner treated with spouse, parent or child (and his spouse) and known associates. With "known associates" means persons who, together with PEP owns or controls, but over 25% of the entity (or trust or foundation, is the beneficiary of 25% or more of the assets) or any other close business relationships with a PEP.

Generally the easiest and often quickest way to obtain information about the customer's identity and ownership structure, etc. is to ask the customer if the required information and documentation. If the obligation to adopt more stringent customer due diligence, it can be information from the customer have to be verified, but with a risk-based approach should the information from the customer often be quite adequate. See also section 5.3 above that rely on information provided by third parties.

The documents routinely be requested are:

  • Certified copy of registration certificate not older than three (3) months
  • Certified copy of share register
  • Copy of the adopted business plan
  • Copy of adopted budget
  • The number of persons employed
  • Continuous monitoring of business relationships

In an already established business relationship will this be monitored so that the actions and transactions conducted within the framework of business relationship is consistent with what the customer previously stated and seemingly fit within his business and risk profile.

Audit Requirement

To review transactions to identify transactions which the Company suspects or has reasonable grounds to suspect is part of money laundering or terrorist financing The company or its representatives have therefore an obligation to review transactions where there is suspicion or reasonable grounds for suspicion that the transaction is part of money laundering or terrorist financing. Some examples of such concrete factors that trigger review requirement is set by the FATF and is:

  • Difficulties in identifying the customer (expensive controls, tasks that are difficult to verify or sources that are difficult to control.)
  • Payments differs from the normal (large transactions, large amounts of cash, several smaller payments instead of one large) and unnecessarily complex transactions.
  • Transactions related to the so-called "risk" countries.

Compliance with money laundering legislation

The Company has under the new law, an obligation to train its personnel and establish procedures to money laundering legislation. The subject of the law are required to have risk-based procedures. The company's procedures designed to prevent the Company and its business used for money laundering or terrorist financing and to continuously educate and inform the staff for this purpose.

Training

The functional manager is responsible for establishing and implementing training on issues relating to money laundering and terrorist financing. Training will be conducted so that the Company's employees will be offered at least three training sessions per year. Of these training sessions, a training per year take place externally by third parties and the remaining two in-house where the function manager is responsible for education in composition.