 What Is Money Laundering?

Money Laundering is the process by which, criminals attempt to make the proceeds of crime appear
legitimate with no obvious links to their criminal origins.

Processes Of Money Laundry:

This is achieved by three processes:

1. Placement – Placing of the proceeds of crime

2. Layering – Hiding of the proceeds from their criminal origin by ‘layers’ of transactions

3. Integration – Creating a legitimate explanation for the proceeds

 Who Needs To Perform Anti-money Laundering Checks?

Solicitors, accountants, tax advisors, insolvency practitioners, financial institutions, credit
institutions, estate agents, chartered surveyors, trust/service providers, gaming companies and
high value dealers with the potential for a business relationship worth over 15,000 Euros, such as
automotive dealers and jewellers.

 Why Do I Need To Perform Anti-money Laundering Checks?

The Anti-Money Laundering regulations are governed by 4 Acts: The Proceeds of Crime Act, The
Serious Organised Crime and Police Act, The Terrorist Act and the Money Laundering
Regulations. . Failure to report suspicious activity can carry a criminal sentence and lead to
substantial fines from the relevant regulatory body.

 I Have Dealt With My Clients For Many Years , Do I Still Need To

Carry Out Customer Due Diligence?
You need to keep CDD up-to-date for all your clients. You may  have sufficient documentary ID
details on your files but if there has been any subsequent change to their circumstances or risk
profile, you should update your CDD. It is advised to review clients’ CDD on a regular basis.

 Who Enforces The Anti-money Laundering Regulations?

The AML regulations are enforced by a range of regulatory bodies. Guidelines are set by the
JMLSG (Joint Money Laundering Steering Group) and enforced by the FCA/PRA (Financial
Conduct Authority/ Prudential Regulation Authority), the SRA (Solicitors Regulation Authority in
England), OFT (Office of Fair Trading), HMRC (HM Revenue & Customs), ICAEW (Institute of
Chartered Accountants in England & Wales, plus other Accountancy bodies), RICS (Royal
Institute of Chartered Surveyors) and more.

 What Is Electronic Verification?

In order to prevent fraud and money laundering it is important to verify individuals carrying out
financial transactions. Previously documentary evidence was relied on to verify an individual.
 These may not always be available and they can also be easily forged or altered therefore
electronic verification provides extra security and reduces risk against money laundering and
fraud.

Electronic verification removes the need for the customer to be present, this saves time and
helps support customer relationship building. The risk of money laundering is reduced as several
data sources are called upon to verify the customer rather than just relying on documentary
evidence.

 If I Collect Passports And Driving Licences, Why Do I Need To

Check Anything Else?
EV can check a wider range of information, thus providing a more thorough knowledge of your
client (KYC – Know Your Customer). In addition, it can also enable you to check other data sets
such as PEPS and Sanctions lists, which is advisable and specified by the 3rd European Money
Laundering Directive. 

With fraudulent documentation on the rise, there is a need to refocus efforts on identifying them.
Electronic verification is designed to remove the risk of receiving potentially fraudulent
documents; therefore you can have a greater level of confidence in their authenticity. Various
checks are carried out on the documents to confirm as much as possible, therefore reducing the
risk of ID fraud.

 Online Systems Are Too Expensive, What If I Cannot Afford It?

There are often hidden costs associated with taking paper documents, which are not always
immediately recognisable. For example, if dealing with a client at distance, the posting through of
important documents by recorded delivery in order to ensure they do not get lost carries a
charge, which is often more than the cost of an electronic search. If the documents are then lost,
there is then the cost of replacing the documents for your potential client. This may also be more
time-consuming as a process, but by performing a quick electronic search, could this then allow
for more searches to be performed and in turn, increase the number of clients taken onboard?

 Why Are You Allowing Me To See Sensitive Information?

The information held in electronic systems is consented for use in these systems. For an AML
check, the Full Electoral Roll is allowed for this purpose and this is covered in the Representation
of the People Act (2002). When a Credit Reference Agency (CRA) utilises financial records in an
AML check, it does not show any financial details, apart from the information necessary to ID
someone.

 What Are Politically Exposed Persons, Specially Designated

Nationals And Financial Sanctions And Why Do I Need To Check
Them?
It is recommended by the 3rd European Money Laundering Directive  to have a procedure in
place to check PEPs, SDNs and the HMT Financial Sanctions.  A PEP is a Politically Exposed
Person, and is someone who holds a prominent public position, or an individual linked to them.
An SDN is a Specially Designated National , on a list which specifies that US Citizens are not
 permitted to conduct business with them. The HM Treasury Financial Sanctions list specifies
individuals with whom it is prohibited to transfer or make funds available to.

 What Are Money Laundering And Financial Terrorism?

Money laundering refers to conversion of money illegally obtained to make it appear as if it
originated from a legitimate source. Money laundering is being employed by launderers
worldwide to conceal criminal activity associated with it such as drugs /arms trafficking, terrorism
and extortion.

Financial Terrorism means financial support to, in any form of terrorism or to those who
encourage, plan or engage in terrorism.

Money launderers send illicit funds through legal channels in order to conceal their criminal origin
while those who finance terrorism transfer funds that may be legal or illicit in original in such a
way as to conceal their source and ultimate use, which is to support Financial Terrorism.

 What Is Kyc?

KYC is an acronym for “Know your Customer” a term used for Customer identification process. It
involves making reasonable efforts to determine, the true identity and beneficial ownership of
accounts, source of funds, the nature of customer’s business, reasonableness of operations in
the account in relation to the customer’s business, etc which in turn helps the banks to manage
their risks prudently.

The objective of the KYC guidelines is to prevent banks being used, intentionally or
unintentionally by criminal elements for money laundering.

 What Is Kyc Policy?

As per RBI guidelines issued vide their circular dated 29/11/2004, all banks are required to
formulate a KYC Policy with the approval of their respective boards. The KYC Policy consists of
the following four key elements.

1. Customer Acceptance Policy

2. Customer Identification Procedures

3. Monitoring of Transactions

4. Risk Management.

 Who Is A Customer?

For the purpose of KYC policy a ‘customer” may be defined as:

o A person or entity that maintains an account and/or has a business relationship

with the bank;

o One on whose behalf the account is maintained (i.e. the beneficial owner);
o Beneficiaries of transactions conducted by professional intermediaries, such as

Stock Brokers, Chartered Accountants, Solicitors etc as permitted under the law, and 

o Any person or entity connected with a financial transaction which can pose

significant reputational or other risks to the bank, say a wire transfer or issue of high value

demand draft as a single transaction.

 What Is A Customer Acceptance Policy?

Customer Acceptance Policy refers to the general guidelines followed by banks in allowing
customers to open accounts with them. Generally the guidelines stipulate that no accounts shall
be opened in anonymous or fictitious names or when the identity of the customer matches with
any person with known criminal background or banned entities. Similarly accounts should not be
opened when the bank is unable to verify the identity and/or obtain documents required as per
the bank’s policy.

 What Is The Customer Identification Procedure?

Customer identification means identifying the customer and verifying his/her identity through
reliable and independent documents, data and information. Banks would need to satisfy to the
competent authorities that due diligence was observed in accordance with the requirements of
existing laws and regulations.

 When Does Kyc Apply?

KYC will be carried out for the following but is not limited to:

o Opening a new account.(deposit/ borrowal )

o Opening a subsequent account where documents as per current KYC standards

not submitted while opening the initial account.

o Opening a locker facility where these documents are not available with the bank

for all locker facility holders.

o When the bank feels it is necessary to obtain additional information from existing

customers based on the conduct of the account.

o After periodic intervals based on instructions received from RBI.

o When there are changes to signatories, mandate holders, beneficial owners, etc.

 What Are The Aml/cft Supervisors Looking For?

The AML/CFT supervisors are focusing on whether the reporting entity has an appropriate and
reasonable risk assessment, and an AML/CFT programme that reflects and controls those risks.
The AML/CFT supervisors take a risk-based approach to supervision - selecting from the
 supervision and enforcement tools available to us. Supervision will take into account the nature
of the business and the risks that each reporting entity is managing. Read our Bulletin article or
speech for more information on the Reserve Bank’s approach to AML/CFT supervision.

 What Are Peps?

“Politically-Exposed Persons” (PEPs) are individuals who, by virtue of their position in public life,
may be vulnerable to corruption. The New Zealand legislation currently limits this concept to
foreign PEPs, and does not include domestic (New Zealand-based) PEPs. Reporting entities are
required to give specific consideration to the risks involved with PEPs and so should:

o have procedures in place to determine whether a customer, or a beneficial owner

of a customer, is a PEP or a close associate of a PEP;

o obtain senior management approval for establishing or maintaining business

relationships with PEPs;

o take reasonable measures to establish the source of wealth and source of funds

of PEPs; and

o conduct enhanced, ongoing monitoring of the business relationship.

 What Is Ongoing Customer Due Diligence?

Ongoing Customer Due Diligence means regularly reviewing customer information and having
systems to conduct account monitoring. This is required for all customers, including existing
customers.