THREE WAYS TO AVOID GETTING INVOLVED WITH MONEY LAUNDERING
In order to limit and detect instances of money laundering in the financial system, following are some of the recommendations that the Financial Action Task Force (FATF) makes;
- Financial and non-financial institutions, businesses and professionals (lawyers, real estate agents, dealers in precious metals and stones and casinos) should maintain records, for both domestic and international transactions with all their clients, in order to facilitate the authorities to swiftly carry out an investigation if the need arises. Record-keeping should be in a manner that allows reconstruction of individual transactions. Moreover, records of official identification should be maintained e.g. passport, identity card, driving license etc.
- Financial institution should also be required to undertake customer due diligence (CDD) when establishing business relationships.
Financial institutions should be prohibited from allowing accounts to be kept anonymous or under obviously fictitious names. Due diligence should be carried out when establishing business relationships, when carrying out occasional transactions that are above the threshold (USD/EUR 15,000), there is suspicion of money laundering or terrorist financing or that there are doubts on the authenticity of documents provided.
Financial institutions should conduct due diligence on business relationship and should scrutinize transactions undertaken throughout the course of this relationship. It should be ensured that transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including where necessary, the source of funds.
- For politically exposed persons, the financial institution should take additional measures in its due diligence process. For example approvals should be sought from senior management before establishing business relations with such persons. Moreover, an enhanced ongoing monitoring of the business relationship should be conducted.
When a business relationship involves a cross-border correspondent bank, the financial institutions should adopt enhanced measures of due diligence and should gather sufficient information to determine the legitimacy of transactions. This will include determining if the correspondent bank has ever been subject to money laundering allegations or is currently being investigated for terrorist financing or any other regulatory action.
The perception of money laundering as a security threat has led to establishing the above mentioned ways as a process of ‘securitization’. Assuming that organized crime, like money laundering, can threaten everything from human life to the stability of financial system; these indeed are must do-able precautions to protect.