AML/CFT 2018 Training

This course is designed to build on your general awareness and understanding of Anti Money Laundering (AML) and Countering of Terrorist Financing (CFT). It centres on Suspicious Activity identification and reporting, red flags and your overall role in limiting any financial activities that may lead to Money Laundering and Terrorist Financing. It also provides a refresher of the Know Your Customer Requirements of Massycard (Barbados) Limited, focusing on: the customer due diligence verification process, prohibited customers, record retention, reporting requirements and your Compliance function.

Money laundering and Terrorist financing defined

Money Laundering

Money Laundering as a process which involves taking criminal proceeds and disguising their illegal source in anticipation of ultimately using the criminal proceeds to perform legal and illegal activities.

Money Laundering Activities involve the following:

  • Concealing or converting property or its proceeds, knowing the property was derived from the commission of an offense (“Predicate offence”).
  • Any act or attempted act to disguise the source of money or assets derived from criminal activity.

 The concealing or disguising the existence, illegal source, movement, destination or illegal application of illicitly derived property or funds to make them appear legitimate

Terrorist Financing

Terrorist Financing is the provision or collection of funds either directly or indirectly with the intention that they should be used or the knowledge that they are to be used, to carry out the unlawful use of force against persons or property. To intimidate or coerce a government, the civilian population or any segment thereof, in the furtherance of political or social objectives.

Terrorist activities include:

  • Bombings which the most common type of terrorist act. Typically, improvised explosive devices are inexpensive and easy to make. Modern devices are smaller and are harder to detect.
  • Kidnappings and hostage takings  
  • Armed Attacks and Assassinations
  • Hijackings and Skyjackings
  • Cyberterrorism is a new form of terrorism which allows terrorists to conduct their operations with little or no risk to themselves

Terrorist financing uses funds for an illegal political purpose, but the money is not necessarily derived from illegal proceeds. This makes detection of terrorist financing very difficult, even more so if we bear in mind the fact that transaction amounts involved in terrorist financing often tend to be smaller than the amounts that under law have to be reported under money laundering. As the measures taken to prevent money laundering are not sufficient in the fight against terrorist financing, they have to be supplemented by special measures prescribed by competent international bodies

Terrorist Financing scheme

Money Laundering vs Terrorist Financing

Stages of Money Laundering and Terrorist Financing

The Stages of Money Laundering

Stages of Terrorist Financing

Terrorist Financing Stages

Acquisition-Where funds are collected through legal or illegal sources

Aggregation- Where the funds are pooled.

Transmission to Terrorist organisation/operational cells- Where funds are allocated to the organisation then the operational cell respictively.

Conversion-Where the funds are used to carry out the terrorist act.


Penalties for Money Laundering and Terrorist Financing

KYC-Know Your Customer

To successfully mitigate ML & TF Risks you must Know YOUR Customer (KYC). As a result, Massycard will NOT do business with customers where the due diligence process cannot be completed (e.g. collection of KYC Forms, IDs etc) and the KYC information cannot/will not be verified (e.g. does the ID match the name).

Prohibited Customers

MCBL will not transact business with the following customers:

Where satisfactory evidence of identity has not been obtained as set out in the KYC Procedures/ New Policy Acceptance Procedures;

For Persons from countries which have been placed on FATF’s list of Non-Compliant Countries;

For Persons designated as terrorists (entities) by the Security Council of the United Nations (“the UN1267 List”). The UN List is available on the FIU’s Website;

For persons listed on the OFAC website.

No transaction would be accepted for/nor shall any transaction be done with an anonymous or fictitious name.

KYC Requirements

Section 15 (1) of the AML/CFT Act requires that financial institutions to take reasonable measures to

(a) Establish the true identity of a customer; and (b) Verify the identity of a customer by means of reliable documents, data or information from an independent source.

The company commits to obtain and examine the identification data provided and record the following;

True name and permanent residential address

Valid photo-bearing identification, with unique identifier, (e.g.passport, national identification card, driver’s licence);

The country of issuance;

Date and place of birth and nationality; and

Contact details e.g. telephone number

Proof of Income.

Customer Signature and any other information deemed appropriate and relevant e.g. source of funds and estimated account turnover.

For Corporate Customers the following Should be obtained:


Customer Types and Due Dilligence

Customer Types

The Compliance Programme clearly identifies customers by risk types: High, Medium & Low. NOTE:  High risk here means a customer has a higher probability of ML & TF. It does not mean that they are Money Launderers or Terrorist Financiers.

Based on the rating of the customer, the type of due diligence process will vary:

1. High Risk customer undergo Enhance Due Diligence (EDD).

2. Medium Risk customers undergo Standard Due diligence.

3. Certain Low Risk customers undergo Simplified Due Diligence (SDD).


Enhanced Due Diligence (EDD) requires additional steps to customer  due  diligence  for customers  such  as  Politically  Exposed Persons(PEP)  or any  customer  whose  business activity ,  ownership  structure  which  are  complex or unusual. For example, this customer type may be required to produce two forms of ID. The completion of KYC forms, in addition, reasonable measures are taken to determine the source of wealth and source of funds by asking the customer to complete a Purpose/Source of Funds Declaration (P/SOFD); and enhanced on-going monitoring of the business relationship is conducted. In addition, Senior Management approval (Board of Directors, Head of Consumer Finance) must be obtained prior to the approval of such an account.

Politically Exposed Person (PEPS)

PEP’s

Are defined as an individual who is or has been entrusted with a prominent function. PEP’s hold positions which can be abused for the purpose of laundering illicit funds or other predicate offences such as corruption or bribery)

Persons Classified as PEP’s

Heads of State, Heads of Government, Parliamentarians and close family members.

Members of high level judicial bodies

Ambassadors and Charges d’’affaires.

Managers of State Owned Enterprises

High ranking officials of the armed forces and the police force.

No employee can open an account or enter into any business relationship with a Public or Politically Exposed Person or continue a business relationship with an existing customer who becomes a PEP without obtaining formal written approval from the Head Consumer Finance Massycard (Barbados) or his/her branch designate.

PEP Types

PEP requirements.

IDENTIFICATION AND REPORTING OF SUSPICIOUS ACTIVITY & RED FLAGS

Suspicious activities are scenarios where the identity of the person involved, the transaction or any other circumstance concerning the transaction gives the institution or any officer or employee of the institution reasonable grounds to suspect that the transaction: involves proceeds of crime;involves the financing of terrorism; or –is of a suspicious or an unusual nature; –Where a transaction is inconsistent in amount, origin, destination, or type with a customer's known, legitimate business or personal activities, the transaction must be considered unusual. Unusual transactions are not necessarily illegal, but they should give rise to further enquiry and analysis. If you see something say something all employees are required to report suspicious activities through the Internal Suspicious Activity Report Form these forms are only to be submitted to the Compliance Department. You do not need the permission of your team lead or manager to report a suspicious activity. All suspicious activities should be reported within three (3) business days.

Examples of Suspicious Activities

  • Customers – provides Insufficient or Suspicious Information
  • Provides unusual or suspicious identification documents that cannot be readily verified.
  • Customer refuses to identify a legitimate source of funds and information is false, misleading or substantially incorrect.
  • A customer uses an apparently fake identification or more than one customer tries to use the same identification.
  • A customer refuses to proceed with a transaction when asked for identification
  • A customer refuses to provide all the information required or seems excessively nervous or anxious.
  • A customer conducts a transaction or transactions that are unusually large based on their history, employment or level of income.

  • Red Flags
  • Suspicious Personal ID Information
  • Altered/forged ID 
  • ID information that doesn’t match what is on file (e.g. signature, etc)
  • Personal ID information is inconsistent with external information
  • Personal ID information is inconsistent with other provided info or information on file
  • Personal ID info associated with known fraud
  • Address or telephone number discrepancies (e.g telephone doesn’t work, mail returns unanswered)
  • The parties to the transaction (owner, beneficiary, etc.) are from countries known to support terrorist activities and organizations;
  • Use of false corporations, including shell-companies;
  • Inclusion of the individual or entity in the United Nations 1267 Sanctions list; •

Tipping Off

Tipping Off

Please note it is also an offence for a person in the regulated sector to “tip off” (i.e. inform) a person suspected of money laundering that (a) he or someone else has made a lawful disclosure (i.e. a SAR) or (b) there is a money laundering investigation taking place, where the tipping off is likely either to prejudice any investigation arising from the disclosure or to prejudice the investigation disclosed to the person suspected of money laundering. As per Section 43 (b) of the Anti Money Laundering Act 2011 - tipping off can result in $50,000.00 fine / imprisonment for 2 years or both.

Risk Assessments

Money Laundering Trends and Typologies in Barbados

  • Fraudulent documentation
  • Sending money to high risk countries
  • Transactions on accounts that did not make business sense
  • Structuring where the individuals makes multiple deposits in small quantities to avoid detection although this practice has decreased.
  • Counterfeit identification
  • Cheque Fraud

REMEMBER if you note any of the following activities it your responsibility to report to the Compliance Department. 

Record Keeping

Role of the Compliance Officer

the strictest confidence.

The Department is responsible for:

Drafting of policies and procedures to prevent ML/TF.

Ensuring Massycard Barbados is compliant with applicable laws and regulations.

Monitoring transactions.

Evaluates new products and services to determine the level of risk

Evaluates reports of suspicious/unusual transactions from entity personnel and files Suspicious Transaction Reports with the Financial Intelligence Unit FIU.

Report preparation of monitoring reports, reports to senior management, board of directors and regulatory authorities.

Training staff on Anti Money laundering and combating terrorist financing and fraud.

Retains records of training given to directors, supervisors, and staff;

Ensures that his/her successor receives adequate instruction on the money laundering policy and procedures in place;

General Information

Please note you can view all training content,AML legislation and guidelines, the Compliance programme and all reporting forms on the Compliance Drive :

I:\MassyCard Anti Money Laundering Training materials


ASSESSMENT QUESTIONS

Instructions

Please note there is only one correct answer ensure you have answered all questions.

Case 1

Please Note Questions 1-6 Are based on the following scenario

Dr. Singh, an epidemiologist is the brother of a parliamentarian seeks a Massycard on his KYC form, his place of birth is the UK, but he has since become a national of Barbados. He completes all the KYC documentation and has sufficient income and good credit. Dr. Singh is approved to have a Massy Card.

Who should be responsible for approving Mr. Singh's Massycard?

  • The Approvals department
  • The Compliance Department
  • The Head of Consumer Finance.

What KYC documents should have been obtained from Dr. Singh?

  • Proof of address, completed application form, copy of photo bearing ID and proof of income.
  • Proof of address, completed application form, proof of income
  • Two forms of ID, completed application form, proof of income
  • Source of funds form, two forms of ID, completed application form, proof of income

On reviewing Dr. Singh’s account, you notice he made five payments within the same week at different locations for amounts that were inconsistent with his usual payments. What should you have done?

  • Be thankful Dr. Singh is clearing his bills?
  • Draw it to your supervisor’s attention detailing your suspicions in an email.
  • Think it over during the week and gather more information
  • Report to the Compliance Officer

During his time as a MCBL card holder Dr. Singh overpaid his card with (illegal) funds and requested a refund. Dr. Singh used the refund cheque as part payment to buy a vehicle. What stage of the money laundering process is this?

  • Smurfing
  • Placement
  • Integration
  • Layering

One year after being a MCBL card holder you read an article indicating Dr. Singh has been charged for money laundering what should you do?

  • Notify your manager and indicate the card should be cancelled
  • Nothing as the card was issued before the charge.
  • Put the Card on hold.
  • Notify the Compliance Department

Why is Dr.Singh subject to enhanced due diligence?

  • His profession
  • His country of birth
  • He is likely to be a terrorist
  • He is an International PEP
  • He is a domestic PEP

High risk customers should be subjected to what type of due diligence?

  • FIU audit
  • Simplified due diligence
  • Standardised due diligence
  • Enhanced due diligence

You can let a customer know that we are reporting their suspicious activity

  • If you and the customer have a good rapport
  • Under certain circumstances where the customer appears to be innocent
  • When your senior manager informs you that you can
  • Under no circumstances

A Suspicious transaction report is completed and submitted to the FIU by:

  • General Manager
  • Compliance Officer
  • The customer
  • The employee that notices the suspicious activity

Which of the following is classified as a PEP?

  • Policeman
  • Commercial pilot
  • Compliance Officer
  • The son of a politician

It is COMPULSORY to alert/involve your supervisor/manager of a red flag or suspicious activity before going to Compliance Officer?

  • TRUE
  • FALSE

Terrorist Financing can come only from an illegitimate source.

  • TRUE
  • FALSE

The tactic in which individuals make multiple deposits in small quantities to avoid detection is called:

  • Skimming
  • Integration
  • Investing
  • Structuring

Which of the following is a red flag?

  • Customer making a series of transactions with no economic rationale.
  • Situations where it is difficult to identify the ultimate beneficiary of money.
  • Customer request information on MCBL’s internal policies and controls.
  • All of the above

What is the primary difference between money laundering and terrorist financing?

  • Terrorist financing is conducted through banks where money laundering is not.
  • Terrorist financing and money laundering differ in the origin of funds, money laundering the funds are from illegal sources whereas Terrorist funds can be from legal or illegal sources.
  • Terrorist financing is used to facilitate political change whereas money laundering is designed to disguise the illegal nature of funds.
  • None of the above

Which of the following best describes a “red flag”?

  • A factor that indicates a consumer fraud type
  • A factor that indicates that a transaction is unusual and possibly suspicious
  • A factor that indicates a consumer has an unusual amount of debt or is a credit risk threat.
  • A factor that indicates a consumer had dual nationalities.

The detection focus for ________________ is suspicious transactions such as deposits uncharacteristic of customer’s wealth.

  • money laundering
  • Terrorist financing
  • Red flags
  • Aggregation

The ____________ stage is when terrorist pool their funds

  • Acquistion
  • Aggregation
  • Transmission to terrorist organisation
  • Transmission to operational cell

How long are business records required to be maintained?

  • Seven years
  • Five years
  • Ten years
  • More than five years if requested by the FIU.

Which of the following is Not part of an AML/CFT risk assessment?

  • Products and services
  • Geographic location
  • Customer type
  • Country economic review.