Compliance & AML Overview

Compliance & AML

• Employees should always report suspicious activity to the Compliance Officer.
• USA PATRIOT Act requires US financial institutions to collect information from non-US banks holding correspondent accounts, specifically:
  • The name and address of the non-US bank's beneficial owners who own 25% or more.
  • The name and address of a US person authorized to receive legal process on behalf of the non-US bank.
• Legal risks of inadequate privacy policies include:
  • Charges of deceptive business practices.
  • Industry or regulatory sanctions.
• Foreign Correspondent Banking under the USA PATRIOT Act requires US banks to obtain:
  • The identity of 10% owners of the correspondent bank, unless publicly traded.
  • Information related to the foreign bank's anti-money laundering program.
• Money Laundering Integration Stage:
• Depositing illicit funds into an account set up for a front company.
• Investigating Suspicious Activity:
  • Branch managers should investigate unusual customer activity before taking action.
  • Banks should only provide customer information to law enforcement with a formal letter verifying the request.
• Identifying Red Flags for Human Trafficking:
  • Cash deposits in cities where the customer does NOT reside or conduct business.
  • Wire transfer activity from countries with significant migrant populations.
• Broker-Dealers:
  • Physical certificates pose money laundering risks due to their potential for use in off-market transactions and lack of readily available source of funds information.
• Trade-Based Money Laundering Red Flags:
  • Use of shell companies.
  • Inconsistency between the commodity description on the bill of lading and the invoice.

Compliance & AML Continued

• Compliance Officers and Law Enforcement: When a law enforcement official contacts a bank, the compliance officer should confirm the officer is an authorized representative.
• Front Companies: Front companies can have a significant economic consequence, weakening the legitimate private sector.
• EU Fourth AML Directive requires banks to report cash transactions above €10,000.
• USA PATRIOT Act Requirements for US financial institutions when conducting business with international institutions:
  • Perform due diligence on correspondent accounts.
  • Comply with Special Measures issued under the USA PATRIOT Act.
• HSBC Settlement Case: Violating anti-money laundering laws can result in significant consequences like:
  • Civil money penalties.
  • Forfeiture of assets.
• Blocking International Funds Transfers: US banks must block or reject international funds transfers involving an Office of Foreign Assets Control designated party.
• Suspicion Transaction Reports (STRs): When a law enforcement agent requests information from a bank regarding an STR, the investigator should refer the agent to the bank's compliance officer.
• Financial Action Task Force (FATF) 40 Recommendations: Countries must criminalize the financing of terrorist acts.
• Suspicious Activity Reporting: Suspected money laundering activities from customer accounts should be reported to the Financial Intelligence Unit (FIU) according to the FATF.
• Egmont Group Role: The Egmont Group facilitates cooperation and information exchange between FIUs to combat money laundering and terrorist financing.
• Automated Surveillance Systems: When evaluating system settings, the settings should be compared to similar organizations within the peer group.
• Investigative Interview Location: The best location for a law enforcement interview with a suspect is an interview room in the offices of a law enforcement agency.
• Cross-Border Money Laundering Investigations: Countries should encourage information sharing and cooperation between FIUs to facilitate investigations.
• Wholesale Auto Business Red Flags: Receiving repeated wire transfers from a high-risk jurisdiction, frequent transfers from a checking account to a savings account and limited or no information about the client's business activities should trigger further investigation.

Additional Key points

• Anti-Money Laundering (AML) Regulations: These regulations exist to prevent criminals from using the financial system to launder money, therefore protecting the integrity of the financial system and combating financial crime.
• Financial Intelligence Units (FIUs): They are responsible for receiving, analyzing, and disseminating financial intelligence to relevant authorities.