Legal and International Framework Overview
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Questions and Answers

What is the time frame within which suspicious transactions must be reported to FIU-Nepal?

  • Within 1 day
  • Within 3 days (correct)
  • Within 15 days
  • Within 7 days

What is a key purpose of Threshold Transactions Reporting (TTR)?

  • To help track criminal transactions for financial intelligence (correct)
  • To prevent minor financial disputes
  • To ensure customer satisfaction
  • To monitor all transactions regardless of amount

Which of the following is an example of a suspicious activity in the insurance sector?

  • Annual reviews of existing insurance policies
  • Purchase of multiple insurance policies with cash in a short period (correct)
  • Regular premium payments made by a lifelong customer
  • Client inquiries about available insurance products

Which is NOT a responsibility of the reporting entity regarding suspicious activity reporting?

<p>Conducting follow-up transactions for customers (C)</p> Signup and view all the answers

What is required when a beneficiary/nominee is designated in an insurance policy?

<p>A government-issued identity document (B)</p> Signup and view all the answers

What is an important aspect of customer due diligence?

<p>Understanding the customer's transaction behavior (C)</p> Signup and view all the answers

What must be reported regarding a person associated with a life insurance policy exceeding twenty-five lakh?

<p>Their relationship with the desired person (B)</p> Signup and view all the answers

How long do reporting entities have to report a threshold transaction amount to FIU-Nepal?

<p>Within 15 days (B)</p> Signup and view all the answers

Which of the following is a requirement for appointing an executive head in an insurance company?

<p>Submission of a Police Clearance Report (D)</p> Signup and view all the answers

What triggers the need for a Suspicious Activity Report (SAR)?

<p>Indicators of potential financial crimes observed during transactions (C)</p> Signup and view all the answers

What action is obligatory for insurance companies regarding employee training on AML/CFT?

<p>Increase training or orientation sessions (D)</p> Signup and view all the answers

Why are indicators or red flags important for reporting entities?

<p>They help in identifying suspicious activities that require further scrutiny (A)</p> Signup and view all the answers

What type of reporting allows entities to communicate dubious transactions to the Financial Intelligence Unit?

<p>Suspicious Transaction Reporting (B)</p> Signup and view all the answers

Which guideline assists reporting entities in identifying suspicious activities?

<p>Suspicious Activity Reporting Guidelines (C)</p> Signup and view all the answers

What is the main responsibility of the Financial Intelligence Unit (FIU)?

<p>To analyze and disseminate ML/FT-related data (C)</p> Signup and view all the answers

What document must be submitted for founder share transactions exceeding one percent?

<p>Police report of the buyer (D)</p> Signup and view all the answers

What is the primary purpose of Customer Due Diligence (CDD) requirements?

<p>To verify the identity and assess the risk of clients (B)</p> Signup and view all the answers

Which aspect is NOT included in the obligations of the reporting entities under the law?

<p>Conducting regular audits (B)</p> Signup and view all the answers

Why are Enhanced Due Diligence (EDD) measures required?

<p>To mitigate risks associated with high-risk clients or transactions (B)</p> Signup and view all the answers

What is the role of the Financial Intelligence Unit (FIU) in relation to AML/CFT directives?

<p>To collect and analyze information regarding financial crimes (B)</p> Signup and view all the answers

Which of the following is a key difference between the ALPR and ALPA?

<p>ALPR details procedural requirements while ALPA focuses on punishment (B)</p> Signup and view all the answers

What activities are mandatory for insurers under the AML/CFT Directives issued by NIA?

<p>Performing transaction monitoring and reporting to FIU (D)</p> Signup and view all the answers

What is the intended effect of banning anonymous transactions under the law?

<p>To enhance transparency and accountability (B)</p> Signup and view all the answers

What outcome may result from failing to comply with AML/CFT directives?

<p>Imposition of fines and other sanctions (C)</p> Signup and view all the answers

Flashcards

Suspicious Activity Reporting (SAR)

Mandatory reporting of suspicious financial transactions or attempted transactions to FIU-Nepal by insurance companies.

Threshold Transaction Reporting (TTR)

Reporting of financial transactions exceeding a specified threshold amount to FIU-Nepal within 15 days of the transaction.

Suspicious Transaction Reporting (STR)

Reporting suspicious transactions within 3 days to FIU-Nepal, as per Appendix 6 guidelines.

Red Flags/Indicators

Signs or clues suggesting suspicious activities in financial transactions.

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Multiple Indicators

The presence of several warning signs for potential criminal activity.

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Insurance Sector Indicators

Specific signs of suspicious activities relevant to the insurance industry.

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Reporting Entity

Any financial institution responsible for recognizing suspicious activities and, if the case exists, filing STRs or SARs.

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Compliance Officer

The individual responsible for ensuring compliance with regulatory requirements, including reporting suspicious transactions.

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KYC/CDD/EDD

Know Your Customer/Customer Due Diligence/Enhanced Due Diligence procedures are mandatory to reduce money laundering/financial terrorism risks in the insurance sector.

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Beneficiary Identity Documents

Insurance policies require beneficiaries to provide valid identification documents (e.g., citizenship, other government-issued IDs).

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Political Exposed Persons (PEPs)

Beneficiaries must disclose if they have a relationship with a politically exposed person (PEP).

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High-Value Insurance Policies

Policies exceeding a certain value (e.g., 25 lakh) require documents verifying the relationship to the insured.

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Insurer Promoters/Executives

Insurers must verify the 'fit and proper' status of their promoters and executives through background checks (police checks).

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Founder Share Transactions

Significant founder share transactions (over 1%) require police reports from the buyer, for increased due diligence.

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AML/CFT Training

Insurance companies must provide training on Anti-Money Laundering and Combating the Financing of Terrorism to their employees and agents.

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Financial Intelligence Unit (FIU)

An independent unit that analyzes, disseminates, and receives ML/FT-related data and suspicious data.

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Suspicious Transaction Reporting (STR)

Reporting suspicious activities and transactions to the FIU.

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Suspicious Activity Reporting (SAR)

Reporting suspicious activities and transactions to the FIU

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Threshold Transactions Reporting (TTR)

A guideline for reporting certain high-value transactions to FIU.

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Money Laundering

The process of disguising the origin of illegally obtained money to make it appear legitimate.

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Asset Laundering

Converting or transferring assets in a way to avoid legal procedures and conceal their origin.

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AML/CFT

Anti-Money Laundering/Combating the Financing of Terrorism.

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ALPA

Act/Law against Money Laundering.

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ALPR

Rules related to the implementation of ALPA.

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Customer Due Diligence

Verification of customers' identity and the legitimacy of business transactions to prevent money laundering.

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Transaction Monitoring

Continuous review of financial transactions to detect suspicious patterns.

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Reporting Entities

Businesses that are required to report suspicious activities to regulatory agencies.

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FIU

Financial Intelligence Unit, an agency responsible for collecting and analyzing information related to suspicious financial activities.

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AML/CFT Directives

Rules and regulations issued by the regulatory agency for AML/CFT compliance.

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Transaction Threshold

A set amount of money above which financial transactions have to be reported.

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Risk Assessment

Analyzing factors which contribute to money laundering risks.

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Study Notes

  • A system of institutions, laws, mechanisms, and regulations governing a society is known as the Legal Institutional Framework.
  • It controls organizational and individual behaviors, ensuring justice, stability, and order.
  • Components include judicial institutions, executives, agencies, legal professionals, enforcement mechanisms, legal systems, legislative bodies, and checks and balances.
  • The framework is crucial for maintaining economic and social development through the rule of law.

International Framework

  • Governs the interactions and legal relations between organizations and countries.
  • A comprehensive set of principles, agreements, guidelines, treaties, and institutions control these global relationships.
  • Resolves conflicts, promotes development, and fosters cooperation in political, social, legal, and economic spheres.
  • Crucial for the integrity of the international financial system, promoting stability and security in international transactions.
  • Influences domestic legal frameworks by requiring countries to implement treaty obligations in their local laws.
  • The International Framework includes ML/FT/PF components like FATF, FSRBs, UNSC Resolutions, and IAIS insurance principles.

FATF Recommendations

  • The Financial Action Task Force (FATF) was created in 1989 to protect and secure the global economy.
  • The FATF provides a comprehensive framework for measures to combat illicit financial flows.
  • This includes laws, regulations, and operational measures that help national authorities detect and disrupt financial flows associated with crime and terrorism, and punish those responsible for illegal activity.
  • Forty recommendations are divided into seven areas:
    • AML/CFT Policies and coordination
    • Money laundering and confiscation
    • Terrorist financing and financing of proliferation
    • Preventive measures
    • Transparency and beneficial ownership
    • Powers and responsibilities of competent authorities
    • International cooperation
  • FATF recommendations are intended to prevent terrorist financing, financing of proliferation, and money laundering.

Insurance Core Principles

  • Developed by the International Association of Insurance Supervisors (IAIS)
  • The executive requires intermediaries and insurers to effectively measure measures to combat money laundering.
  • Include all elements of FATF recommendations, aligning supervisor and jurisdiction laws with national risk, and regulations referencing AML/CFT.

Relevant United Nations Security Council Resolutions (UNSCRs)

  • These resolutions impose obligations for maintaining international security and peace, playing a significant role in combating money laundering and terrorist financing.
  • Key resolutions include 1267 (1999), 1373 (2001), 1540 (2004), 2178 (2014), and 2462 (2019).

Domestic Framework (Nepal)

  • Nepal has enacted the Asset (Money) Laundering Prevention Act, 2008 (ALPA).
  • This act controls criminal activities by preventing illegal money practices and covering illegal funds, actions, and assets.
  • Includes obligations and duties for reporting entities, regulators, and law enforcement.
  • Additional frameworks include: -Assets (Money) Laundering Prevention Rules (ALPR)
    • AML/CFT Directives issued by NIA

Nepal Insurance Authority's Guidelines

  • Regulations to control money laundering, terrorist financing, and financing of proliferation.
  • Mandates various identity document requirements, relationship disclosures, fit and proper tests, and more.
  • Directives for suspicious transaction reporting (SAR, TTR)
  • Circulars from other organizations (RB, FIU, National Risk Assessments)

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Chapter 2: Legal and Institutional Framework PDF

Description

Explore the essential components of the legal and institutional framework that governs societies. This quiz delves into the mechanisms, regulations, and institutional structures that maintain justice and order. Additionally, it covers the international legal framework that governs relationships between nations and organizations.

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