Chapter 5 - AML PDF

Chapter Five Anti-Money Laundering and Combating the Financing of Terrorism =================================================================================== **Introduction 125** 1. **Offences 125** 2. **The Role of the Financial Services Sector 126** 3. **Prohibitions...

Chapter Five Anti-Money Laundering and Combating the Financing of Terrorism =================================================================================== **Introduction 125** 1. **Offences 125** 2. **The Role of the Financial Services Sector 126** 3. **Prohibitions 130** 4. **Politically Exposed Persons (PEPs) 131** 5. **Suspicious Transaction Reports (STRs) 132** 6. **Practical Measures 133** 7. **Record Keeping Requirements 135** 8. **135** 9. **138** **139** It is important to appreciate that the crime of money laundering is considered as an independent crime. In other words, the punishment of the perpetrator for the predicate offence is not required and does not prevent punishment for the crime of money laundering the criminally derived proceeds. In a similar fashion, a person doing any of the above with knowledge that the funds are wholly, or even partly, owned by a terrorist organisation, or intended to finance a terrorist organisation, a terrorist person or a terrorist act is guilty of the crime of financing terrorism. This is the case even if it were without the intention to conceal or disguise the fund's illicit origin. Furthermore, providing, collecting, preparing or obtaining funds (or facilitating this) with the intent to use them for terrorist purposes, or while knowing that such proceeds will be used in whole or in part for the commitment of a terrorist offence is the crime of financing terrorism. That is also the case if a person has committed such acts on behalf of a terrorist organisation or a terrorist person while aware of the true background or purpose. Article 4 of the law specifies that the legal person is criminally responsible for the money laundering or financing terrorism crime if it is committed in their name or for its account intentionally. 2. The Role of the Financial Services Sector 2.1 Obligations ### **Learning Objective** 5.2.1 Know relevant obligations placed upon financial institutions and designated non-financial business (Articles 15, 16 & 17) Financial institutions, such as banks, designated non-financial businesses, such as brokers, real estate agents and dealers in precious metals, and designated non-financial professions, such as lawyers and accountants, are all required to report suspicions of money laundering and terrorist financing. If there is suspicion or if there are reasonable grounds to suspect money laundering or terrorist financing is happening or being attempted, a detailed report should be submitted to the UAE's **Financial Intelligence Unit (FIU)**, which is the financial intelligence department at the UAE Central Bank. These reports must include all of the data and information available regarding the transaction and the parties involved, and provide any additional information required by the FIU, with no right to object under confidentiality provisions. Lawyers, notaries, other legal professionals and independent legal auditors are exempted from this provision if the information related to the operation has been obtained subject to professional confidentiality. To facilitate the suspicion reporting, financial institutions and designated non-financial businesses and professions are obliged to: - Identify the crime risks faced and continuously assess, document, and update such assessments. This assessment and its supporting data should be available to the supervisory authorities on request. - Take the necessary due diligence measures and procedures, taking into account the various risk factors and retain the records related to this process. - Refrain from opening or conducting any financial or commercial transaction under an anonymous or fictitious name, or by pseudonym or number, and maintaining a relationship or providing any services to such clients. - Develop internal policies, controls and procedures approved by senior management to enable the management of identified risks and their mitigation, and to review and update these continuously, as well as apply them to all subsidiaries and affiliates in which a majority stake is held. - Promptly apply the directives issued by the competent authorities in the State for implementing the decisions issued by the UN Security Council under Chapter 7 of the UN Convention for the Prohibition and Suppression of the Financing of Terrorism and Proliferation of Weapons of Mass Destruction, and other related directives. - Maintain all records, documents, and data for all transactions, whether local or international, and make this information available to the competent authorities promptly upon request. - Comply with any other obligations stipulated in the implementing regulations of the law. 2.2 Customer Due Diligence (CDD) ### **Learning Objective** 5.2.2 Know required customer due diligence (CDD) measures (Decision (No. 10/Chairman) of 2019): purpose (Article 5); application (Article 6); ongoing supervision (Articles 7 & 12); methods (Article 8); high risk countries (Article 22) **Customer due diligence (CDD)** is a vital component in the prevention and detection of money laundering and terrorist financing. In simple terms, it is verifying whether customers are who they say they are, confirming they are not on any prohibited lists and assess their risk factors. In other words, CDD is the act of performing background checks on the customer to ensure that they are properly riskassessed before being onboarded. Article (6) of Decision No. 10 of 2019 requires financial institutions and **designated non-financial businesses and professions (DNFBPs)** to undertake CDD measures: - when establishing a business relationship - when carrying out occasional transactions in favour of a customer for amounts equal to or exceeding AED 55,000, whether the transaction is carried out in a single transaction or in several transactions that appear to be linked - when carrying out occasional transactions in the form of wire transfers for amounts equal to or exceeding AED 3,500 - whenever there is a suspicion of crime - where there are doubts about the veracity or adequacy of the identification data previously obtained for the customer. The CDD measures require verification of the identity of the customer and the beneficial owner before or during the establishment of a business relationship, opening of an account, or before executing a transaction for a customer with whom there is no business relationship. It is only in cases where there is a low crime risk that verification of customer identity is allowed to take place after the establishment of the business relationship, which must meet the following conditions: a. The verification will be conducted in a timely manner as of the commencement of business relationship or the implementation of the transaction. b. The delay is necessary in order not to obstruct the natural course of business. c. The implementation of appropriate and effective measures to control the risks of crime. Importantly, financial Institutions and DNFBPs are always required to take measures to manage the risks in circumstances where customers are able to benefit from the business relationship prior to completion of the verification process. Financial Institutions and DNFBPs should also undertake ongoing supervision of business relationships and CDD measures, including: - - - CDD should be done using documents, data or information from a reliable and independent source or any other source to verify the identity. This is required as follows: - - - - - - - Financial institutions and DNFBPs are required to verify that any person purporting to act on behalf of the customer is so authorised, and verify the identity of that person. Financial institutions and DNFBPs are also required to understand the intended purpose and nature of the business relationship, and obtain, when necessary, information related to this purpose. They are also required to understand the nature of the customer's business as well as the customer's ownership and control structure. Where the natural or legal person is from a high risk country (in terms of money laundering and/or terrorist financing), financial institutions and DNFBPs must undertake enhanced CDD measures based on the level of risk that might arise from the business relationship. 2.3 Beneficial Ownership ### **Learning Objective** 5.2.3 Know requirements regarding establishing beneficial ownership (Decision No. (10/Chairman) of 2019) (Articles 9,10 &11) Financial institutions and DNFBPs are required to take reasonable measures to verify the identity of the beneficial owners of legal persons and legal arrangements. This should be done using information, data, or statistics acquired from a reliable source. For customers that are legal persons, beneficial ownership verification involves: a. Obtaining and verifying the identity of the natural person, who alone or jointly with another person, has a controlling ownership interest in the legal person of 25% or more. b. In the event of failing to verify the identity of the natural person exercising control, or where the person(s) with the controlling ownership interest is not the beneficial owner, the identity shall be verified for the relevant natural person(s) holding the position of senior management officer, whether one or more persons.  For customers that are legal arrangements, beneficial ownership validation involves verifying the identity of the settlor, the trustee(s), or anyone holding a similar position, the identity of the beneficiaries or class of beneficiaries, the identity of any other natural person exercising ultimate effective control over the legal arrangement, and obtaining sufficient information regarding the beneficial owner to enable the verification of their identity at the time of payment, or at the time they intend to exercise their legally acquired rights. There is an exemption from the requirement to identify and verify the identity of any shareholder, partner, or the beneficial owner, if reliable sources show that the customer or the owner holding the controlling interest is either a company listed on a regulated stock exchange or a subsidiary where the majority of the equity is held by a holding company. In addition to the CDD measures required for the customer and the beneficial owner, financial institutions are required to conduct CDD measures and ongoing monitoring of the beneficiary of life insurance policies and other fund generating transactions, including life insurance products relating to investments and family takaful insurance. This should be performed as soon as the beneficiary is identified or designated and will involve the following: - Where the beneficiary is identified by name, the name of the person, whether a natural person, legal person or legal arrangement, must be obtained. - Where the beneficiary is designated by characteristics or by class -- such as a family relation like parent or child, or by other means such as a will or estate -- the financial institution is required to obtain sufficient information concerning the beneficiary to ensure that it will be able to establish the identity of the beneficiary at the time of the pay out. In all cases financial institutions must verify the identity of the beneficiary at the time of the pay out of the insurance policy, or prior to exercising any rights related to the policy. If the financial institution identifies the beneficiary of the insurance policy to be a high-risk legal person or arrangement, then it should conduct enhanced CDD measures to identify the beneficial owner of that beneficiary. 3\. Prohibitions ### **Learning Objective** 5.3.1 Know the types of business that financial institutions and DNFBPs are prohibited from engaging with (Decision No. (10/Chairman) of 2019) (Articles 13 & 14) Financial institutions and DNFBPs are prohibited from establishing or maintaining a business relationship or executing any transaction where they are unable to undertake CDD measures. In such circumstances, they should consider reporting a suspicious transaction to the FIU. Furthermore, even where there is suspicion of a crime, financial institutions and DNFBPs should not apply CDD measures if they have reasonable grounds to believe that undertaking such measures would tip off the customer. They should, however, report a suspicious transaction to the FIU along with the reasons that prevented them from undertaking CDD measures. Financial institutions and DNFBPs are also prohibited from dealing with shell banks, whether this involves opening bank accounts in their names, or accepting funds or deposits from them. The final prohibition to consider is that financial institutions must not create or keep records of bank accounts using pseudonyms, fictitious names or numbered accounts without the account holder's name. 4\. Politically Exposed Persons (PEPs) ### **Learning Objective** 5.4.1 Know the definition of a PEP (Decision No. (10/Chairman) of 2019) (Article 1) 5.4.2 Know required measures for PEPs (Decision No. (10/Chairman) of 2019) (Article 15) We saw in the section on CDD that, for natural persons, senior management approval is required where the customer or the beneficial owner is a PEP. A PEP is defined as a natural person that is or has been entrusted with a prominent public function in the UAE (domestic PEP) or any other foreign country (foreign PEP). Examples of prominent public functions include heads of state or government, senior politicians, senior government officials, judicial or military officials, senior executive managers of stateowned corporations, senior officials of political parties and persons who are, or have previously been, entrusted with the management of an international organisation or any prominent function within such an organisation. The definition also includes direct family members of a PEP, which includes the spouse, children, spouses of children and parents. Furthermore, associates known to be close to a PEP, are also within the definition, such as individuals having joint-ownership rights in a legal person or arrangement or any other close business relationship with a PEP, and individuals having individual ownership rights in a legal person or arrangement established in favour of a PEP. For PEPs, in addition to undertaking CDD measures, financial institutions and DNFBPs must carry out the following: - For **foreign PEPs**: a. Put in place suitable risk management systems to determine whether a customer or the beneficial owner is considered a PEP. b. Obtain senior management approval before establishing a business relationship, or continuing an existing one, with a PEP. c. Take reasonable measures to establish the source of funds of customers and beneficial owners identified as PEPs. d. Conduct enhanced ongoing monitoring over such relationship. - For **domestic PEPs and individuals** previously entrusted with prominent functions at international organisations: e. Take sufficient measures to identify whether the customer or the beneficial owner is considered one of those persons. f. Take the same steps as for foreign PEPs listed as b, c and d above when there is a high-risk business relationship accompanying such persons. We have also seen that financial institutions are required to take reasonable measures to determine the beneficiary or beneficial owner of life insurance policies and family takaful insurance. If this beneficiary or beneficial owner is identified as a PEP, then senior management should be informed before paying out on the policies. Additionally, the overall business relationship should be thoroughly examined and a suspicious transaction report to the FIU should be considered. 5\. Suspicious Transaction Reports (STRs) ### **Learning Objective** 5.5.1 Know requirements relating to STRs (Decision No. (10/Chairman) of 2019) (Articles 16, 17 &18) If financial institutions and DNFBPs have reasonable grounds to suspect that a transaction, attempted transaction, or funds constitute proceeds of crime in whole or in part, or are related to a crime or intended to be used in such activity, regardless of the amount, they must submit a suspicious transaction report (STR) directly to the FIU without any delay. This should be done via the electronic system of the FIU or any other means approved by the FIU. The financial institution or DNFBP should then respond to all additional information requested by the FIU. Adherence to these requirements is not a breach of banking or contractual secrecy. Financial institutions and DNFBPs must put indicators in place to identify suspicions, and update these indicators to reflect the development and diversity of the methods used for committing such crimes and in compliance with the instructions of the FIU and other supervisory authorities. Lawyers, notary publics, other legal stakeholders and independent legal auditors are exempt from the STR requirements if obtaining information regarding transactions relates to the assessment of their customer's legal position, or defending or representing them before judiciary authorities or in arbitration or mediation, or providing legal opinion with regards to legal proceedings. Financial institutions and DNFBPs, their board members, employees and authorised representatives are not subject to any administrative, civil or criminal liability for reporting suspicions when reporting to the FIU or providing information in good faith. Financial institutions and DNFBPs, their managers, officials or staff, must not disclose, directly or indirectly, to the customer or any other person that they have reported, or are intending to report a suspicious transaction. 6\. Practical Measures ### **Learning Objective** 5.6.1 Know requirements for financial institutions and DNFBPs relying on third party service providers (Decision No. (10/Chairman) of 2019) (Article 19) and business development (Article 23) 5.6.2 Know internal supervision measures for financial institutions and DNFBPs and for those with foreign branches and subsidiaries (Decision No. (10/Chairman) of 2019) (Article 20) 5.6.3 Know required tasks undertaken by the compliance officer (Decision No. (10/Chairman) of 2019) (Article 21) This section details some practical measures included within the anti-money laundering and counter terrorist financing requirements covering three particular areas: - the use of third party service providers and new technologies - how the requirements impact firms' internal supervision processes, and - their foreign branches and subsidiaries, and the tasks required of the compliance officer. 6.1 Third Party Service Providers and New Technologies Financial institutions and DNFBPs can utilise the services of a third party service provider to undertake the required CDD measures, but only with the following caveats, the financial institution or DNFBP must: - remain responsible for the validity of the measures undertaken - immediately obtain the identification data and other necessary information collected through the CDD measures and ensure that copies of the documents for such measures can be obtained without delay and upon request, and - ensure that the third party is regulated and supervised, and that it adheres to the required CDD measures towards customers and record-keeping provisions. Financial institutions and DNFBPs can rely on third parties that are part of the same group. Where a financial institution or DNFBP is developing new products and practices, including the means by which new and existing products will be made available, it must identify and assess the risks of money laundering and terrorism financing that may arise and take appropriate measures to manage and mitigate such risks. 6.2 Internal Supervision and Foreign Branches and Subsidiaries Financial institutions and DNFBPs should implement internal policies, procedures and controls for combating money laundering and the financing of terrorism that are commensurate with the risks, reflecting the nature and size of the business. These should be continuously updated, and apply to all the entity's branches and subsidiaries. These policies, procedures and controls must include the following: 1. CDD measures towards customers, including procedures for the risk management of business relationships prior to completing the verification process. 2. Procedures for the reporting of suspicious transactions. 3. Appropriate arrangements for managing compliance, including appointing a compliance officer. 4. Screening procedures to ensure the competence of new members of staff. 5. The provision of periodic programmes and workshops to build the capabilities of the compliance officer and other competent employees. 6. An independent audit function to test the effectiveness and adequacy of internal policies, controls and procedures. 6.3 Compliance Officer Tasks The appointed compliance officer must have the appropriate competencies and experience to be responsible for performing the following tasks: 1. Detecting money laundering and terrorist financing transactions. 2. Receiving, reviewing and scrutinising data concerning potentially suspicious transactions, and taking decisions to notify the FIU whilst maintaining complete confidentiality. 3. Reviewing and assessing the internal rules and procedures and their consistency with the law and other regulatory requirements and decisions. Proposing updates where necessary and preparing and submitting semi-annual reports to senior management, copying the report to the relevant supervisory authority with senior management remarks and decisions. 4. Preparing, executing and documenting ongoing training and development programmes and plans for the institution's employees on money laundering and the financing of terrorism and illegal organisations, and the means to combat them. 5. Collaborating with the supervisory authority and the FIU, providing them with all requested data, and allowing their authorised employees to view the necessary records and documents that will allow them to perform their duties. 7\. Record Keeping Requirements ### **Learning Objective** 5.7.1 Know record keeping requirements (Decision No. (10/Chairman) of 2019) (Article 24) Financial institutions and DNFBPs must retain all records, documents, data and statistics for all financial transactions and local or international commercial and cash transactions for a period of no less than five years from the date of completion of the transaction or termination of the business relationship with the customer. These records and documents should include those obtained through CDD measures, ongoing monitoring, account files and business correspondence, and copies of personal identification documents, including STRs and the results of any analysis. The records and documents must be organised so as to permit data analysis and tracking of financial transactions, and all customer information regarding CDD, ongoing monitoring and analysis, records, files, documents, correspondence and forms must be made available immediately to the competent authorities upon request. 8. Penalties 8.1 Administrative Penalties ### **Learning Objective** 5.8.1 Know the range of administrative penalties for financial institutions and designated nonfinancial business that violate Federal Law No. 20 and its executive regulation (Article 14) The following administrative penalties will be imposed on financial institutions and designated non-financial businesses and professions that violate the law and regulations in relation to money laundering and terrorism financing: - Warnings. - Administrative penalties of no less than AED 50,000 and no more than AED 5,000,000 for each violation. - Banning the violator from working in the sector related to the violation for the period determined by the supervisory authority. - Constraining the powers of the board members, supervisory or executive management members, managers or owners who are proven to be responsible for the violation including the appointment of temporary inspector. - Arresting managers, board members and supervisory and executive management members who are proven to be responsible for the violation for a period to be determined by the supervisory authority, or request their removal. - Arrest or restrict the activity or the profession for a period to be determined by the supervisory authority. - Cancel the violator's licence. The supervisory authority will, upon imposing administrative penalties, publish the penalties. The supervisory authority may also request regular reports on the measures taken to correct the violation. 8.2 Money Laundering ### **Learning Objective** 5.8.2 Know the criminal penalties for any person considered to be a perpetrator of money laundering (Article 22) 5.8.3 Know the criminal penalties for perpetrators of money laundering that: abuse their influence (Article 22); does so through their employment or professional status (Article 22); commits the crime via a non-profit organisation (Article 22); is part of a criminal enterprise (Article 22); is a repeat offender (Article 22) Any person who commits or attempts to commit the crime of money laundering will be sentenced to imprisonment for a period not exceeding ten years and to a fine of no less than AED 100,000 and no more than AED 5,000,000, or either one of these two penalties. A temporary imprisonment and a fine of no less than AED 300,000 and no more than AED 10,000,000 will be applied if the perpetrator of a money laundering crime commits any of the following: - abuses the influence or the power granted by the person's profession or professional activities - commits the crime through a non-profit organisation commits the crime through an organised crime group - is a repeat offender. An attempt to commit a money laundering offence is punishable by the full penalty prescribed for perpetrating the same offence. 8.3 Financing Terrorism ### **Learning Objective** 5.8.4 Know the criminal penalties for any person who launders money for the financing of: terrorism (Article 22); illegal organisations (Article 22) Life imprisonment or temporary imprisonment of no less than ten years and penalty of no less than AED 300,000 and no more than AED 10,000,000 is applied to anyone using funds for terrorist financing. Temporary imprisonment and a penalty of no less than AED 300,000 applies to anyone using funds to finance illegal organisations. The court may choose to commute or exempt the offenders from a sentence if they provide the judicial or administrative authorities with information relating to the offence that leads to the disclosure, prosecution, or arrest of the perpetrators. 8.4 Penalties for Legal Persons ### **Learning Objective** 5.8.5 Know the criminal penalties for any legal person considered to be a perpetrator of: money laundering (Article 23); financing terrorism (Article 23); financing illegal organisations (Article 23) Legal persons, as opposed to natural persons, may face a penalty in the form of a fine of no less than AED 500,000 and no more than AED 50,000,000 where representatives or managers or agents commit the crimes of money laundering, financing terrorism or financing illegal organisations for its account or in its name. Additionally, if the legal person is convicted of the crime of financing terrorism, the court will order its dissolution and closure of its offices where its activities are performed. The court will also order the publishing of a summary of the judgment by the appropriate means at the expense of guilty party.  8.5 Failure to Report Suspicions ### **Learning Objective** 5.8.6 Know the penalty for failing to comply with suspicious transaction reporting obligations (Article 24) A failure to report suspicions, or gross negligence in implementing processes and procedures in relation to suspicions can result in imprisonment and/or a fine of no less than AED 100,000 and no more than AED 1,000,000. 8.6 Tipping Off ### **Learning Objective** 5.8.7 Know the offence of tipping off (Article 25); the penalty for tipping off (Article 25) Anyone who notifies or warns a person in relation to suspicions, or reveals any transaction under review in relation to suspicions, is guilty of 'tipping off'. The offence of tipping off leads to imprisonment for no less than six months and/or a penalty of no less than AED 100,000 and no more than AED 500,000. 9\. Market Abuse Regulations in the UAE ### **Learning Objective** 5.9.1 Understand the regulations in relation to market abuse in the UAE (Article 16 of the Rules relating to the prevention and penalties arising from market abuse in the UAE are derived from two sources: - Article 16 (the Regulations as to Trading, Clearing, Settlement, Transfer of Ownership and Custody of Securities) says that any dealing in securities with the aim of deceiving other transacting parties will be null and void. Furthermore, resorting to a series of illusory transactions to delude others as to the existence of an active market in the securities traded is deemed to be a form of deception. Any act aimed at causing a rise or a fall in the price of any securities with the intention of encouraging other transacting parties to join in, whether as sellers or purchasers of the securities, will also be null and void. - Article 37 (the Regulations as to Disclosure and Transparency) details the potential penalties. It states that any person will be liable to imprisonment for a period of not less than three months and not more than three years and a fine of not less than AED 100,000 and not more than AED 1 million, or either of these penalties, if they: a. furnish any data, or proffer any declaration or information being untrue and such as to affect the market value of the securities and an investor's decision to invest or otherwise b. deal in securities on the basis of unpublicised or undisclosed information they acquired by virtue of their position c. spread tendentious rumours regarding the selling or buying of shares d. exploit unpublicised information which could affect the prices of securities to achieve personal benefits. Any dealing or transaction effected on the basis of the preceding shall be null and void. The board of the Securities and Commodities Authority (SCA) or the Authority may, in the event of contravention of the provisions of its law and regulations, impose administrative sanctions by levying a monetary penalty and by barring any investor from trading, whether a natural or juristic person, for a period not exceeding one year from the date of the rendering of the decision to bar them, or either of these two sanctions. 10. Conflicts of Interest Accepted Practice in the UAE 10.1 Chinese Walls ### **Learning Objective** 5.10.1 Understand the rules on Chinese walls: control of information; effect of the rules; attribution of '**Chinese wall**' is the term given to arrangements made by a firm, such that information held by an employee in one part of the business must be withheld from (or, if this is not possible, at least not used by) the people with or for whom they act in another part of the business. Accepted practice requires that where a firm establishes and maintains a Chinese wall, it must: - withhold or not use the information held, and - for that purpose, permit its employees in one part of the business to withhold the information from those employed in another part of the business. But only to the extent that at least one of those parts of the business is carrying on regulated activities, or another activity carried on in connection with a regulated activity. The requirement to maintain Chinese walls includes taking reasonable steps to ensure that these arrangements remain effective and are adequately monitored. 10.2 Investment Research ### **Learning Objective** 5.10.2 Know the rules on managing conflicts of interest in connection with investment research and research recommendations: application; implementation; conditions; exemptions In general, the conflicts management rules on the production and dissemination of investment research apply to all firms. Where a firm produces investment research, it must implement measures for managing conflicts of interest in relation to the financial analysts involved in producing research, and other relevant persons, where their interests may conflict with those to whom it is disseminated. Firms must also ensure that there are arrangements such that financial analysts and other relevant persons who know the likely timing/content of investment research which is not yet publicly available, or available to clients and which cannot be inferred from information that is available, cannot undertake personal transactions, or trade for others, until the recipient of the investment research has had a reasonable opportunity to act on it. However, there are certain exceptions, such as the receipt of an instruction from an execution-only client or a market maker acting in good faith: - in cases not covered by the above, they cannot undertake personal account transactions without prior approval from the firm's compliance or legal department and then only in exceptional circumstances - the firm, and any person involved in the production of research, must not accept inducements from those with a material interest in the subject matter of the research - they may not promise favourable research coverage to the issuers of the securities - none of the issuers, relevant persons other than financial analysts, or anyone else may be allowed to review draft investment research which includes a recommendation or target price, other than to verify compliance with the firm's legal obligations. End of Chapter Questions Think of an answer for each question and refer to the appropriate section for confirmation. 1. **What is predicate offence?** 2. **Is money laundering an independent crime?** 3. **What sort of businesses are required to report suspicions of money laundering and terrorist financing?** 4. **What is CDD?** 5. **When should the verification of the customer and beneficial owner take place?** 6. **What is required to satisfy CDD for natural persons?** *Answer reference: Section 2.2* 7. **What is required to satisfy CDD for legal persons and legal arrangements?** 8. **What does verification of legal persons beneficial ownership include?** *Answer reference: Section 2.3* 9. **Who should a financial institution report a suspicion of a crime to?** *Answer reference: Section 3* 10. **What is a politically exposed person?** 11. **When should a suspicious transaction report be submitted?** 12. **List the caveats that financial institutions and DNFBPs must following when enrolling a third party service provider.** 13. **Name three tasks an appointed compliance officer should perform.** 14. **How long should records be retained from the date of completion of a transaction or termination of a business relationship?** 15. **What administrative penalty fine can be imposed for violating the law?** 16. **What are the penalties if a money laundering crime is committed through a non-profit organisation?** *Answer reference: Section 8.2* 17. **What are the penalties a legal person can face if a crime is committed?** *Answer reference: Section 8.4* 18. **What are the penalties for dealing on the basis of unpublicised or undisclosed information?** *Answer reference: Section 9* 19. **What are Chinese walls?** 20. **List the investment research exceptions in relation to an execution-only client.**