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Obligations of Financial Institutions and Other Reporting Entities

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by the Financial Intelligence Unit Fri, Jun 29. 2012

Apart from criminalizing the offences of money laundering and terrorist financing, the Proceeds of Crime and Money Laundering (Prevention) Act (POCA), CAP, 181 and the United Nations (Anti-Terrorism Measures) Act (UNATMA), CAP 183 of the 2009 Revised Edition of the Laws of St Vincent and the Grenadines create certain legal obligations for financial institutions and regulated businesses listed in Schedule 1 of the POCA.{{more}} These obligations are aimed at safeguarding the financial system from use by money launderers and terrorist financiers and ensuring that St Vincent and the Grenadines maintains sound legal and regulatory frameworks for the prevention and combating of these scourges.

By extension, the reputation of financial institutions and regulated businesses in St Vincent and the Grenadines will be lauded as clean as a direct result of maintaining sound practices in keeping with internationally accepted and required standards.

Among the entities listed as financial institutions and relevant businesses in Schedule 1 of POCA are Domestic Banks; Offshore Banks; Local and International Insurance Companies; Lawyers; Accountants; Real Estate Agents; Registered Agents; International Business Companies; Mutual Funds; Trusts; Jewellers; Money Remitters.

Reporting of Suspicious Transactions

Section 46 subsections (2) and (3) compels scheduled entities to “pay special attention to all complex, unusual or large transactions, whether completed or not, and to all unusual patterns of transactions, and to insignificant but periodic patterns of transactions, which have no apparent economic purpose.” Upon suspicion that that the aforementioned transactions or any other transaction or financial activity could constitute or be related to money laundering or the proceeds of criminal conduct, a Regulated institution must report the suspicious transactions to the Financial Intelligence Unit (FIU).

Section 10A of UNATMA imposes a similar obligation on scheduled entities, where they suspect that a transaction as described in section 46 of POCA or any other transaction or financial activity could constitute or be related to the commission of a terrorist act, or the financing of a terrorist act to report the suspicious transaction to the FIU.

Record Keeping

Section 46 subsection (1) of POCA places obligations on these scheduled entities to keep and retain records relating to financial activities in accordance with the Proceeds of Crime Regulations (Regulations).

Section 5 of the Regulations states that all Regulated institutions are required to keep copies of all records for a period of seven (7) years. These records must be kept throughout the duration of the relationship with the customer and even subsequent to the end of the relationship. Examples of records to be kept include: Entry records-account opening records, including verification documentation; Ledger records; Supporting records- records in support of ledger entries, including credit and debit slips and cheques. The exception to the seven-year rule includes instances where an investigation has been initiated; then the FIU may request that an institution keep records until further notice, notwithstanding the lapse of 7 years.

Identification and Verification of Customers/Accounts (Customer Due Diligence)

Section 4 of the Regulations places the obligation on scheduled entities to establish and maintain identification procedures which require a customer to produce satisfactory evidence of identity, particularly in instances of account opening (forming of a new business relationship) or instances of ‘one-off transactions’ (transactions carried out other than in the course of normal business) of EC$10,000 or more.

Satisfactory evidence of identity includes documents such as a current valid passport, a national identification card and driver’s licence bearing a photograph. Verification of identification also includes obtaining a customer’s name, date and place of birth, current permanent address (That is, proof of address), employment information, including occupation, usually in the form of job letter, and a specimen signature.

Once a scheduled entity has satisfactorily verified the identity of a customer, no further verification is necessary as long as the customer maintains a business relationship on a regular basis, except where there are concerns regarding the identity of the client or beneficial owner during the course of the business relationship. The entity is therefore expected at all times to monitor a business relationship for consistency with the stated account purposes and businesses and the identified potential activity. Where there has been no recent contact with the customer or no transaction within a period of 5 years, then the scheduled entity is expected to confirm the identity of the account holder.

The aforementioned obligations may be adopted and applied with some measure of flexibility, as each customer is unique and may not always be able to provide all the required pieces of identification, in the case of minors for example.

Implementation of a Written Compliance Program

Section 46 subsection (6) of POCA places the obligation on scheduled entities to develop and implement a written compliance programme, designed to monitor and ensure compliance with the Regulations. A written compliance programme includes appointing a senior staff member or member at management level to ensure compliance with the Act and Regulations. In addition, there must be a system established for internal reporting and internal controls to ensure compliance, as well as training of staff in their obligations under the legislation.

It is acknowledged that these obligations under POCA and its Regulations may have legal and financial implications for financial institutions and other reporting entities; however, it is imperative that they too do their part in ensuring that St Vincent and the Grenadines maintains a sound financial system which is not utilized by money launderers and terrorist financiers.

For more information on the anti-money laundering legislation and related information visit us at www.svgfiu.com.

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