Obligations of Financial Institutions and Other Reporting Entities – Pt:2

by the Financial Intelligence Unit Fri, Jul 27. 2012

The last Article outlined the obligations of financial institutions and other reporting entities under the Anti-money Laundering/Combating Financing of Terrorism Legislation and highlighted that 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.{{more}}

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.

Pursuant to section 46 subsections (2) and (3) of the Proceeds of Crime and Money Laundering (Prevention) Act, (POCA), CAP 181 of the 2009 Revised Edition of the Laws of Saint Vincent and the Grenadines financial institutions and other entities listed in the First Schedule of the Act are compelled 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).

In a similar vein section 10A of the United Nations (Anti-Terrorism Measures) Act (UNATMA), CAP 183 of the 2009 Revised Edition of the Laws of Saint Vincent and the Grenadines imposes an 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.

There are numerous indicators which may assist reporting entities to identify potential money laundering or terrorism financing activity. Although the existence of a single indicator does not necessarily indicate illicit activity, it should encourage further monitoring and examination. In most cases it is the existence of multiple indicators that raises a reporting entity’s suspicion of potential criminal activity, and informs their response to the situation.

Financial institutions and relevant businesses should include these money laundering/terrorism financing indicators in staff training, and encourage their staff to use these indicators when describing suspicious behaviours for inclusion in Suspicious Transaction/Activity Reports.

Money launderers and terrorism financiers will continuously look for new techniques to obscure the origins of illicit funds and lend their activities an appearance of legitimacy. Financial institutions and relevant business entities should continually review their products, services and individual customers to ensure their internal AML/CTF systems and training are effective.

Among the common indicators which feature in international case studies relating to money laundering and terrorist financing are structured transactions which fall below a reporting threshold; cash withdrawals conducted at various bank branches and ATMs on the same day; customers making large cash deposits, despite having no known source of income; high-value international funds transfers to/from a jurisdiction with no apparent logical purpose; third-party individuals making large cash deposits into accounts.

It is therefore essential for financial institutions and other reporting entities to be vigilant in knowing their customers and maintaining systems which aid in effective implementation of and compliance with the legislation.

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