MAC Employee Induction Program
Chapter 4 – AML and CFT 30mins
Anti Money Laundering (AML)/Countering the Financing of Terrorism (CFT) and the Prevention of Financial Crime is the responsibility of every member of staff, not just the risk and compliance team.
Everyone plays a vital role in preventing financial crime.
Money laundering is the generic term used to describe the
process in which criminals disguise the original ownership and control of the proceeds of their criminal activity by making such proceeds appear to have derived from a legitimate source.
The processes used by the criminals to launder the proceeds of their criminal activity are varied, and can be extensive.
Those engaged in money laundering generally attempt to:-
- Conceal the true ownership and origin of the proceeds
- Maintain control over the proceeds/change the form of the proceeds
- Confuse the audit trail to such a degree that it is unclear how such funds were obtained.
Terrorist Financing (“TF”) is the attempt to take legitimate and/or illegitimate proceeds and use them to facilitate terrorist activities.
Not about the proceeds – but about the destination.
- Motivation: Profit
- Source: funds are typically derived from criminal activity (e.g., drug and people trafficking, arms smuggling)
- Size: large amounts
- Method: criminals involved will often use any potential method to disguise the origin of funds including ‘structuring’ techniques
- Ultimate purpose: to “clean” the funds and integrate into the legitimate financial system
- Circular pattern: funds ultimately revert to the original source
- Motivation: Ideological
- Source: funds may or may not be derived through illegal means (charitable donations)
- Size: any size but tend to be smaller
- Method: focused on delivering funds to the end user. More likely to use informal value transfer systems (e.g., hawalas) and currency exchange firms
- Ultimate purpose: to further the ideological goals of the controller of the assets
- Linear pattern: funds to not revert to the original owner
Companies you interact with could be:
- involved in criminal activity and could be using you to facilitate the laundering of his money or the committing of a predicate crime;
- influenced by a criminal and money you receive may have originated from that criminal or they may be accepting such money into their business;
- in a position of influence and the money coming to you has come from accepting bribes or other corrupt activity;
- supplying money to criminals.
- You might be subject to disgruntled staff members creating fictitious customers and laundering money or commit fraud;
- Your staff may be being coerced into accept bribes in order to turn a ‘blind eye’ to third party requests.
- Undue client secrecy and complex ownership structures without rationale;
- no clear rationale for the set up;
- clients are reluctant to provide further details;
- unexplained delays in providing further information;
- Inconsistent information;
- Structures set up to evade tax in certain jurisdictions
- Transactions without a proper rationale;
- Pressure to act quickly
The Isle of Man anti-money laundering and counter-financing of terrorism regime has three tiers
- Proceeds of Crime Act 2008
- Anti-Terrorism & Crime Act 2003
- Terrorism and Other Crime (Financial Restrictions Act 2014)
- Isle of Man Bribery Act
- Anti-Money Laundering and other Financial Crime (Misc. Amendments) Act 2018
- Anti Money Laundering and Countering the Financing of Terrorism Code 2019
- Anti-Money Laundering and Countering the Financing of Terrorism Handbook (November 2019)
- Sector specific and targeted guidance CDD, Source of Funds/Wealth, Introduced Business, Generic Designated Business
- If you have any knowledge or suspicion (or have reasonable grounds for knowledge or suspicion) that someone may be involved in financial crime you have a personal obligation to report it – This is your defence
- Applies to attempted transactions/prospective customers also
- Where suspicious activity is identified – conduct enhanced CDD (unless you reasonably believe it will tip off the customer)
- Timely report to the MLRO or DMLRO in their absence
- If you are suspicious, don’t proceed with a transaction unless you have received consent from MLRO
- Keep any reports you make to the MLRO confidential
- Attend training
All employees of MAC have a responsibility to identify suspicious activity and bring it to the attention of the MLRO or the DMLRO.
When an employee has a suspicion or knowledge of money laundering or terrorist financing, it must be reported immediately.
Click here for the “How Do I Raise a SAR” staff manual.
All suspicions should be reported to the MLRO, or if absent to the DMLRO, using the STR/SAR Form.
Upon receipt of this form, the MLRO or DMLRO will send an acknowledgement to the employee making the report. No documentation regarding the suspicion is to be placed on the Client due diligence / correspondence file or any other file that is used by employees generally. The MLRO or DMLRO may request additional information or documentation from the person making the report – such request should be responded to as soon as practicable.
Under the Proceeds of Crime Act 2008, the MLRO or DMLRO has to receive consent from the FIU to continue with a transaction where a disclosure has been made in relation to that transaction.
It is very important that you wait for this consent from the MLRO before progressing with any transaction which relates to a suspicious transaction report that you have made. The MLRO or DMLRO will advise you of consent in writing. It is vital that this consent is kept confidential to you in order to avoid the offence of tipping off.
It is important to remember that the offences described in Section 3 relate to each suspicion that you have so each time you are suspicious, you should make a report to the MLRO or DMLRO