Challenges in customer due diligence for banks in the UAE

2020 ◽  
Vol 23 (2) ◽  
pp. 527-539
Author(s):  
Dina ElYacoubi
Keyword(s):  
Money Laundering ◽  
Task Force ◽  
Business Environment ◽  
Law Firms ◽  
Due Diligence ◽  
Remedial Action ◽  
Content Type ◽  
Narcotics Control ◽  
Financing Of Terrorism ◽  
Customer Due Diligence

Purpose The purpose of this paper is to unpack the customer due diligence (CDD) vulnerabilities and to examine and analyze the UAE specific dynamics that make the country exposed to these threats. This research also intends to put on the table suitable solutions and remedial action steps that the UAE government, regulators and financial institutions (FIs) can adopt. Design/methodology/approach This study is qualitative in nature. Findings Despite the impressive regulatory framework and the satisfactory practices by FIs, there still remains some UAE specific challenges that make it difficult to undertake CDD for certain customers. The challenges that were identified include difficulties in Arabic names, complications in identifying the beneficial owners, impediments in establishing the source of wealth/funds, concerns with politically exposed persons, the increasing cost of compliance that resulted in a pattern of de-risking within FIs. Research limitations/implications The international bodies whose mandate is to formulate the necessary anti-money laundering and combating the financing of terrorism policies and regulations for global implementation together with Association of Certified Anti-Money Laundering Specialists (ACAMS) have published sufficient studies on CDD-related issues in the UAE. Yet on the other hand, very limited literature was found by independent scholars. This paper will, therefore, largely reference publications by Financial Action Task Force, the International Narcotics Control Strategy Report and ACAMS. It will also include works by respected law firms that have operations in the UAE, local publications, government documents, academic papers by the International Monetary Fund and the World Bank, legal journals and others. Originality/value Illicit actors exploit the UAE’s relatively open business environment, a multitude of global banks and exchange houses and global transportation links to undertake illicit financial activity […] the UAE does not have any major anti-money laundering (AML) deficiencies. However, the monitoring of FIs for AML purposes, particularly in the area of CDD, could be improved. This paper unpacks the CDD vulnerabilities and analyzes the UAE specific dynamics that make the country exposed to these threats. This research also puts on the table suitable remedial action steps that the UAE government, regulators and FIs can adopt.

Money-laundering risk and preventive measures in Pakistan

2020 ◽  
Vol 23 (3) ◽  
pp. 699-714
Author(s):  
Irfan Hassan Jaffery ◽  
Riffat Abdul Latif Mughal
Keyword(s):  
Money Laundering ◽  
Task Force ◽  
New Technology ◽  
Control Measures ◽  
Due Diligence ◽  
Content Type ◽  
Record Keeping ◽  
Financing Of Terrorism ◽  
Customer Due Diligence ◽  
The Impact

Purpose The purpose of this paper is to examine the effectiveness of anti-money laundering/combating of financing of terrorism (AML/CFT) measures in Pakistan. Key variables of AML/CFT regulations of Pakistan are used. This study explores the impact of customer due diligence, record keeping, wire transfers, correspondent banking, reporting of transactions, new technology and internal controls/compliance/trainings on money-laundering risk. Design/methodology/approach Data is collected with the help of questionnaires developed in light of Financial Actions Task Force (FATF) recommendations and the AML/CFT regulations of Pakistan. Findings Results show that customer due diligence, correspondent banking and new technology may help control money-laundering risk in Pakistan, whereas impact of record keeping, wire transfers and reporting of transactions did not have an effect on money-laundering risk. This study suggests a better implementation of these measures. Research limitations/implications The current study was limited to Pakistani banks. For more conclusive results, future studies should replicate similar studies in other countries. Practical implications Findings of this study may help the State Bank of Pakistan in taking measures to simplify the process of implementing FATF rules and regulations regarding AML/CFT, regular monitoring and trainings to the staff of banks and development finance institutions in customer due diligence, correspondent banking and new technology. Further, it helps to take appropriate measures in resolving banks-specific issues related to AML/CFT. Social implications Effective AML/CFT control measures would strengthen socio-economic growth in a country. Further, formalization, compliance and integrity would eliminate money laundering risk. It would create an economy that works with equity and promotes transparency. Originality/value This research paper supports implementation of AML/CFT regulations, proper monitoring and novel supervision of banks.

China’s dirty laundry – international organizations posing a risk to China’s AML systems

2018 ◽  
Vol 21 (2) ◽  
pp. 189-202 ◽  
Author(s):  
Mohammed Ahmad Naheem
Keyword(s):  
Risk Assessment ◽  
Money Laundering ◽  
International Organizations ◽  
Banking Sector ◽  
Due Diligence ◽  
International Banking ◽  
Content Type ◽  
International Money ◽  
Customer Due Diligence ◽  
Chinese Banking

PurposeThis paper aims to review some of the current challenges that international money laundering schemes are posing in the Chinese banking sector. Anti-money laundering (AML) systems in China are relatively new, and customer due diligence checks and other AML systems are underdeveloped in some areas.Design/methodology/approachThe paper considers a particular case example of a multi-company organization that has known links to China. This company has been the target of both European and US investigations for suspected embezzlement and money laundering, and yet is still in operation.FindingsThe paper considers the complexities of this organization and how a seemly innocent link to a used clothing charity can fund an international organization spanning several countries. The paper offers a list of basic indicators of risk that could be applied to a risk-based system used within the Chinese banking context by using this group as an example.Originality/valueThe paper uses empirical and academic studies from other authors working in this region and supports many of the findings of the need to develop stronger risk-based, as opposed to rules-based, systems for managing AML risk assessment. Previous work by the author and suggestions from other authors are both used to suggest a basic framework for AML risk assessment. The paper concludes by reiterating the fact that China, like all other countries, is now operating in an international banking context, in much the same way that international organized crime is also operating at a global level.

Anti-money laundering law and policy as a double edged sword

2020 ◽  
Vol 23 (4) ◽  
pp. 899-912
Author(s):  
Norman Mugarura
Keyword(s):  
Money Laundering ◽  
Financial Institution ◽  
Business Environment ◽  
Security Issue ◽  
Patriot Act ◽  
Online Data ◽  
Content Type ◽  
Developed Economies ◽  
Secondary Sources ◽  
Financing Of Terrorism

Purpose Regulators have a duty to enforce anti-money laundering (AML) and countering financing of terrorism regulation. However, in doing so, they should not to be overzealous especially in carrying out investigations into suspicious money laundering transactions. This does not mean that oversight agencies should not carry out the required investigations with due diligence. This study aims to propose that banks cannot be allowed to operate in a lawless environment; however, there is a need ensure that businesses are able to operate with minimal regulatory interference. Design/methodology/approach Data was collected from primary and secondary sources such as Uganda’s Anti-Money laundering Act 2013 (amended 2017), Patriot Act 2001, Proceeds of Crime Act 2000 International legal instruments, case law, books, websites, journal papers, policy documents and scholarly debates and evaluated to foster the objectives of the paper accordingly. The paper has also been enriched by empirical experiences of countries in Europe, Africa and within countries on money-laundering regulation and its intricacies. There was a wealth of online data sources and in print, which were reviewed and internalised to foster the objectives for writing the book. Findings Regulation of businesses against money laundering and financing of terrorism imposes a heavy cost burden on poorer countries and should be funded by developed economies for some countries to easily operate desired International AML standards. It also needs to be noted that banks cannot be allowed to operate in a lawless business environment, which makes money laundering an international and national security issue. Originality/value The thesis of this paper was drawn from the author’s presentation to security agencies in Kampala in August 2019. In his presentation, the author opined that investigations into money-laundering offences should be triggered when a financial institution forms suspicions of potential money-laundering offences to have been committed. Some of the questions he sought to answer during the presentation was whether sharing information on “accountable persons or the regulated sector” in Uganda’s AML 2013 with newspapers before investigations are concluded does not amount to tipping off presumed money-laundering culprits? How should investigations be conducted?

Updates on Hong Kong’s anti-money laundering laws 2020

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Foster Hong-Cheuk Yim ◽  
Ian Philip Lee
Keyword(s):  
Money Laundering ◽  
Task Force ◽  
High Standard ◽  
Case Law ◽  
Evaluation Report ◽  
Content Type ◽  
Financial Centre ◽  
Salient Points ◽  
Financing Of Terrorism ◽  
Mutual Evaluation

Purpose The purpose of this paper is to discuss the latest developments of anti-money laundering (AML) laws in terms of case law and to give meaningful response in relation to certain key findings (KFs) and recommendations by the financial action task force contained in its mutual evaluation report dated September 2019. Design/methodology/approach In terms of AML case law, the authors analyse the latest judgment from the Hong Kong (HK) court of final appeal. In terms of the evaluation report, the authors outline salient points from the KFs and recommendation, commenting on their likelihood of success. Findings With the developments in AML case law and the KFs identified, HK is expected to maintain its high standard in AML/counter financing of terrorism (CFT) compliance. Originality/value A robust AML/CFT regime is the bedrock of HK’s reputable status as an international financial centre. This study seeks to illicit meaningful interactions amongst all stakeholders.

Rethinking the internal mechanism of the EGMONT group in financial crime control

2019 ◽  
Vol 22 (2) ◽  
pp. 327-338
Author(s):  
Johnson Adeoye Adetunji
Keyword(s):  
Money Laundering ◽  
Technical Assistance ◽  
Financial Crime ◽  
Due Diligence ◽  
Member States ◽  
Content Type ◽  
Historical Perspectives ◽  
Fundamental Needs ◽  
Financing Of Terrorism ◽  
Investigation Process

Purpose This paper aims to evaluate the use of Intelligence gathering, especially the exercise of customer due diligence (CDD), enhanced due diligence (EDD), know your customer (KYC) and recordkeeping as effective anti-money laundering (AML) and counter-terrorism financing (CTF) measures. It re-appraises the risk of breach of privacy associated with recordkeeping of clients’ information in countries where there are no data protection laws and the role of the EGMONT group against the backdrop of the recent suspension of Nigeria from the group; it argues that, in view of other existing liberal punitive measures, suspending a developing nation like Nigeria by the EGMONT group (arising from a rigid demand for an autonomous financial intelligence unit (FIU)) is draconian and counterproductive. Finally, it argues that the fundamental needs and challenges of developing member states of the EGMONT group, particularly members that are battling with weak and non-transparent investigation process and terrorism require, inter alia, technical and manpower assistance to disrupt financial crime and financing of terrorism. Design/methodology/approach A doctrinal approach is utilised to analyse AML and CTF from the social and historical perspectives. A comparative analysis of international control of money laundering and terrorist financing, appraising the challenges of developing member states in complying with the Financial Action Task Force regulations and the principles of the Egmont group. Findings There are liberal punitive measures than suspension which the EGMONT group could apply when dealing with developing members of the group, especially on the issue of rigid demand for an autonomy of a national FIU. The fundamental needs and challenges of developing member states of the Egmont group, particularly members that are battling with weak and non-transparent investigation process and terrorism require, inter alia, technical and manpower assistance to disrupt financial crime and financing of terrorism. Originality/value The paper queries the appropriateness of the decision to suspend Nigeria by the Egmont group for failure to comply with its policy autonomy of its FIU when there are other liberal disciplinary measures that could have been applied. And, it suggests the need to lay more emphasis on technical assistance for member states to achieve the objectives of the group.

Suspicious transaction reporting: an Indian experience

2015 ◽  
Vol 18 (1) ◽  
pp. 2-16 ◽  
Author(s):  
B. Viritha ◽  
V. Mariappan ◽  
Irfan Ul Haq
Keyword(s):  
Money Laundering ◽  
Reporting System ◽  
Task Force ◽  
Annual Reports ◽  
Content Type ◽  
Suspicious Transaction ◽  
Financing Of Terrorism ◽  
Secondary Information ◽  
Financial Intelligence ◽  
The Impact

Purpose – The purpose of this paper is to assess the effectiveness of anti-money laundering (AML) reporting system in India in terms of Suspicious Transaction Reports (STRs) and its impact on countering money laundering through the conviction and confiscation. The main emphasis of financial action task force (FATF) guidelines on AML and countering of financing of terrorism (CFT) is the obligation of financial institutions and designated non-financial businesses and professions to instantaneously report the suspicious transactions to Financial Intelligence Unit (FIU), an agency with a mandate to deal with AML. Design/methodology/approach – It is a descriptive study to explore the outcome of the AML process. The study has used the secondary information published in the annual reports of FIU-India and FATF. The study period is 2006-2007 to 2011-2012. Findings – Though there is a significant increase in the STRs filed, the impact of AML is not realized in terms of neither AML-related convictions nor confiscations, since the enactment of the Prevention of Money Laundering Act (PMLA). However, the AML/CFT regime in India has just started earnestly, and it still has to go a long way before stabilizing and achieve tangible results. Research limitations/implications – In the Indian context, only few of the effectiveness indicators of the FATF methodology 2013 could be selected due to the limited availability of data, as much of the information maintained by various stakeholders, including reporting entities, FIU-India and other investigative and enforcement agencies, is kept confidential. Thus, it is difficult to establish the effectiveness of enforcement function of AML. Evaluation of effectiveness of AML is judged on the basis of convictions and confiscations. Originality/value – There is a dearth of studies assessing the reporting system under PMLA and thus this paper attempts to throw some insights on the outcome of AML chain, especially the impact of reporting suspicious transactions.

Interaction effects of professional commitment, customer risk, independent pressure and money laundering risk judgment among bank analysts

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zuraidah Mohd-Sanusi ◽  
Yusarina Mat-Isa ◽  
Ahmad Haziq Ahmad-Bakhtiar ◽  
Yusri Huzaimi Mat-Jusoh ◽  
Tarjo Tarjo
Keyword(s):  
Money Laundering ◽  
Interaction Effects ◽  
Situational Factors ◽  
Primary Data ◽  
Professional Commitment ◽  
Due Diligence ◽  
Content Type ◽  
Risk Judgment ◽  
Banking Institutions ◽  
Customer Due Diligence

Purpose This study aims to examine the direct and indirect effects of professional commitment, customer risk and independence pressure on money laundering risk judgment among bank analysts. Design/methodology/approach This study uses a within-subjects experimental research design and collects primary data via a questionnaire distributed to bank analysts in banking institutions in Malaysia. Findings Results show that professional commitment, customer risk and independence pressure significantly influence money laundering risk judgment (i.e. customer due diligence and money laundering reporting). The results also show significant interaction effects between customer risk and independence pressure in influencing money laundering risk judgment. Practical implications Professional commitment and situational factors are crucial in putting pressure on bank analysts responsible for performing a thorough check and due diligence to minimize money laundering risk to the bank. Social implications As money laundering is lifeblood of crimes, understanding the factors influencing money laundering risk judgment would assist the affected institutions to manage the risk better and contribute towards the fight against crimes. Originality/value This study focuses on money laundering risk judgment. It contributes to understanding the competency of the gatekeepers, such as bank analysts, in practicing professional commitment and dealing with situational factors.

Customer identification in currency exchange companies as per FATF recommendations

2019 ◽  
Vol 23 (1) ◽  
pp. 96-102 ◽  
Author(s):  
Joel Harry Clavijo Suntura
Keyword(s):  
Task Force ◽  
Research Work ◽  
Due Diligence ◽  
Centralized Control ◽  
Identity Verification ◽  
Content Type ◽  
Currency Exchange ◽  
Customer Identification ◽  
Financial Transactions ◽  
Customer Due Diligence

Purpose The purpose of this paper is to determine if customers due to diligence measures laid down in Financial Action Task Force (FATF) Recommendation no. 10 can be applied to customers of currency exchange companies. Design/methodology/approach Currency exchange financial entities undertake financial transactions with occasional customers, for this reason, this research work is aimed at carrying out a study of the content of FATF Recommendation no. 10 regarding the applicability of due diligence measures to occasional customers. For this purpose, the analytical and interpretative methods have been used. Findings FATF Recommendation No. 10 about customer due diligence measures has been designed primarily for financial entities with regular customers, however, most customers of financial currency exchange companies are occasional customers. For such financial entities, customer identification is mandatory only for transactions above 15,000 USD/EUR, leaving a potential risk of money laundering for financial transactions below that threshold. Furthermore, within currency exchange companies, risk factor analysis and customers’ identity verification are performed only on regular customers. Originality/value Customer due diligence measures in currency exchange financial entities should not be subject to the transaction threshold. Moreover, it is necessary to adopt a centralized control system to avoid currency exchange companies infringement of their control systems.

Deficient regimes of anti-money laundering and countering the financing of terrorism

2020 ◽  
Vol 23 (3) ◽  
pp. 663-675
Author(s):  
Sisira Dharmasri Jayasekara
Keyword(s):  
Economic Impact ◽  
Money Laundering ◽  
Risk Premium ◽  
Task Force ◽  
Short Term ◽  
Economic Implications ◽  
Content Type ◽  
Financing Of Terrorism ◽  
Mutual Evaluation

Purpose The purposes of this paper are to discuss the short-term economic impact of the jurisdictions that have been identified as deficient countries in terms of the regime of anti-money laundering and countering the financing of terrorism and to identify the probable reasons for the poor results of mutual evaluation reports of the deficient countries. Design/methodology/approach This study uses a case study approach to discuss the short-term economic impact of the countries that are under the International Co-operation Review Group (ICRG) process due to poor results of mutual evaluation reports. The sample of countries for the study was selected based on the Financial Action Task Force (FATF) listing as of November 30, 2019. The objectives of the study are expected to be achieved by discussing the issues of these jurisdictions based on publicly available information. However, this study will not consider the long-term economic impact on the countries due to the observed short-term nature of the ICRG process. Findings This analysis reveals that the ICRG process affects countries in two different perspectives. First, there are implications on the financial system of a deficient country as a result of identifying it as a high-risk country. Second, there are some other forms of economic implications due to the rigorous ICRG process. The downgrading of the sovereign rating by international and credit rating agencies is one of such implications that result in adding a risk premium to the country. This results in increased transaction costs and borrowing costs of deficient countries. Besides, it appears that the ICRG process impacts the capital and currency markets of deficient countries as a result of enhanced due diligence process on fund transfers and limitations in corresponding banking relationships. However, despite these difficulties, some countries have been identified more than once for the ICRG process. Therefore, such countries have to take measures to strengthen the anti-money laundering and countering the financing of terrorism (AML/CFT) regime to avoid future listing. However, long-term sustainability of the countries that were removed from the FATF grey-listing is also questionable under the current FATF methodology of evaluating countries because of the level of effectiveness depends on the judgment of assessors on the risk and context of countries rather the technical compliance. Research limitations/implications This study was limited to the countries that were in the grey list as of November 30, 2019. The countries exited from the list have not been considered for the study. Originality/value This paper is an original work done by the author by discussing the issues of the ICRG process in respect of deficient countries in view of strengthening the AML/CFT regimes of such countries.

An analysis of the obligations of gambling entities under the FATF's 2003 anti‐money laundering recommendations

2006 ◽  
Vol 9 (1) ◽  
pp. 7-18 ◽  
Author(s):  
Jackie Johnson
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Due Diligence ◽  
Content Type ◽  
Suspicious Transaction ◽  
Financial Action Task ◽  
Customer Due Diligence ◽  
Business Sectors ◽  
Practical Implications ◽  
Consultation Paper

PurposeTo highlight the compliance issues which face gambling entities with the implementation of the Financial Action Task Force's (FATF's) 2003 Forty RecommendationsDesign/methodology/approachTo determine the gambling sector's attitudes towards the FATF's new anti‐money recommendations their responses to an earlier FATF consultation paper are analysed. Interested parties were asked to provide feedback on a number of options proposed by the FATF. Twenty six of the 145 respondents provided feedback on issues relating to the gambling sector. It is these responses that form the bases of the analysis in this paper.FindingsThe preferences of the gambling sector were not taken on board by the FATF. The increased customer due diligence (CDD), suspicious transaction reporting and the identification of politically exposed persons will be a burden on casino operators, the only gambling sector to be specifically identified in the new recommendations. Non‐compliance could be a serious issue.Research limitations/implicationsThe small number of responses from the gambling sector does place limitations on the ability to generalise the outcomes to the global gambling industry, though five of the respondents were gambling organisations.Practical implicationsFor regulators, the possibility of non‐compliance by the gambling sector should be addressed as should the likelihood of pressure for reduced CDD procedures.Originality/valueThe FATF's updated 2003 Forty Recommendations impose considerable compliance costs on the financial sector. A number of other business sectors are also caught within the scope of these new recommendations. This paper addresses anti‐money laundering compliance issues for the gambling sector, an area not previously explored.

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