A compliance officer is developing an anti-money laundering program for a financial institution located in a Financial Action Task Force member…

A financial institution located in a Financial Action Task Force (FATF) member country should address

the following issues in its anti-money laundering program when dealing with customers located in

countries/jurisdictions that are not members of FATF:

The requirement to identify the beneficial owners of accounts: Beneficial owners are the natural

persons who ultimately own or control a customer or a legal entity. Identifying the beneficial owners

of accounts is a key component of customer due diligence (CDD) and helps the financial institution to

assess the risk profile of the customer, prevent the misuse of legal entities for money laundering or

terrorist financing, and comply with the FATF Recommendations12.

The requirement for customer identification for the opening of new accounts: Customer

identification is the process of verifying the identity of a customer using reliable and independent

sources of information or documents. Customer identification is another essential element of CDD

and helps the financial institution to establish a business relationship with the customer, prevent

identity fraud, and comply with the FATF Recommendations13.

The financial institution’s obligation to report suspicious transactions: Suspicious transactions are

transactions that have no apparent economic or lawful purpose, or are inconsistent with the

customer’s known profile or business activities, or indicate involvement in money laundering or

terrorist financing. Reporting suspicious transactions to the competent authorities is a core

obligation of the financial institution under the FATF Recommendations14 and helps to detect and

deter illicit activities and support law enforcement investigations.

The obligation to freeze funds involved in suspicious transactions is not an issue that should be

addressed in the anti-money laundering program, as it is not a requirement under the FATF

Recommendations. The FATF Recommendations require the financial institution to freeze funds or

other assets of designated persons and entities that are subject to targeted financial sanctions

related to terrorism, proliferation of weapons of mass destruction, or other threats to the

international financial system1 . However, the financial institution is not obliged to freeze funds

involved in suspicious transactions, unless it receives a specific order from the competent authorities

or the courts.

The FATF Recommendations, as amended November 2023

Interpretive Note to Recommendation 10 (Customer Due Diligence), paragraphs 5(b) and 6

Recommendation 10 (Customer Due Diligence), paragraph 1

Recommendation 20 (Reporting of Suspicious Transactions)

Recommendation 6 (Targeted Financial Sanctions Related to Terrorism and Terrorist Financing),

Recommendation 7 (Targeted Financial Sanctions Related to Proliferation), and Recommendation 8

(Non-Profit Organisations)