AML flexibility offered

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AML reporting entities will change the way they do business during the Covid-19 lockdown and will be allowed some flexibility, regulators say.

Monday, March 30th 2020, 7:58AM 1 Comment

"While the ongoing customer due diligence (CDD) and account monitoring requirements continue to apply, reporting entities should be aware of the challenges that their customers are currently facing," the FMA, Reserve Bank and Department of Internal Affairs said in a joint statement.

"The AML/CFT Act prescribes a risk-based approach to ongoing CDD and account monitoring. This means that for current customers, reporting entities have the discretion to not necessarily sight certain documents in certain circumstances, depending on the reporting entity’s assessment of ML/FT risk.

"The supervisors understand that, in the current situation, it may be more difficult for reporting entities to carry out ongoing CDD as per their usual processes. Instead, reporting entities should apply a risk-based approach. This may mean, for example, that reporting entities accept scanned copies of documents as an interim measure, with the originals to be sighted at a reasonable later time (upon lifting of alert levels)."

When new business relationships are set up or work is done for new clients and an identity cannot be verified face-to-face, businesses had options, the AML supervisors said.

One was delayed verification, where someone could start a business relationship with a customer but delay the verification until later if it was essential not to interrupt normal business practice; and money laundering and financing of terrorism risks were effectively managed through procedures of transaction limitations and account monitoring or (if the reporting entity is not a financial institution) through other appropriate risk management procedures; and verification of identity is completed as soon as is practicable once the business relationship has been established.

"Supervisors expect reporting entities that are continuing to operate and establish new business relationships would implement transaction limitations, ie limited transfers or withdrawals until verification requirements were completed."

They can also offer electronic verification options, with additional security measures.

"It is also important to be aware that in this challenging environment, reporting entities should remain vigilant as criminals may try to target their products and services. Reporting entities must continue to effectively manage money laundering and financing of terrorism risks, and report suspicious activities where required to do so in accordance with the AML/CFT Act."

Tags: AML CFT Covid-19 FMA renovation Reserve Bank

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