CB goes extra mile to curb money laundering

• Makes it obligatory for designated non-finance biz to conduct customer due diligence
• Applies to casinos, real estate agents, dealers in precious metals and precious stones, lawyers, notaries, accountants, auditors and company secretaries

By Shabiya Ali Ahlam

The Financial Intelligence Unit (FIU) of the Central Bank has made it obligatory for designated non-finance businesses (DNFBs) to conduct customer due diligence in a bid to curb money laundering and terrorist financing activities.  

The move must have been prompted by the European Parliament recently confirming that Sri Lanka, Tunisia and Trinidad and Tobago were on the European Commission’s blacklist of countries at risk for acts of money laundering.

Falling under the DNFB definition are casinos, real estate agents, dealers in precious metals and precious stones, lawyers, notaries, accountants, auditors and company secretaries.

While it is mandatory for the said DNFBs to implement proper policies and procedures in this regard, the objective of the new effort is to prevent the use of such businesses and professions as an avenue to carry out illegal activities.

The effort comes under the Designated Non-Finance Business (Customer Due Diligence) Rules, No. 1 of 2018 and Extraordinary Gazette Notification, No. 2015/56 dated April 21, 2017 on ‘Suspicious Transactions (Format) Regulations of 2017’, in terms of the Financial Transactions Reporting Act, No. 6 of 2006 (FTRA). 

The entities are expected to identify the potential risk posed by their customers by conducting due diligence based on a ‘risk-based’ approach. 
Due diligence must also be carried out by the persons who carry out their business through the Internet when their customers engage in financial transactions equal to or above the prescribed thresholds. 

The FIU states it is mandatory for the DNFBs to appoint a compliance officer who will be responsible for ensuring the entity meets the anti-money laundering/countering financing of terrorism (AML/CFT) requirements in terms of the FTRA. 

The said officer must be appointed from the senior management level.

It has been stressed that identification and verifying of customer identity should be done using a ‘reliable source’, at the point of entering into a business relationship. 

When the DNFB has reasonable grounds to suspect that any transaction may be related to the commission of any unlawful activity under the FTRA, it must submit a suspicious transaction report (STR) to the FIU, from where further investigations would be initiated.

Further, records of transactions, correspondence relating to transactions and all reports furnished to the FIU should be retained for a period of six years from the date of transaction, correspondence and furnishing of the report. 

Records of identity obtained should also be retained for six years from the date of closure of the business relationship. Where any record is subject to an on-going investigation, such records should be retained until such time the institution is informed by the relevant authority.