Anti- Money Laundering

&
Combating Financing Terrorism

(AML/CFT)

2023
Why to know about Money Laundering &
Terrorism financing

Regulators Mandate to train Staff on AML/CFT Practices.

Continuous update in the topics related to AML/CFT.

Provide awareness to new staff joining the company.

Refresh the information for such important Topic.

Participate in protecting the company form being used in

Money Laundering and Terrorism Financing activities.
Definitions

It is the process by which

Terrorism Financing involve
financial proceeds obtained
funds raised from legitimate
from illegal activities/sources
sources, such as personal
is integrated into the
donations and profits from
legitimate economy by
businesses and charitable
putting it through a series of
organizations, as well as from
transactions, so as to disguise
criminal sources.
the source of Funds.
Hide Source of Fund Hide Destination of Fund
Latest Money Laundering incidents in Kuwait
1 MDB – Malaysian Sovereign
Social Media Influencers
Fund
• It is an ongoing political scandal • Ministry of Interior has released
occurring in Malaysia, where in the names of the 10 social media
2015, Malaysia's then-Prime influencers that are being
Minister Najib Razak was charged with money laundering,
accused of channelling over Kuwait media reported.
US$700 million from 1Malaysia • The Attorney General, has
Development Berhad (1MDB), a ordered the immediate seizure of
government-run strategic all their assets and issued them
development company, to his with a travel ban.
personal bank accounts. • The Central Bank has frozen the
suspects’ bank accounts, and the
• Kuwait was part of the process Ministry of Interior has sent the
by transferring money to a bank names of the accused to the land
operating in Kuwait and airports to ensure that they
do not attempt to flee.
Latest Money Laundering incidents in Kuwait
Owners of 11 companies are accused
Money laundering in Kuwait by a
of money laundering and financing
Parliament from Bangladesh
terrorism

• Through Human trafficking 3 • Ministry of Interior is conducting

intensive investigations with the
individuals, whose one of them is owners of 11 companies who are
accused of money laundering and
Member of Parliament in financing terrorism
Bangladesh collected more than KD • The security sources, in
cooperation with the Central Bank
50 million by bringing 20 thousand of Kuwait, concluded that these
companies, which work in the fields
labor to Kuwait via cleaning of real estate and money exchange,
contracts. have made remittances worth
millions of dinars in coordination
• Source: Alqabas -February 2020 with external bodies.
• Source: Arabtimes/ Alqabas -
December 2019
Global Terrorism Index
Money Laundering Summary
Criminal Activities
Corruption Drugs Tax Arms
Theft
Practices Trafficking Evasion Trafficking

Banks &
Investment Exchange Insurance Brokerage Real Estate
Lending
Companies Companies Companies Companies Agent
Institutions
ML Impact of ML

Increasing rates of crime and corruption

Weakening the financial institutions

Losing control or errors in decisions related

to economic policies

Economic deformation and lack of stability

Country reputation risk & Increasing social costs

and burdens
Stages of Money Laundering
Stages of Money Laundering
ML Phases Objectives

• Getting rid of holding the proceeds of

Placement illegitimate operations

• Separate the illicit money from its

Layering original source

• Legitimatize the money generated

from illegitimate activities through
Integration integrating the money into the
financial system
ML Phases Techniques

Depositing smaller cash amounts in

one or several accounts

Money smuggling over borders

Placement Purchasing single-premium

insurance policy without paying
attention to details and conditions
for cancellation and commissions

Buying precious/ valuable metals

Issuing several complex bank

transfers

Layering Buying shares and then reselling the

same

Entering into or financing business

projects

Integration Buying Bonds, equity etc

ML & FT in Exchange Companies

➢ Why Exchange companies are Attractive to

criminals?
➢ Cash-intensive business
➢ Provide services to expats.
➢ Simplicity of transactions
➢ Worldwide reach
➢ Less Strict Customer Identification process
➢ Processing transactions without knowledge of
the illegal origin or Destination of funds
concerned.
 What you should do?

Report
Do not assist Do not tip off
Suspicions

Do not assist the money You should always raise Ensure that you do
launderer if he/she flags and report not tip off suspicions
decline to provide suspicions to your AML
necessary documents transactions to the
officer if you feel the
for building. transaction is unusual
Client, who can be a
or the Client is not potential money
entertaining your launderer.
request for documents
etc.
New Technologies & Developments
in ML & TF
16
New Technologies in Money laundering

➢Development of new technologies of information and

communication has created opportunities for criminals to
misuse such technologies for the purposes of money
laundering and Financing Terrorism.
➢ Prepaid card system, internet payment services, and mobile
payment services have participated in increasing anti-money
laundering and Financing Terrorism operations.
➢The use of cryptocurrencies such as bitcoin poses another big
challenge, and beyond the control of banks, as these are peer-
to-peer, completely anonymous with no engagement of a formal
banking system.
➢Digital currency dealers and exchangers commonly allow
anonymous accounts with no limit on account or transaction
value.
Digital/Virtual Assets

➢Virtual Assets is defined as a digital representation of the value

that can be digitally traded or transferred and can be used for
payment or investment purposes.

➢Central Bank of Kuwait has issued a circular on 17th July 2023

regarding procedure related to virtual assets. Some of the main
points covering the circular
➢ Complete Prohibition of using virtual asset/currencies.
➢Prohibited to deal with virtual assets and refrain from providing any
type of services to any customers
➢Absolute prohibition of all activities of mining of virtual currency
assets.
Challenges of New Technologies in Money laundering

Difficulties in identifying the source of funds in some of the technologies

used in transferring

Difficulties to identify the clients and beneficiaries, where and apply

“Know your Client” procedures.

Difficulties in monitoring in some transfer technologies

Inabilities in setting limits for the transactions using the

technologies

Lack of legal and regulatory environment regarding the new

technologies' implications

Alternative for money physical smuggling over the border

Local, Reginal & Regulatory Bodies
 Kuwait Financial Intelligent Unit (KFIU)

➢Established according to Article (16) of Law No. (106)

for the year 2013 KFIU as an independent legal entity.
➢It is responsible for receiving, requesting, analyzing,
and disseminating information concerning suspected
proceeds of crime or funds related, linked to or to be
used for money laundering or terrorism financing.

www.kwfiu.gov.kw
 Egmont Group

➢The Egmont Group is a united body of 166 Financial Intelligence

Units (FIUs)
➢The Egmont Group provides a platform for the secure exchange of
expertise and financial intelligence to combat money laundering and
terrorist financing (ML/TF)
➢As a global network of FIUs, the Egmont Group’s membership is
divided into eight regional groups that assist the organization to
accomplish its goals of development, cooperation, and sharing of
expertise on a regional level.
➢EG MENA region currently comprises 13 FIUs representing the
jurisdictions

www.egmontgroup.org
MENA-Egmont Group

www.egmontgroup.org
Financial Action Task Force (FATF)

➢FATF is an inter-governmental body established in 1989 by

a Group of Seven (G-7) Summit in Paris.
➢The objectives of the FATF are to set standards and
promote effective implementation of legal, regulatory and
operational measures for AML/CFT.
➢FATF has developed a 40 Recommendations that are
recognized as the international standard for AML/CFT.
➢The FATF monitors the progress of its members in
implementing necessary measures, reviews ML/FT
techniques and counter-measures, and promotes the
adoption and implementation of appropriate measures
globally.
www.fatf-gafi.org
FATF Meeting

➢FATF's Fiscal year begins in July and ends in

June.
➢Each year the Presidency is hold from one of
the members.
➢During a Fiscal year, the FATF holds three
meetings, in October, February and June.
➢Every Meeting, FATF issue list of jurisdictions
that have significant strategic deficiencies in
their regimes to counter money laundering and
terrorist financing.
High-Risk Jurisdictions subject to a Call for Action–
October 2023
The latest Public Statement issued identify the following:

Category Description Action Taken Countries

Jurisdictions that North Korea

Counter measures
pose a risk to the
Category 1 international
when dealing with
such jurisdictions.
financial system.

Iran
Jurisdictions that
have not made Consider the risks
sufficient progress arising from the
Category 2 in addressing its deficiencies of such
strategic AML/CFT jurisdiction Myanmar
deficiencies.
Jurisdictions under Increased Monitoring–October 2023

➢FATF has identified jurisdictions with strategic AML/CFT deficiencies for

which they have developed an action plan with the FATF.

Barbados
Philippines
Bulgaria
Senegal
Burkina Faso
South Africa
Cameroon
South Sudan
Croatia
Syria
Congo
Tanzania
Gibraltar
Türkiye
Haiti
Uganda
Jamaica
UAE
Mali
Vietnam
Mozambique
Yemen
Nigeria
What About Kuwait

➢When Kuwait has been removed from FATF’s monitoring

process under its on-going global AML/CFT compliance
process?
➢October 2013
➢ June 2014
➢February 2015

➢By February 2015, Kuwait is no longer subject to the

FATF’s monitoring process under its on-going global
AML/CFT compliance process.
➢FATF declared significant progress in improving Kuwait
AML/CFT legal and regulatory framework
MENAFATF

➢The MENAFATF is voluntary and co-operative

independent organization.
➢Established in November 2004, by Governments of 14
countries met in Manama, Bahrain.
➢Today MENAFATF has 21 members & 16 Observers.
➢It sets its work, regulations, rules and procedures and
co-operates to achieve its objectives the FATF.

www.menafatf.org
US Treasury Office of Foreign Assets Control (OFAC)

OFAC administers and enforces economic

and trade sanctions against:
➢Certain foreign countries
➢Specially Designated Global Terrorists
➢Specially Designated Nationals (SDN)
➢Foreign Terrorist Organizations
➢Persons engaged in the production of
weapons of mass destruction.
US Treasury Office of Foreign Assets Control (OFAC)
➢Some sanctions are more restrictive than others, and apply to
the whole country, while others are specifically target certain
individuals or entities within a country.
➢Currently, sanctioned countries include the Balkans, Belarus,
Burma, Cote D'Ivoire (Ivory Coast), Cuba, Democratic Republic
of Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria, and
Zimbabwe.
➢ For full details, please see the link: www.treasury.gov

When an individual appears on OFAC’s lists he becomes a

‘specially designated national’ (SDN).
Firms are prohibited under OFAC rules from conducting
business with any individual whose name appears on OFAC’s
list.
Major Imposed Sanctions

Sanctions Removed
Combating AML: Regulatory
Response
AML/CFT Requirements in Kuwait

Anti-Money Laundering and Terrorist

Financing Law No. 106 of 2013
CBK Instructions No. 2/R S/508/2023
Ministerial Resolution No. (141) of 2023
for Terrorism and Terrorism financing
FATF Recommendations
Blacklisted Individuals and Entities by
CBK
UN & OFAC and PEPs List
AML regulatory Framework
Resolution 37 of 2013 CBK Instructions
for Executive Regulation For AML/CFT
Industry
Guidance

Secondary
Legislation

Primary
Legislation

AML/CFT Law
No. 106 of 2013
Main Articles of Law 106

Article 2 : • Criminalize Money Laundering

Article 3: • Criminalize Financing Terrorism
Article 4: • AML/ CFT Risk Assessment & Perform EDD
Article 5: • Avoid Unknown identity & perform CDD
Article 9: • Precautions on Wire Transfers
Article 10: • AML Program
Article 11 • Records Maintaining
Article 12 • Reporting to FIU
Article 13 • Avoid Disclosure to Client
Penalties on Individuals

Imprisonment for a term not exceeding

10 years
Persons committing ML Article
Fine between ½ of the funds subject of 28
the crime and its entire amount

Imprisonment for a term not exceeding 15

Persons committing FT years Article
29
Fine between the amount of funds subject
of the crime and double the amount

Imprisonment for a term not exceeding

Persons committing 20 years
ML/FT through Charities Article
or Organized Group Fine of double the amount of the funds 30
subject of the crime
Other Penalties

• Any corporate body commits a crime of money

laundering or financing of terrorism shall be punished
Article (32): with
Money laundering or • Fine: not less than KD 50,000 and not exceeding KD
terrorist financing one million or the amount equivalent to total amount of
funds of the subject crime, whichever is higher.
through companies/
• Corporate body may be also punished with preventing
establishments: it from carrying on any business activity for a term of 5
years and closing offices used in committing the crime.

• Fine: K.D. 5,000 – K.D. 500,000 for

corporates, BOD or Executive in failing to
Article (33): have the following:
Negligence, failure to • Avoid Unknown identity & perform CDD
comply with Article • Precautions on Wire Transfers
5,9,10&11 • AML Program
• Record Maintaining
CBK Instructions No. 2/R S/508/2023
➢In light of law No. 106/2013 for AML & CFT, CBK has issued
AML/CFT guidelines that are more applicable to Banks,
Financing Companies and Exchange Companies.
➢Following to issuing AML Law, CBK Instruction No.
2/RS/310/2013 has been issued to provide guidelines to
Exchange Companies which was updated with Instruction No.
2/RS/457/2020.
➢In February 2023, CBK has amended AML/CFT Instructions
further by issuing Updated Instruction No. 2/R S/508/2023.
Identify and Assess AML/CFT Risks
Exchange companies should prepare and document a Risk
Assessment study to be updated every two years.
The study should contain as minimum the risks of clients, countries
and products and services.

The assessment should be classified to high, medium and low.

Take the needed measurements and controls for each of the risks
identified within the three levels classification.
Consider risk factors for Clients, Countries and Products and
services.
The study should be approved by the shareholders and the general
manager of the company.
The study should be maintained in companies record for minimum
of five years.
Defining Policies & Procedures

➢All Exchange Companies has to develop AML/CFT

Policies and Procedures that highlight on the
following:
➢Identify Clients, Beneficiaries, Political Exposed Persons and
determine the required documents to confirm their
information.
➢Maintain of Records, Documents and transaction details
➢Conduct Clients and Beneficiary Due Diligence
➢Screening Transactions and Accounts Monitoring
➢Updating Profile and Declaration Forms
➢Communicate with Kuwait Financial Intelligence Unit
➢Review of internal Controls & Policies and Procedures.
➢Assign Compliance Officer with responsibility to ensure
implementation of AML/CFT Law
➢Know Your Employee and Training Arrangements for Staff.
 Client Due Diligence

➢ All firms must assess ML/FT risks with an objective to know

Clients, what they do and whether or not they are likely to be
involved in criminal activity.
➢ This is achieved through Clients Due Diligence (CDD)
➢ CDD is getting information to assess the risks that are posed
by a relationship with client.
➢ Basic Client due diligence consists of four different parts
1. Obtaining and verifying information to identify the Client
2. Obtaining additional information to Know Your Client –
the KYC information
3. Obtaining information on the purpose and intended
nature of the business relationship
4. Registering a Client
 Client Identification

➢ It is prohibited to engage in any business relation with unknown

identity, where it is essential to check the identity of clients before
starting any business relation with them.
➢ This process will be through requiring the following from
Individual and Corporate clients:
➢ Individual Clients:
➢ Valid Civil ID for Citizens and Residents clients
➢ Valid Passport & Valid Visa for Non-Resident
➢ GCC National ID (Gulf Co-operation Council)
➢ Bedoun Card including Medical Insurance Cards
➢ Authenticated Power of Attorney in case doing the
transaction for third beneficiary
➢ Corporate Clients:
➢ Valid Commercial Registration for the Company/
Proprietorship
 Know Your Client (KYC) Procedure
➢ Know your Client refers to due diligence activities to ascertain
relevant information from clients for the purpose of doing
business with them.
➢ KYC includes identifying and verifying the client and
beneficiary owners using reliable independent source
documents, data & Information.
➢ Perform the necessary KYC formalities to ascertain the
identity of the customer as well as the beneficial owner.
➢ Complete information of purpose of transaction and
relationship with the beneficiary must be collected to confirm
the genuineness of the transfer, prior to process the
transaction.
➢ Declaration form duly filled up and signed by the customer
must be obtained for all High value transaction and retained
as per record retention policy.
 Data Integrity, Data privacy, Data security & Data
confidentiality
➢ Always ensure accuracy, Completeness & Consistency
of the data recorded in Company’s internal system.
➢ Original Customer ID must be verified each and
every time for purposes of customer identification
and before conducting a transaction.
➢ Always ensure that the consumer data collected
during the registration or while conducting
transactions is kept confidential and not disclosed to
any external parties.
➢ Always ensure that the consumer data collected in
stored in a safe location and protect the data from
unauthorized access of information.
Enhanced Due Diligence (EDD)

➢ Enhanced Due Diligence is to take additional measures to

know more about Client and his transactions to confirm that
they are legitimate and free from any criminal link.
➢ EDD must be performed in case of there is any doubt or
suspicion about the information provided by the customer
regardless of their transaction value.
➢ Financial supporting documents is an example of further
information to be obtained and verified to confirm the
legitimacy of the source of funds and source of client’s
wealth.
➢ This is necessary to ensure that company’s products and
services are not used for money laundering and terrorist
financing activities.
➢ EDD should be implemented for Online services.
Client to have Enhanced Due Diligence (EDD)
➢ Non-for-Profit Organizations
➢ Dealers in precious metals and stones.
➢ Dealers in real estate.
➢ Dealers in jewelry and luxury goods.
➢ Auction Houses.
➢ Non-resident Clients.
➢ Dealers in second hand/used vehicles/truck dealers/Machine
Parts manufactures.
➢ Import/Export Companies/Travel Companies.
➢ Leather Goods stores/casinos/cash intensive business (like
Restaurants, theatres, Retail Stores).
➢ Politically Exposed Persons/Foreign Politically Exposed
Persons (PEPs/ FPEPs).
➢ Clients classified as High Risk Countries.
Client Account Monitoring

➢ “Monitoring” is a process designed to detect and

identify potentially Suspicious Transaction.
➢ Ongoing monitoring is required to be able to detect
any suspicious activities at later stages throughout
the duration of the relationship.
➢ This permits to ensure that the Client’s activities are
in line with his/her legitimate business at all times.
➢ Transaction Monitoring is the base work of for
initiating an investigation on suspicious transactions
➢ Frequent Inward Remittances should be monitored.
Transactions Scanning
➢All transactions are screened for sanctioned
list for the following:
➢OFAC List
➢UN List,
➢UK-HMT List,
➢European Union List
➢Black listed customers received from Central
Bank of the KUWAIT and Ministry of Foreign
Affairs Committee
➢Screening proceeds is conducted on names
and countries for both clients and
beneficiaries
49
Risk Based Approach (RBA)

➢ Risk-based approach to money laundering/ terrorist

financing, allow to target resources where the risk to
greatest and to reduce the effort where the risk is low.
➢ To assess the risks, the company should consider its
products and business, its Client base, the location in
which it operates.
➢ Irrespective of what risk-based approach a firm uses, the
objective for all firms is to know who its Clients are,
what they do and whether or not they are likely to be
involved in criminal activity
➢ Classification into risk categories depends on the
information received from CDD/KYC.
Overview of the ML/TF Risk Assessment Process
PEPs – High Risk Clients

➢ Politically Exposed Persons are defined as persons

who are within one of the following criteria:
➢ Current or former Parliament, Minister or
Senior Governmental Officer
➢ Senior official of a major foreign political party
(i.e Embassy)
➢ Senior Executive of a International Organization
➢ An immediate family member of any of the
individuals mentioned above; meaning spouse,
parents, siblings, children
Actions to be taken with PEPs

➢ Once a client is identified as Politically Exposed

Persons, the following procedures should be
followed:
➢ Obtain Senior Management Approval before start
or continue any Business Relation with PEPs
➢ Take the needed action to identify the source of
income and wealth
➢ Conduct enhance due diligence on the client.
➢ Request additional information from the client
➢ Frequent review of the transactions with the
client.
Suspicious Transaction Report
(STR)
Suspicious Transaction

➢Suspicious Transaction is where there are

reasonable grounds to suspect that a person
(Individual/Corporate) is involved in
laundering money / financing terrorism.
➢When there is reasonable ground for
suspicion, the staff can raise STR with all
details in consultation with Branch Manager.
➢The copies of all applicable documents should
be forwarded to the Compliance Manager
Reporting Suspicious Transactions
Staff has reasonable ground to raise suspicious
on specific transaction

Staff Report his/her suspicious to Compliance

Officer

Compliance Officer evaluate the reported

suspicious

Compliance Officer complete STR attaching all

supporting documents

Report STR to KFIU within Two Working Days

Suspicious Transaction Report Form (1/4)
Suspicious Transaction Report Form (2/4)
Suspicious Transaction Report Form (3/4)
Suspicious Transaction Report Form (4/4)
Number of STRs by Reporting Entities Received in 2020/2021

Source: Annual Report 2018/2019 -KFIU

Number of STRs 2018- 2021

Source: Annual Report 2018/2019 -KFIU

Transaction ML/ FT Red Flags and Indicators

• Transfers over a short period of time low amounts at

different branches that together represent large amount.
• Mismatches between the economic activity, country of
origin and the money remittances received/sent.
Exchange Companies
• Customers regularly send or receive payments with
relevant indicators countries are regarded as “Tax Heaven” or Non-cooperative-
high risk countries”
• Transactions in a series are structures just below the
regulatory thresholds.

• Accounts of individuals who receive large transfers from an

unknown source with a declared purpose of financing their
living expenses.
• New customers excessively asking the employees of the
Terrorist Financing entity disclosure and reporting requirements or records
relevant indicators retention requirements
• Frequent change of the persons authorized to control a
given account (beneficiaries, actual beneficiaries, etc.)
• A behavior that demonstrates commitment to extremism or
extremist concepts.
Transaction ML/ FT Red Flags and Indicators

• Receiving financial flows exceeding the expected volume of

sales
• The customer does not have a clear business model that
Trade Based Money reflects the nature of business activity.
Laundering relevant • Receiving funds from third party with no association to the
indicators transaction.
• Receiving financial flows inconsistent with the financial
payments of goods.

• The PEP seems generally uncomfortable to provide

information about source of wealth or source of funds
• The repetitive transfer of funds from/ to countries which
Politically Exposed have no association with the politically exposed person.
Persons (PEP) relevant
• The politically exposed person provides incomplete/
indicators inaccurate information.
• Difficulty to distinguish between personal flows and
economic activity flows
Transaction ML/ FT Red Flags and Indicators

• Inability of the non-profit organization to determine the

final beneficiary of its funds/ resources.
• The transaction is not economically justified based on the
Non-Profit activity or occupation of the NGO account holder.
Organisations relevant
• The parties to the transaction (owner, beneficiary, etc.) are
indicators countries known to support terrorist activities and
organizations
• Using shell companies, including fake companies.

• Transactions from foreign countries received by PEPs, with

vague transfer information (e.g. "consulting fees"), where it
is difficult to identify the source of funds.
• International transfers made from a country by the heads of
Corruption relevant political parties with authority, in favor of a company that
indicators sells consumer goods.
• Government officials, who has executive position, receive
International Funds Transfer Instructions from businesses
accounts and/ or personal accounts, where these funds
appear to be of high value.
Records Maintaining

➢All documents and information should be

maintained for at least FIVE Years from date of
ending the relation with clients.
➢Information details of transactions executed or
attempt to execution to be maintained for FIVE
Years from execution date.
➢Copies of Suspicious Transaction Reports sent
to KFIU with full details to be maintained for
FIVE Years of reporting date
Ministerial Resolution No. 141 for 2023
➢It is issued for the Implementation of UN Security
Council Resolutions Issued under Chapter VII of
the UN Charter Related to Terrorism and Terrorism
financing
➢The Resolution requires Ministry of Foreign
Affairs to establish a Committee to implement
Resolutions of UN Security Council with the
following responsibilities:
➢Take the required action for freezing of assets according
to the UN Resolutions and for whoever their names that
are linked to Terrorism or listed in the Local List
➢Request for information and documents that it needs.
Freezing of Assets

➢All Assets owned fully or partially or under control or custody

of any Person, Group or Entity has been listed by Local
Committee or UN Sanctions Committee are subject to freezing
Procedures.
➢Assets related to any party who is working on behalf of listed
Persons, or Entities or within their direct or indirect control or
ownership should be frozen as well.
➢ Freezing procedures applies as well on funds and proceed
from the Assets subject to freezing.
➢It is prohibited to allow access to Assets or provide Financial
Services directly or indirectly to listed Persons or Entities.
➢It is obligatory to notify CBK within 3 days of Freezing Date.
Screening of Names

➢To identify the names of Persons and Entities, UN

provide a Consolidated Sanctions List includes all
individuals and entities subject to sanctions measures
imposed by the Security Council in the below link

https://scsanctions.un.org/consolidated/

➢Other sources of information could be used to provide

such lists as well.
CBK Instructions for engagement with Correspondence
Banks
➢Engagement with Correspondence Banks should CBK
Instructions as follows:
➢The agreement signed between Exchange Companies & Correspondence
banks should clearly identify the followings:
➢Both parties to comply with instructions related to balance exposure.
➢Both Parties to comply with law No. 106/2013 for AML/CFT.
➢Continuous follow up to the update of UN Sanction List and to comply with
UN resolutions that refer to listed names in UN List.
➢Comply with AML/CFT instructions related to Precautions for Enhanced Due
Diligence.
➢Correspondence Banks should fill Questionnaire that reflects compliance
with AML/CFT guidelines along with all supporting documents in that
regard.
➢Comply with CBK Instructions that provide guidelines for the
engagement with the Correspondence Banks
➢All transaction with Correspondence banks and Money Transfer
Networks should be executed in Max. NEXT day. Clients to be notified in
case of any difficulties to execute the transaction within the timeframe.
Financial Crime & Fraud
What is Financial Crime

➢There are many categories of financial crime ranging

from theft of stationery or computer equipment (asset
misappropriation) to major fraud such as Enron and
the Madoff investment fraud.
➢ The most common examples of financial crime are:
➢ Fraud
➢ Asset Misappropriation
➢ Money laundering & Terrorist financing
➢ Corruption
➢ Misleading statements and market manipulation
➢ Insider dealing
➢Market abuse.
Anti-Fraud Instructions

➢CBK issued couple of instructions for financial

institutions within its supervisory.
➢Instructions No. 2/RS/293/2012, regarding fraud
incidents incur in Financial Institutions and
precautions to be taken.
➢Instructions No. 2/RS/409/2018 regarding incidents
of Fund Embezzlement in financial Institutions.
What is Fraud

➢Fraud is a crime that involves deception and

misrepresentation (or a material omission) to
obtain an unfair or unlawful advantage, avoid
an obligation or cause permanent loss to
another party
➢Fraud can be split up into three different
categories
➢Internal Fraud
➢External Fraud
➢Collusion.
Consequences of Fraud

Financial Loss

Negative effect of reputation

Loss of Customers

Adverse effect on Public Trust

Penalties And Regulatory enforcements

75
Agent Victim Fraud

➢Agent victim fraud is an action by a third

party (like a scammer) that results in a
financial loss to an Agent. This type of fraud
may be initiated in many ways, and you can
help prevent it.
➢Agent victim fraud scenarios are as follows:
➢Code entries
➢Computer intrusions/USB infections
➢Remote access
➢Test transactions

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Fraud Scenarios
• A scammer calls an Agent and instructs the employee to enter
Code Entries codes into the Money Transfer Operator system to fix a technical
issue or update/upgrade the system.

Computer • An employee clicks a malicious link in a phishing email,

unknowingly downloads malicious software while visiting an
Intrusions/USB unsafe website or unknowingly downloads malicious software
infections from a scammer’s inserted USB drive.

• A scammer calls an Agent pretending claims Money Transfer

Operator system needs to be updated or upgraded. The employee
Remote Access agrees to establish a computer connection using remote access
software. The scammer then takes control of the computer and
sends transactions without funds being collected by the Agent.

• A scammer calls an Agent to have the employee enter transaction

Test Transactions data, claiming it is a test or training session, which ultimately
results in a transaction

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What is a phish?

➢A Phish is a fraudulent attempt, usually made through

email (although can also be made through the phone or
text), to steal personal information or spread malicious
code or software onto computers.
➢The following help identify a potential phishing emails:
➢Unknown sender
➢Unsolicited or unexpected correspondences
➢Generic greetings
➢Requests for personal information
➢Sense of urgency
➢Poor grammar and spelling
➢Links to websites or attachments

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Protect the company form Phishing

Practice the following: Do not do the following:

• Hover over links without • Click on links in emails

clicking them to know that look suspicious.
where the link is taking Simply clicking on a link
you. can download harmful
• Delete suspicious looking files onto your computer
emails. or mobile device.
• Provide log-in credentials
or other personal
information.
• Doing so may give a
scammer easy access to
accounts or computer.

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Security Actions

Never send a money transfer without collecting funds.

Never Enter information into the Money Transfer Operator system based on an
incoming phone call.

Never agree to establish a computer connection in response to an incoming phone

call, even if the caller claims from Money Transfer Operator or network’s technical
services.

Never Download software from an unknown source or insert a CD or USB

provided to you into the computer providing Money Transfer Operator services.

Never Enter a test or training transaction into the live system.

Never Return or make a call to Money Transfer Operator using a telephone number
supplied by a caller.

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Behavioral Actions

Review fraud awareness education materials provided to your location by Money

Transfer Operator.

Review any fraud alerts from Money Transfer Operator posted on the money
transfer system or in Agent Portal. These messages contain timely fraud alert
information.

Do not allow consumers to see the computer screen when you’re entering
transaction information.

Do not allow unauthorized people access behind the counter or near the
Money Transfer Operator transaction area.

Do not respond to emails, phone calls or faxes requesting Money Transfer

Operator account information, such as account numbers, terminal IDs, operator
IDs and passwords.

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Clients Fraud

➢Clients Fraud is the result of criminals

operating schemes or scams to persuade
Clients to send money for specific purposes
that might sound financially appealing to the
Client.
➢Most Clients fraud involves the perception on
the part of the victim that they will receive
some sort of financial gain or that they are
helping a friend, relative or loved one.

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Fraud Types

ADVANCED FEE/PREPAYMENT
Fraud MYSTERY SHOPPING
Types LOTTERY/PRIZE
TAX
RENTAL PROPERTY
VACCINATION SCAM
INTERNET PURCHASE
RELATIONSHIP
CHARITY
FAKE LOAN SCAM
FAKE CHECKS
IMMIGRATION
ANTI-VIRUS
EMERGENCY
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Indicators of Client Fraud (Sending Transactions)

There are some potential behavioral and transactional indicators that

will help to detect if Clients may be victims of fraud.

BEHAVIORAL INDICATORS TRANSACTIONAL INDICATORS

• Clients who may seem apprehensive or • Clients who send multiple transactions in
confused, especially elder and dependent a single day or over the course of a few
adults. days.
• Clients who seem overly excited to • Clients who wish to protect or delay their
send money. money transfer.
• Clients who express concern about
sending money for an emergency
situation.
• Clients who seem excited or anxious
about receiving a large sum of money or
“once-in-alifetime deal”.
• Clients who may be sending money for
the first time and ask questions about the
process.

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Action recommended to be taken
If one or more of the behavioral or transactional indicators witnessed,
the following measures should be taken to help prevent Clients from
sending their transaction:

Ask Clients the reason for their money transfer.

Ask Clients if the receiver is someone that they have met in

person.

Tell Clients to confirm any emergency situation before sending

any money.

Inform Clients that similar transactions have indicated fraud and

that they should not send the money.

If you suspect the transaction is being sent for a scam, refuse to send
the transaction.
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Never Ever List

NEVER send money to someone you have not met in

person.

NEVER send money for an emergency without verifying

with someone who has knowledge of the situation that it’s
a real emergency.
NEVER send funds received by check until it officially
clears, which can take weeks.

NEVER send money in response to a telemarketing sales

call.

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Client Fraud Scenarios
Scenario No. 1

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Scenario No. 2

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Scenario No. 3

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Scenario No. 4

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Scenario No. 5

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The End…