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Government of Barbados TABLE OF CONTENTS INTERNATIONAL AND REGIONAL INITIATIVES. 8 THE CARIBBEAN FINANCIAL ACTION TASK FORCE.. 8 THE FINANCIAL ACTION TASK FORCE.. 9 OTHER INTERNATIONAL ORGANISATION. 10 THE ANTI-MONEY LAUNDERING AUTHORITY.. 10 THE FINANCIAL INTELLIGENCE UNIT.. 11 INTERNAL CONTROL AND PROCEDURES. 14 THE DUTY OF VIGILANCE OF EMPLOYEES. 17 THE CONSEQUENCES OF FAILURE.. 18 VERIFICATION (KNOW YOUR CUSTOMER) 20 CASES NOT REQUIRING THIRD PARTY EVIDENCE IN SUPPORT.. 24 CASES REQUIRING THIRD PARTY EVIDENCE IN SUPPORT.. 26 TIMING AND DURATION OF VERIFICATION.. 28 RECOGNITION OF SUSPICIOUS CUSTOMERS/TRANSACTIONS. 37 REPORTING TO THE REPORTING AUTHORITY.. 40 SECTION A: INVESTMENT BUSINESS. 51 SECTION B: FIDUCIARY SERVICES. 57 CLIENT ACCEPTANCE PROCEDURES. 59 FATF MEMBERS AND OBSERVERS. A 1 THE FORTY RECOMMENDATIONS. B 1 CFATF MEMBERS AND OBSERVERS. C 1 THE NINETEEN RECOMMENDATIONS. D 2 CRITERIA DEFINING NON-COOPERATIVE COUNTRIES OR TERRITORIES. E 1 SUSPECT TRANSACTION REPORT.. F 1 Guidelines For International Business And Financial Services Sector To Assist With The Detection And Prevention Of Money Laundering
FOREWORDOver the last 20 years the Government of Barbados has sought to diversify its economy through the promotion and development of an international business and financial services sector. In its efforts towards this goal, the government is very much aware of its international obligations and especially the need to ensure that the jurisdiction maintains its reputation as one of quality and integrity and is not used by persons for money laundering and other improper purposes. To this end, Barbados has sought to ensure that its regulatory and supervisory practices are consistent with the highest international standards. In addition to this, Barbados established an Anti-Money Laundering Authority in 2000 in accordance with provisions of the Money Laundering (Prevention and Control) Act, 1998. The operational arm of the Authority, the Financial Intelligence Unit, in its efforts to detect and prevent money laundering in Barbados has been instrumental in assisting various agencies in this area of activity. One instrument with which the Unit has been giving assistance is the development of anti-money laundering guidelines and know-your-customer rules. This document is a culmination of work between the Unit and the Ministry of Economic Development (International Business and Financial Services Division) in developing guidelines especially for service providers in the international business and financial services sector dealing with investment business and fiduciary services. In keeping with the requirements of the Money Laundering (Prevention and Control) Act, 1998 and government’s wish to maintain Barbados as a reputable jurisdiction adhering to the highest international standards, we strongly encourage the widest readership of these guidelines among those involved in fiduciary and investment services. These guidelines will be used by the Ministry of Economic Development in the assessment of the adequacy of anti-money laundering systems and procedures which service providers have put in place. The Authority also actively encourages all institutions to develop and maintain links with it to ensure that their internal systems and procedures are effective and up to date thus enabling them to carry out their duty of vigilance. INTERNATIONAL BACKGROUND Regulators worldwide share a common goal in the fight against money laundering. Guidance notes and principles have been issued by several regulatory agencies in an effort to harmonise supervisory standards and more effectively combat criminal activity. The know-your-customer principle is a fundamental requirement for a effective anti-money laundering programme and its importance is emphasized in all regulatory guidelines. The Financial Action Task Force (FATF) is an inter-governmental body which develops and promotes policies to combat money laundering. The FATF was established by the G-7 Summit in Paris in 1989 and currently has 29 member countries and two regional organizations. In 1990, the FATF issued 40 Recommendations to be implemented to fight money laundering and these were subsequently revised in 1996. The 40 Recommendations have become the internationally accepted anti-money laundering standard. (See Appendix 2). The Caribbean Financial Action Task Force (CFATF) is an organization of states and territories of the Caribbean basin which has agreed to implement common counter-measures against money laundering. The CFATF originated in early 1990 and holds observer status with the FATF. Barbados is a member of this body whose membership currently stands at 26. (See Appendix 3). In June 1990, the CFATF issued 19 Recommendations to complement the FATF’s 40 Recommendations by presenting a regional perspective to the issue. (See Appendix 4). In order to assess the status of the anti-money laundering framework of their member countries, both the FATF and the CFATF undertake detailed reviews referred to as mutual evaluations. A CFATF mutual evaluation of Barbados was completed in September 1997. Barbados will undergo a second mutual evaluation in November, 2001. Barbados is committed to ensuring that its supervisory and regulatory standards in the international financial services sector are consistent with international standards. Recently, there has been increased pressure from such bodies as the FATF, the Organisation for Economic Cooperation and Development (OECD) and the U.S. Treasury for countries to strengthen their anti-money laundering framework. The events of September 11th, 2001 have caused the financing of terrorist activities to be a major worldwide concern and this will no doubt form part of FATF’s concerns for money laundering. Barbados remains committed to implementing adequate measures to combat money laundering. PART IINTRODUCTIONPURPOSE OF GUIDELINES1. The purpose of these guidelines is to ensure that persons/entities in the international business and financial services sector comply with the anti-money laundering requirements contained in the Barbados legislation. 2. Persons and entities other than financial institutions are vulnerable to money launderers. In this regard, those engaged in any of the following activities should be aware of the guidelines and are encouraged to use this document to safeguard their operations: - a. Financial service providers and consultants; b. Money exchange houses such as bureaux de change, cheque encashment; c. Money transmission services including wire transfers; d. Bookmaking/gaming services; e. Dealers in motor vehicles, jewellery, art and antiques; f. Professional accountants and other persons engaged in accounting and bookkeeping services; g. Management services including investment management; h. Services relating to company registration and incorporation, the provision of company secretary services and registered offices for companies; i. Trustee services including the provision of trust investment advice; and j. advice, administration and other services provided in the course of business relating to real estate. WHAT IS MONEY LAUNDERING?3. The phrase "money laundering" covers all procedures to conceal the origins of criminal proceeds so that they appear to have originated from a legitimate source. This gives rise to three features common to persons engaged in criminal conduct, namely that they seek: i. to conceal the true ownership and origin of criminal proceeds; ii. to maintain control over them; and iii. to change their form. 4. There are three stages of laundering, which may occur in sequence but often overlap: i. Placement is the physical disposal of criminal proceeds. In the case of many serious crimes (not only drug trafficking) the proceeds take the form of cash which the criminal wishes to place in the financial system. Placement may be achieved by a wide variety of means according to the opportunity afforded to, and the ingenuity of, the criminal, his advisers and their network. Typically, it may include: a) placing cash on deposit at a bank (often intermingled with a legitimate credit to obscure the audit trail), thus converting cash into a readily recoverable debt; b) physically moving cash between jurisdictions; c) making loans in cash to businesses which seem to be legitimate or are connected with legitimate businesses, thus also converting cash into debt; d) purchasing high‑value goods for personal use, as expensive presents to reward existing or potential colleagues, or for later re-conversion into cash or some negotiable instrument. e) purchasing the services of high‑value individuals; f) purchasing negotiable assets in one‑off transactions, e.g. various forms of securities, real property and stock certificates; or g) placing cash in the client account of a professional intermediary. ii. Layering is the separation of criminal proceeds from their source by the creation of layers of transactions designed to disguise the audit trail and provide the appearance of legitimacy. Again, this may be achieved by a wide variety of means according to the opportunity afforded to, and the ingenuity of, the criminal, his advisers and their network. Typically, it may include: a) rapid switches of funds between financial institutions (e.g. between banks, between banks and insurance companies, between either of the above and the stock market, etc.) and or jurisdictions; b) use of cash deposits as collateral security in support of legitimate transactions; c) switching funds through a network of legitimate businesses and "shell" companies across several jurisdictions; or d) resale of goods/assets. iii. Integration is the stage in which criminal proceeds are treated as legitimate. If layering has succeeded, integration places the criminal proceeds back into the economy in such a way that they appear to be legitimate funds or assets. 5. The criminal remains relatively safe from vigilance systems while proceeds are not moving through these stages and remain static. Certain points of vulnerability have been identified in the stages of laundering which the launderer finds difficult to avoid and where his activities are therefore more susceptible to recognition, in particular: a) cross‑border flows of cash; b) entry of cash into the financial system; c) transfers within and from the financial system; d) acquisition of investments and other assets; e) incorporation of companies; and f) formation of trusts. 6. Accordingly, vigilance systems require institutions and their key staff to be most vigilant at these points along the audit trail where the criminal is most actively seeking to launder ‑ i.e. to misrepresent the source of criminal proceeds. One of the recurring features of money laundering is the urgency with which, after a brief "cleansing", the assets are often reinvested in new criminal activity. LEGISLATION7. Between 1990 and 2000, the Government of Barbados enacted several pieces of legislation aimed at preventing and detecting drug trafficking, money laundering and other serious crimes. These are the: - a. Drug Abuse (Prevention and Control) Act, 1990; b. Proceeds of Crime Act, 1990-13; c. Mutual Assistance in Criminal Matters Act, 1992; and d. Money Laundering (Prevention and Control) Act, 1998-38. 8. The Money Laundering (Prevention and Control) Act 1998-38 establishes a mandatory threshold of BDS$10,000 (or its equivalent in foreign currency) for the retention of business transaction records. This requirement will facilitate a system to help identify money launderers. 9. This framework is supported by the Ministry of Economic Development (International Business) which is responsible for the supervision and regulation of international business entities licenced under the International Business Companies Act, Cap. 77, the Societies with Restricted Liability Act, Cap. 318B, and the Foreign Sales Corporation Act, Cap. 59C. The Ministry has certain responsibilities under the International Trust Act, 1995. Offences10. Section 3(1) of the Money Laundering (Prevention and Control) Act states that a person engages in money laundering where: § The person engages, directly or indirectly, in a transaction that involves money or other property, that is proceeds of crime; or § The person receives, possesses, conceals, disposes of, or brings into or sends out of Barbados, any money or other property that is proceeds of crime. 11. It is not necessary for the original offence from which the proceeds stem to be committed in Barbados, so long as it would have been an offence had it taken place within Barbados. See sub-section 3(4). 12. The offences and their associated penalties appear in Sections 12, 20, 21 and 22 of the Act and are summarized as follows: § A person who has been convicted of an indictable offence is not permitted to be licensed to carry on the business of a financial institution; and where the person is a financial institution the licence will be revoked. See Section 12(1). § Engaging in the act of money laundering is punishable on conviction to a maximum of 25 years imprisonment, a fine of $2.0 million or both. See Sub-section 20(3). § Aiding, abetting, counseling or conspiring to engage in a transaction involving money or property that is or is suspected to be the proceeds of crime is punishable on conviction to a maximum of 15 years imprisonment, a fine of $1.5 million or both. See Sub-section 20(4). § Where an offence is committed under Section 20 by a body of persons, whether corporate or unincorporated, every person acting in an official capacity for or on behalf of such a body at the time of the commission of the offence, is guilty of that offence and will be tried and punished accordingly. See Section 21. § Tipping off the target or third party about an investigation or pending investigation into money laundering or freezing order; disposing, destroying or falsifying material evidence all of which may result in the investigation being prejudiced. See Sub-section 22(1); or § Falsifying, concealing, destroying or otherwise disposing of, or causing or permitting the falsification, concealment, destruction or disposal of any document or thing that is likely to be material to the execution of a freezing order. See Sub-section 22(2); or § Disclosing the existence of a freezing order (on the property of, or in the possession or under the control of a person suspected of money laundering) to an unauthorised person as defined in the Act. See Sub-section 22(3); § Is punishable on conviction to a maximum of 2 years imprisonment, a fine of $50,000 or both. INTERNATIONAL AND REGIONAL INITIATIVESTHE CARIBBEAN FINANCIAL ACTION TASK FORCE13. The Caribbean Financial Action Task Force (CFATF) is a regional organisation, which has its genesis in the Financial Action Task Force (FATF). This organisation has as its mandate ensuring that the supervisory and regulatory practices are such within the countries of the Caribbean that they act as a deterrent to money laundering and in cases where it does occur that it can be detected. Barbados is a member of the CFATF. 14. Barbados is a member of this body whose membership currently stands at 26. In June 1990, the CFATF issued 19 Recommendations to complement the FATF’s 40 Recommendations by presenting a regional perspective to the issue. 15. In order to assess the status of the anti-money laundering framework of their member countries, both the FATF and the CFATF undertake detailed reviews referred to as mutual evaluations. A CFATF mutual evaluation of Barbados was completed in September 1997. The second round evaluation is scheduled for November 12 to 16, 2001. THE FINANCIAL ACTION TASK FORCE16. The Financial Action Task Force (FATF) was set up by the seven major industrialised countries of the world (Group of 7) and other developed countries to combat money laundering. The FATF lends support to regional organisations in implementing its recommendations. 17. In 1990, the FATF issued 40 Recommendations to be implemented to fight money laundering and these were subsequently revised in 1996. The 40 Recommendations have become the internationally accepted anti-money laundering standard. OTHER INTERNATIONAL ORGANISATIONS18. Barbados is a member of the Offshore Banking Supervisors of the Basle Committee as well as a member of the International Association of Insurance Supervisors and the International Organisation of Securities Commissioners. These organisations have been engaged in setting standards for the more adequate exchange of information in matters concerning money laundering. THE ANTI-MONEY LAUNDERING AUTHORITY19. The Money Laundering (Prevention and Control) Act, 1998-38 confers responsibility for the supervision of financial institutions to the Anti-Money Laundering Authority (“the Authority”) which was officially established in August 2000. Where the Authority believes on reasonable grounds that a transaction involves proceeds of crime the Authority sends the report to the Commissioner of Police. A Financial Investigations Unit has been established within the Royal Barbados Police Force to investigate reports referred to it by the Authority. 20. The Authority was established under section 5 of the Money Laundering (Prevention and Control) Act, 1998-38 to supervise financial institutions. The Act provides for the appointment by the Minister of persons who have a sound knowledge of banking, financial and legal matters. 21. Correspondence should be addressed to:- The Director
THE FINANCIAL INTELLIGENCE UNIT22. A Financial Intelligence Unit has been established to carry out the Authority’s Anti-Money Laundering supervisory function over financial institutions including the functions of collecting, analyzing and disseminating suspect transaction reports. Financial Institutions must report suspicious transactions to the Unit. This includes any transaction where the identity of the person involved, the transaction or any other business transaction gives any officer or employee of a financial institution reasonable grounds to suspect that the transaction involves proceeds of crime or is of an unusual nature. 23. Correspondence should also be addressed to the address above. SCOPE OF GUIDELINES24. These guidelines are a statement of standards expected by the Authority and the Ministry of Economic Development (International Business) (the Ministry) concerning fiduciary services and investment business. The Authority actively encourages all institutions to develop and maintain links with it to ensure that their internal systems and procedures are effective and up to date, so enabling them to implement their duty of vigilance. 25. Although the Money Laundering (Prevention And Control) Act applies to all persons and businesses, additional administrative requirements are placed on financial institutions which are defined as: § Any persons carrying on business under the Financial Institutions Act; and includes: · A deposit taking institution · A credit union within the meaning of the Co-operatives Societies Act · A building society within the Building Societies Act · A friendly society within the meaning of the Friendly Societies Act · An insurance business within the meaning of the Insurance Act · An offshore bank within the meaning of the Offshore Banking Act · An exempt insurance company within the meaning of the Exempt Insurance Act · An international business company within the meaning of the International Business Companies Act · A society with restricted liability within the meaning of the Societies with Restricted Liability Act, 1995 · A foreign sales corporation within the meaning of the Barbados Foreign Sales Corporation Act · A mutual fund, mutual funds administrator and a mutual fund manager · International Trusts within the meaning of the International Trusts Act, 1995. GROUP PRACTICE26. Where a group whose headquarters are in Barbados operates branches or controls subsidiaries in another jurisdiction, it should: § ensure that such branches or subsidiaries observe these Guidelines or adhere to local standards if those are at least equivalent; § keep all such branches and subsidiaries informed as to current group policy; and § ensure that each branch or subsidiary informs itself as to its own local reporting point equivalent to the Authority in Barbados and that it is conversant with procedures for disclosure.
PART IIINTERNAL CONTROL AND PROCEDURESTHE DUTY OF VIGILANCE1. Institutions should be constantly vigilant in deterring criminals from making use of any of the facilities described above for the purpose of money laundering. The task of detecting crime falls to law enforcement agencies. While financial institutions may on occasion be requested or, under due process of law, may be required to assist law enforcement agencies in that task, the duty of vigilance is necessary to avoid assisting the process of laundering and to react to possible attempts at being used for that purpose. Thus the duty of vigilance consists mainly of the following five elements: i. Verification; ii. Recognition of suspicious transactions; iii. Reporting of suspicion; iv. Keeping of records; v. Training. 2. Institutions perform their duty of vigilance by having in place systems which enable them to: i. determine (or receive confirmation of) the true identity of customers requesting their services; ii. recognise and report suspicious transactions to the Reporting Authority; in this respect any person who voluntarily discloses information to the Reporting Authority arising out of a suspicion or belief that any money or other property represents the proceeds of criminal conduct is protected by law under sections 52(1) and 52(2) of the Proceeds of Crime Act, from being sued for breach of any duty of confidentiality; iii. keep records for the prescribed period of time; iv. train key staff; v. liaise closely with the Anti-Money Laundering Authority on matters concerning vigilance policy and systems; and vi. ensure that internal auditing and compliance departments regularly monitor the implementation and operation of vigilance systems. 3. An institution should not enter into a business relationship or carry out a significant one‑off transaction unless it has fully implemented the above systems. 4. Since the international business and financial services sector encompasses a wide and divergent range of organisations, from large institutions to small intermediaries, the nature and scope of the vigilance system appropriate to any particular organisation will vary depending on its size, structure and the nature of the business. However, irrespective of size and structure, all institutions should exercise a standard of vigilance which in its effect measures up to these Guidelines. 5. Vigilance systems should enable key staff to react effectively to suspicious occasions and circumstances by reporting them to the relevant personnel in‑house and to receive training from time to time, whether from the institution or externally, to adequately equip them to play their part in meeting their responsibilities. 6. As an essential part of training, key staff should receive a copy of their company's current instruction manual(s) relating to entry, verification and records based on the recommendations contained in these Guidelines. All institutions should produce an instruction manual relating to entry, verification and records based on the recommendations contained in these Guidelines. 7. All institutions/organizations should appoint a Reporting Officer as the point of contact with the Authority in the handling of cases of suspicious customers and transactions. The Reporting Officer should be a senior member of key staff with the necessary authority to ensure compliance with these Guidelines. 8. In addition, institutions may find it useful to delegate the responsibility for maintaining vigilance systems to a Prevention Officer (or more than one Prevention Officer) rather than reserve to the Reporting Officer all such day‑to‑day responsibility. A Prevention Officer should nevertheless have the necessary authority to guarantee to the Reporting Officer compliance with these Guidelines. 9. Institutions large enough to have a compliance, internal audit or fraud department will probably appoint a Reporting Officer from within one of these departments. 10. The role of the Prevention Officer may very well include that of determining the vigilance systems appropriate for the institution. Thereafter, the Prevention Officer should set out the day‑to‑day methods and procedures for key staff to operate such vigilance systems. 11. In dealing with customers, the duty of vigilance begins with the start of a business relationship or a significant one‑off transaction and continues until either comes to an end. However, the keeping of records (from which evidence of the routes taken by any criminal proceeds placed in the financial system are preserved) continues as a responsibility as described below in these Notes. THE DUTY OF VIGILANCE OF EMPLOYEES12. It cannot be stressed too strongly that all employees and in particular, all key staff are at risk of being or becoming involved in criminal activity if they are negligent in their duty of vigilance and they should be aware that they face criminal prosecution if they commit any of the offences under the Proceeds of Crime Act and the Money Laundering (Prevention and Control) Act. 13. It seems prudent at this juncture to draw attention to the level of knowledge required to constitute the offence of money laundering. Section 3(2) of the Act provides that a person engages in money laundering whether he knows or has reasonable grounds to suspect that the property is derived or is realized directly or indirectly from some form of unlawful activity, or where the person is (a) an individual, he fails without reasonable excuse to take reasonable steps to ascertain whether or not the property is derived or realized directly or indirectly, from some form of unlawful activity; or (b) a financial institution, the person fails to take reasonable steps to implement or apply procedures to control or combat money laundering. 14. Although on moving to new employment, employees will normally put out of their minds any dealings with customers of the previous employer, if such a customer becomes an applicant for business with the new employer and the employee recalls a previous suspicion, he/she should report this to his/her new Reporting Officer (or other senior colleague according to the vigilance systems operating). THE CONSEQUENCES OF FAILURE15. For the institution involved, the first consequence of failure in the duty of vigilance is likely to be commercial. Institutions which, however unwittingly, become involved in money laundering risk the loss of their good market name and position and the incurring of non‑productive costs and expenses. 16. The second consequence may be to raise issues of supervision and fit and proper standing. 17. The third consequence is the risk of criminal prosecution of the institution for the commission of an offence under the Money Laundering (Prevention and Control) Act. 18. For the individual employee it should be self‑evident that the consequences of failure are not dissimilar to those applicable to institutions. The employee's good name within the industry is likely to suffer and he or she may face the risk of prosecution for the commission of an offence under the Money Laundering (Prevention and Control) Act. 19. An institution undertaking verification should establish to its reasonable satisfaction that every verification subject relevant to the application for business actually exists. All the verification subjects of joint applicants for business should normally be verified. On the other hand, where the guidance implies a large number of verification subjects it may be sufficient to carry out verification to the letter on a limited group only, such as the senior members of a family, the principal shareholders, the main directors of a company, etc. 20. The determination of involvement is avoidable on proof that knowledge or suspicion was reported without delay in accordance with the vigilance systems of the institution. VERIFICATION (KNOW YOUR CUSTOMER)21. The following points of guidance will apply according to: i. the legal personality of the applicant for business (which may consist of a number of verification subjects); and ii. the capacity in which he/she is applying. 22. An institution should carry out verification in respect of the parties operating the account. Where there are underlying principals, however, the true nature of the relationship between the principals and the account signatories must also be established and appropriate performed on the former, especially if the signatories are accustomed to acting on their instruction. In this context "principals" should be understood in its widest sense to include, for example, beneficial owners, settlers, controlling shareholders, directors, major beneficiaries, etc, but the standard of due diligence will depend on the exact nature of the relationship. 23. Attention is drawn to the exemptions set out below. VERIFICATION SUBJECTIndividuals24. The verification subject may be the account holder himself or one of the principals to the account. 25. An individual trustee should be treated as a verification subject unless the institution has completed verification of that trustee in connection with a previous business relationship or one‑off transaction and termination has not occurred. Where the applicant for business consists of individual trustees, all of them should be treated as verification subjects unless they have no individual authority to operate a relevant account or otherwise to give relevant instructions. Partnerships26. Institutions should treat as verification subjects all partners of a firm which is an applicant for business who are relevant to the application and have individual authority to operate a relevant account or otherwise to give relevant instructions. Verification should proceed as if the partners were directors and shareholders of a company in accordance with the principles applicable to non‑quoted corporate applicants (see below). In the case of a limited partnership, the general partner should be treated as the verification subject. Limited partners need not be verified unless they are significant investors. Companies (including corporate trustees)27. Unless a company is quoted on a recognized stock exchange or is a subsidiary of such a company or is a private company with substantial premises and payroll of its own, steps should be taken to verify the company's underlying beneficial owner(s) namely those who ultimately own or control the company. 28. The expression "underlying beneficial owner(s)" includes any person(s) on whose instructions the signatories of an account, or any intermediaries instructing such signatories, are for the time being accustomed to act. Other institutions29. Where an applicant for business is an institution but not a firm or company (such as an association, institute, foundation, charity, etc), all signatories who customarily operate the account should be treated as verification subject(s). Intermediaries30. If the intermediary is a locally regulated institution and the account is in the name of the institution but on behalf of an underlying customer (perhaps with reference to a customer name or an account number) this may be treated as an exempt case but otherwise the customer himself (or other person on whose wishes the intermediary is prepared to act) should be treated as a verification subject. 31. Subject to paragraphs 43 and 49, if the documentation is to be in the intermediary’s name, or if the documentation is to be in the customer’s name but the intermediary has the power to operate any bank, securities or investment account, the intermediary should also be treated as a verification subject. 32. Where an institution suspects that there may be an undisclosed principal (whether individual or corporate) it should monitor the activities of the customer to ascertain whether the customer is in fact merely an intermediary. If a principal is found to exist, further enquiry should be made and that principal should be treated as a verification subject. EXEMPT CASES33. Unless a transaction is a suspicious one, verification is not required in the following defined cases, which fall into two categories: those which do not require third party evidence in support and those which do. However, where an institution knows or suspects that laundering is or may be occurring or has occurred, the exemptions and concessions as set out below do not apply and the case should be treated as a case requiring verification (or refusal) and, more important, reporting. CASES NOT REQUIRING THIRD PARTY EVIDENCE IN SUPPORTExempt institutional applicants34. Verification of the institution is not needed when the applicant for business is an institution itself subject either to these Guidelines or to their equivalent in another jurisdiction. Small one‑off transactions35. Verification is not required in the case of small one‑off transactions (whether single or linked) unless at any time between entry and termination it appears that two or more transactions which appear to have been small one‑off transactions are in fact linked and constitute a significant one‑off transaction. For the purposes of these Guidelines, transactions which are separated by an interval of three months or more are not required, in the absence of specific evidence to the contrary, to be treated as linked. 36. These Guidelines do not require any institution to establish a system specifically to identify and aggregate linked one‑off transactions but institutions should exercise care and judgement in assessing whether transactions should be regarded as linked. If, however, an existing system does indicate that two or more one‑off transactions are linked, it should act upon this information in accordance with its vigilance system. Certain postal, telephonic and electronic business37. In the following paragraph the expression "non‑paying account" is used to mean an account or investment product which does not provide: § cheque or other money transmission facilities, or § the facility for transfer of funds to other types of account which do provide such facilities, or § the facility for repayment or transfer to a person other than the applicant for business whether on closure or maturity of the account, or on realization or maturity of the investment, or otherwise. 38. Given the above definition, where an applicant for business pays or intends to pay monies to an institution by post, or electronically, or by telephoned instruction, in respect of a non‑paying account and: § it is reasonable in all the circumstances for payment to be made by such means; § such payment is made from an account held in the name of the applicant for business at another regulated institution or recognised foreign regulated institutions; § the name(s) of the applicant for business corresponds with the name(s) of the paying account-holder; § the receiving institution keeps a record of the applicant’s account details with that other institution; and § there is no suspicion of money laundering, the receiving institution is entitled to rely on verification of the applicant for business by that other institution provided that the other institution declares that verification has been carried out and completed. Certain mailshots, off‑the‑page and coupon business39. The exemption set out in paragraphs 46 and 47 also applies to mailshots, off‑the‑page and coupon business placed over the telephone or by other electronic media. In such cases, the receiving institution should also keep a record of how the transaction arose. CASES REQUIRING THIRD PARTY EVIDENCE IN SUPPORTReliable introductions40. Verification may not be needed in the case of a reliable introduction from a locally regulated institution in the form of a written introduction. Judgement should be exercised as to whether a local introduction may be treated as reliable, employing the knowledge which the institution has of local institutions generally, supplemented as necessary by appropriate enquiries. Details of the introduction should be kept as part of the records of the customer introduced. 41. Verification may not be needed where a written introduction is received from an introducer who is: § a professionally qualified person or independent financial adviser operating from a recognised foreign regulated institution; § the receiving institution is satisfied that the rules of his/her professional body or regulator (as the case may be) include ethical guidelines, which taken in conjunction with the money laundering regulations in his/her jurisdiction include requirements at least equivalent to those in these Guidelines; and § the individual concerned is reliable and in good standing and the introduction is in writing, including an assurance that evidence of identity will have been taken and recorded, which assurance may be separate for each customer or general. 42. Details of the introduction should be kept as part of the records of the customer introduced. 43. Verification is not needed where the introducer of an applicant for business is either an overseas branch or member of the same group as the receiving institution. 44. To qualify for exemption from verification, the terms of business between the institution and the introducer should require the latter: § to complete verification of all customers introduced to the institution or to inform the institution of any unsatisfactory conclusion in respect of any such customer; § to keep records in accordance with these Guidelines and applicable laws; and § to supply copies of any such records to the institution upon demand. 45. In the event of any dissatisfaction on any of these, the institution should (unless the case is otherwise exempt) undertake and complete its own verification of the customer.
TIMING AND DURATION OF VERIFICATION46. Whenever a business relationship is to be formed or a significant one‑off transaction is undertaken, the institution should establish the identity of all verification subjects arising out of the application for business either by: i. carrying out the verification itself, or ii. by relying on the verification of others in accordance with these Guidelines Notes. 47. Where a transaction involves an institution and an intermediary, each needs separately to consider its own position and to ensure that its own obligations regarding verification and records are duly discharged. 48. The best time to undertake verification is not so much at entry as prior to entry. Subject to paragraphs 43 and 53, verification should, whenever possible, be completed before any transaction is completed. 49. If it is necessary for sound business reasons to open an account or carry out a significant one‑off transaction before verification can be completed, this should be subject to stringent controls which should ensure that any funds received are not passed to third parties. Alternatively, a senior member of key staff may give appropriate authority. This authority should not be delegated. Any such decision should be recorded in writing. 50. Verification, once begun, should normally be pursued either to a conclusion or to the point of refusal. If a prospective customer does not pursue an application, key staff may (or may not) consider that this is in itself suspicious and reportable to the Authority. 51. In cases of telephone business where payment is or is expected to be made from a bank or other account, the verifier should: i. satisfy himself/herself that such account is held in the name of the applicant for business at or before the time of payment, and ii. not remit the proceeds of any transaction to the applicant for business or his/her order until verification of the relevant verification subjects has been completed. METHODS OF VERIFICATION52. Verification is a cumulative process. Except for small one‑off transactions, it is not appropriate to rely on any single piece of documentary evidence. 53. The best possible documentation of identification should be required and obtained from the verification subject. For this purpose "best possible" is likely to mean that which is the most difficult to replicate or acquire unlawfully because of its reputable and/or official origin. 54. File copies of documents should be retained. Reference numbers and other relevant details should be recorded. 55. The process of verification should not be unduly influenced by the particular type of account or service being applied for. Individuals 56. A personal introduction from a known and respected customer and/or member of key staff is often a useful aid but it does not remove the need to verify the subject in the manner provided in these Guidelines. It should in any case contain the full name and permanent address of the verification subject and as much as is relevant of the information contained in paragraph 58. 57. Save in the case of reliable introductions, the institution should, whenever feasible, interview the verification subject in person. 58. The following personal information should be obtained: § full name(s) used § date and place of birth § nationality § current permanent address including postcode (any address printed on a personal account cheque tendered to open the account, if provided, should be compared with this address) § occupation and name of employer (if self‑employed, the nature of the self -employment) § specimen signature of the verification subject (if a personal account cheque is tendered to open the account, the signature on the cheque should be compared with the specimen signature) § reason for opening the account § expected level of business and source of funds § any other information deemed appropriate by the institution 59. In this context "current permanent address" means the verification subject's actual residential address as it is an essential part of identity. 60. To establish identity, the following documents are considered to be the best possible : § where the applicant is a non-resident and it is applicable, Social Security number § current valid passport § National identity card § Armed Forces identity card § driver’s licence which bears a photograph 61. Documents sought should be pre‑signed by, and if the verification subject is met face-to‑face, preferably bear a photograph of the verification subject. 62. Documents which are easily obtained in any name should not be accepted uncritically. Examples include: § birth certificates § an identity card issued by the employer of the applicant even if bearing a photograph § credit cards § business cards § national health or insurance cards § provisional driving licences § student union cards 63. If the verification subject is an existing customer of an institution acting as intermediary in the application, the name and address of that institution and that institution's personal reference on the verification subject should be recorded. 64. If information cannot be obtained from the sources referred to above to enable verification to be completed and the account to be opened, a request may be made to another institution or institutions for confirmation of such information from its/their records. Failure of that institution to respond positively and without undue delay should put the requesting institution on its guard and immediate consideration should be given to declining a relationship. In no circumstances should an institution or service provider enter into a relationship with a customer that it does not know. Companies 65. All account signatories should be duly accredited by the company. 66. The following documents should be obtained: § Certificate of Incorporation; § the name(s) and address(es) of the beneficial owner(s) and/or the person(s) on whose instructions the signatories on the account are empowered to act; § Memorandum and Articles of Association; § Resolution, bank mandate, signed application form or any valid account opening authority, including full names of all directors and their specimen signatures and signed by no fewer than the number of directors required to make up a quorum; § Copies of Powers of Attorney or other authorities given by the directors in relation to the company; § a signed director's statement as to the nature of the company's business; § a confirmation as described in paragraph 70. 67. As legal controls vary between jurisdictions, particular attention may need to be given to the place of origin of such documentation and the background against which it is produced. Financial institutions and service providers should exercise extreme caution in their business relations and transactions with persons, including companies and financial institutions, from jurisdictions with no or inadequate anti-money laundering structures and procedures. Partnerships 68. The following (or their foreign equivalent) should be obtained as part of the verification procedure: § the partnership agreement, and § information listed in paragraph 66 in respect of the partners and managers relevant to the application for business. Other institutions 69. Signatories should satisfy the provisions of paragraph 66 onwards as appropriate. RESULT OF VERIFICATIONSatisfactory 70. Financial institutions and service providers should reassess their requirements pertaining to identification records to ensure that all customer records conform to the new requirements. In addition, customer identification records should be verified periodically to ensure that identification information remains current. Any change in the name and address of any customer from that given when the business relationship was first established should be recorded. 71. The file of each applicant for business should show the steps taken and the evidence obtained in the process of verifying each verification subject or, in appropriate cases, details of the reasons which justify the case being an exempt case. Unsatisfactory 72. In the event of failure to complete verification of any relevant verification subject and where there are no reasonable grounds for suspicion, any business relationship with or one‑off transaction for the applicant for business should be suspended and any funds held to the applicant's order returned until verification is subsequently completed (if at all). Funds should never be returned to a third party but only to the source from which they came. If failure to complete verification itself raises suspicion, a report should be made to the Authority for determination as to how to proceed. RECOGNITION OF SUSPICIOUS CUSTOMERS/TRANSACTIONS73. A suspicious transaction will often be one which is inconsistent with a customer's known legitimate business or activities or with the normal business for that type of account. It follows that an important pre‑condition of recognition of a suspicious transaction is for the institution to know enough about the customer's business to recognize that a transaction, or a series of transactions, is unusual. 74. Although these Guidelines tend to focus on new business relationships and transactions, institutions should be alert to the implications of the financial flows and transaction patterns of existing customers, particularly where there is a significant, unexpected and unexplained change in the behaviour of an account. 75. Against such patterns of legitimate business, suspicious transactions should be cognizable as falling into one or more of the following categories: § any unusual financial activity of the customer in the context of his own usual § any unusual transaction in the course of some usual financial activity; § any unusually‑linked transactions; § any unusual employment of an intermediary in the course of some usual transaction or financial activity; § any unusual method of settlement; § any unusual or disadvantageous early redemption of an investment product. 76. The Reporting Officer should be well versed in the different types of transaction which the institution handles and which may give rise to opportunities for money laundering.
REPORTING OF SUSPICION77. Reporting of suspicion is important as a defence against a possible accusation of assisting in the retention or control of the proceeds of criminal conduct or of acquiring, possessing or using the proceeds of criminal conduct. In practice, a Reporting Officer will normally only be aware of having a suspicion, without having any particular reason to suppose that the suspicious transactions or other circumstances relate to the proceeds of one sort of crime or another. 78. It should be noted in this context that suspicion of criminal conduct is more than the absence of certainty that someone is innocent. It is rather an inclination that there has been criminal conduct. The standard here is not an evidential one. The fact that a transaction is unusual satisfies this requirement. 79. Institutions should ensure: § that key staff know to whom their suspicions should be reported; and § that there is a clear procedure for reporting such suspicions without delay to the Reporting Officer 80. Key staff should be required to report any suspicion of laundering either directly to their Reporting Officer or, if the institution so decides, to their line manager for preliminary investigation in case there are any known facts which may negate the suspicion. 81. Employees should comply at all times with the approved vigilance systems of their institution and will be treated as having met appropriate standards of vigilance if they disclose their suspicions to their Reporting Officer or other appropriate senior colleague according to the vigilance systems in operation in their institution. 82. On receipt of a report concerning a suspicious customer or suspicious transaction the Reporting Officer should determine whether the information contained in such report, supports the suspicion. He should investigate the details in order to determine whether in all the circumstances he in turn should submit a report to the Reporting Authority. 83. If the Reporting Officer decides that the information does substantiate a suspicion of laundering, the involvement of proceeds of crime or the funding of terrorism, he should disclose this information promptly. If he is genuinely uncertain as to whether such information substantiates a suspicion, he should nevertheless, report. If in good faith he decides that the information does not substantiate a suspicion, he must record fully the reasons for his decision not to report to the Reporting Authority in the event that his judgement is later found to be wrong. 84. In establishing its reporting system, each institution (or group) must bear in mind the importance of minimizing the number of persons who should be aware of the reporting of a suspicion; the more widely known, the greater the opportunities for tipping. REPORTING TO THE REPORTING AUTHORITY85. If the Reporting Officer decides that a disclosure should be made, a report, in standard form should be sent to the Reporting Authority. (See Appendix 5) 86. If the Reporting Officer considers that a report should be made urgently (e.g. where the account is already part of a current investigation), initial notification to the Reporting Authority should be made by facsimile. 87. The receipt of a faxed report will be promptly acknowledged by the Reporting Authority. The report is forwarded to trained financial investigation officers who alone have access to it. They may seek further information from the reporting institution and elsewhere. It is important to note that after a reporting institution makes an initial report in respect of a specific suspicious transaction, that initial report does not relieve the institution of the need to report further suspicions in respect of the same customer or account and the institution should report any further suspicious transactions involving that customer. 88. Discreet inquiries are made to confirm the basis for suspicion but the customer is never approached. In the event of a prosecution the source of the information is protected, as far as the law allows. Production orders are used to produce such material for the Court. Maintaining the integrity of the confidential relationship between law enforcement agencies and institutions is regarded by the former as of paramount importance. 89. Vigilance systems should require the maintenance of a register of all reports made to the Reporting Authority pursuant to this paragraph. Such register should contain details of: § the date of the report; § the person(s) to whom the report was forwarded; § a reference by which supporting evidence is identifiable; and § receipt of acknowledgment from the Reporting Authority. KEEPING OF RECORDSTime Limits 90. In order to facilitate the investigation of any audit trail concerning the transactions of their customers, institutions should observe the following: § Entry records: institutions should keep all account opening records, including verification documentation and written introductions, for a period of at least 5 years after termination or, where an account has become dormant, 5 years from the last transaction. § Ledger records: institutions should keep all account ledger records for a period of at least 5 years following the date on which the relevant transaction or series of transactions is completed. § Supporting records: institutions should keep all records in support of ledger entries, including credit and debit slips and cheques, for a period of at least 5 years following the date on which the relevant transaction or series of transactions is completed. 91. Where an investigation into a suspicious customer or a suspicious transaction has been initiated, the Reporting Authority may request an institution to keep records until further notice, notwithstanding that the prescribed period for retention has elapsed. Even in the absence of such a request, where an institution knows that an investigation is proceeding in respect of its customer, it should not, without the prior approval of the Reporting Authority, destroy any relevant records even though the prescribed period for retention may have elapsed.
CONTENTS OF RECORDS92. Records relating to verification will generally comprise: § a description of the nature of all the evidence received relating to the identity of the verification subject; § the evidence itself or a copy of it or, if that is not readily available, information reasonably sufficient to obtain such a copy. 93. Records relating to transactions will generally comprise: i. details of personal identity, including the names and addresses, of: § the customer; § the beneficial owner of the account or product; § any counter‑party; ii. details of securities and investments transacted including: § the nature of such securities/investments; § Valuation(s) and price(s); § memoranda of purchase and sale; § source(s) and volume of funds and bearer securities; § destination(s) of funds and bearer securities; § memoranda of instruction(s) and authority(ies) § book entries; § custody of title documentation; § the nature of the transaction; § the date of the transaction; § the form (e.g. cash, cheque) in which funds are offered and paid out. 94. In the case of electronic transfers, institutions should retain records of payments made with sufficient detail to enable them to establish: § the identity of the remitting customer; and § as far as possible the identity of the ultimate recipient. 95. Institutions should keep all relevant records in readily retrievable form and be able to access records without undue delay. A retrievable form may consist of: § an original hard copy; § microform; or § electronic data. 96. Records held by third parties are not regarded in a readily retrievable form unless the institution is reasonably satisfied that the third party is itself an institution which is able and willing to keep such records and disclose them to it when required. 97. Where the Reporting Authority requires sight of records which according to an institution's vigilance systems would ordinarily have been destroyed, the institution is nonetheless required to conduct a search for those records and provide as much detail to the Reporting Authority as possible. TRAINING98. Institutions have a duty to ensure that key staff receive sufficient training to alert them to the circumstances whereby they should report customers/clients and/or their transactions to the internal compliance officer. Such training should include making key staff aware of the basic elements of: § the Proceeds of Crime Act; the Money Laundering (Prevention and Control) Act and any Regulations made or Code of Practice issued thereunder, and in particular the personal obligations of key staff thereunder, as distinct from the obligations of their employers thereunder; § guidelines issued by the Authority; § vigilance policy and vigilance systems; § the recognition and handling of suspicious transactions; § other pieces of anti‑money laundering legislation identified under the Barbados Anti‑Money Laundering Regime at the beginning of these notes; and § any Code of Conduct/ Practice issued under regulatory legislation or voluntarily adopted by various industry associations. 99. The effectiveness of a vigilance system is directly related to the level of awareness engendered in key staff both as to the background of international crime against which the Proceeds of Crime Act and anti‑money laundering legislation have been enacted and these Guidelines issued, and as to the personal legal liability of each of them for failure to perform the duty of vigilance and to report suspicions appropriately.
TRAINING PROGRAMMES100. While each institution should decide for itself how to meet the need to train members of its key staff in accordance with its particular commercial requirements, the following programmes will usually be appropriate: New employees Generally 101. Training should include: § guidelines issued by the authority; § the company's instruction manual; § a description of the nature and processes of laundering; § an explanation of the underlying legal obligations contained in the Proceeds of Crime Act, the Money laundering (Prevention and control) Act and any Regulations made or Code of Practice issued thereunder; § an explanation of vigilance policy and systems, including particular emphasis on verification and the recognition of suspicious transactions and the need to report suspicions to the Reporting Officer (or equivalent). Specific appointees Cashiers/ foreign exchange operators /dealers/ salespersons/ advisory staff 102. In addition to the areas of training stated for new employees, key staff who are dealing directly with the public are the first point of contact with money launderers and their efforts are vital to the implementation of vigilance policy. They need to be made aware of their legal responsibilities and the vigilance systems of the institution, in particular the recognition and reporting of suspicious transactions. They also need to be aware that the offer of suspicious funds or the request to undertake a suspicious transaction should be reported to the Reporting Officer in accordance with vigilance systems, whether or not the funds are accepted or the transaction proceeded with. Account opening/new customer and new business staff/processing and settlement staff 103. Key staff who deal with account opening, new business and the acceptance of new customers, or who process or settle transactions and/or the receipt of completed proposals and cheques, should receive the training given to cashiers etc. In addition, verification should be understood and training should be given in the institution's procedures for entry and verification. Such staff also need to be aware that the offer of suspicious funds or the request to undertake a suspicious transaction may need to be reported to the Reporting Officer in accordance with vigilance systems, whether or not the funds are accepted or the transaction proceeded with. Administration/operations supervisors and managers 104. A higher level of instruction covering all aspects of vigilance policy and systems should be provided to those with the responsibility for supervising or managing staff. This should include: § the Proceeds of Crime Act, the Money laundering (Prevention and control) Act and Regulation and Codes of Practice; § guidelines issued by the Authority § procedures relating to the service of production and restraint orders; § internal reporting procedures; and § the requirements of verification and records. Reporting Officers and Prevention Officers 105. In-depth training concerning all aspects of the relevant laws, vigilance policy and systems will be required for the Reporting Officer and, if appointed the Prevention Officer. In addition, the Reporting Officer will require extensive initial and continuing instruction on the validation and reporting of suspicious transactions and on the feedback arrangements. These officers also need to be aware of local money laundering trends and techniques. UPDATES AND REFRESHERS106. It will also be necessary to make arrangements for updating and refresher training at regular intervals to ensure that key staff remain familiar with and are updated as to their responsibilities. PART IIISECTION A: INVESTMENT BUSINESS1. Regulated institutions which provide investment services should comply with the provisions of Part II of these Guidelines. Risks of Exploitation 2. Because the management and administration of investment products is not generally cash based, it is probably less at risk from placement of criminal proceeds than is much of the banking sector. Most payments are made by way of cheque or transfer from another institution and it can therefore be assumed that in a case of laundering, placement has already been achieved. Nevertheless, the purchase of investments for cash is not unknown, and therefore the risk of investment business being used at the placement stage cannot be ignored. Payment in cash will therefore need further investigation, particularly where it cannot be supported by evidence of a legitimate cash‑based business as the source of funds. 3. Fund management is likely to be at particular risk to the layering stage of laundering. The liquidity of investment products under management is attractive to launderers since it allows them quickly and easily to move the criminal proceeds from one product to another, mixing them with lawful proceeds and facilitating integration. 4. Fund management is also at risk to the integration stage in view of: § the easy opportunity to liquidate investment portfolios containing both lawful and criminal proceeds, while concealing the nature and origins of the latter; § the wide variety of available investments; § the ease of transfer between investment products. 5. The following investments are particularly at risk: § collective investment schemes and other "pooled funds" (especially where unregulated); and § high risk/high reward funds (because the launderer's cost of funds is by definition low and the potentially high reward accelerates the integration process). Borrowing against security of investments 6. Secured borrowing is an effective method of layering and integration because it puts a legitimate financial business (the lender) with a genuine claim to the security in the way of those seeking to restrain or confiscate the assets. VERIFICATION7. Mutual funds, fund managers and administrators will note the particular relevance in their case of exemptions to the need for verification set out in Part II above. Customers dealing direct 8. Where a customer deals with the mutual fund, fund manager or administrator direct, the customer is the applicant for business to the fund manager or administrator and accordingly determines who the verification subject(s) is(are). In the exempt case referred to in respect of mailshot, off‑the‑page or coupon business, a record should be maintained indicating how the transaction arose and recording details of the paying institution's branch sort code number and account number from which the cheque or payment is drawn. Intermediaries and underlying customers 9. Where an agent/intermediary introduces a principal/customer to the mutual fund or fund manager and the investment is made in the principal's/customer's name, then the principal/customer is the verification subject. For this purpose it is immaterial whether the customer's own address is given or that of the agent/intermediary. Nominees 10. Where an agent/intermediary acts for a customer, whether for a named client or through a client account, but deals in his own name, then the agent/intermediary is a verification subject and (unless the applicant for business is a recognized foreign regulated institution under Part III) the customer is also a verification subject. 11. If the applicant for business is a recognized foreign regulated institution, identified under Part III, the fund manager may rely on an introduction from the applicant for business (or other written assurance that it will have verified any principal/customer for whom it acts as agent/intermediary). Delay in verification 12. If verification has not been completed within a reasonable time, then the business relationship or significant one‑off transaction in question should not proceed any further. 13. Where an investor has the benefit of cancellation rights, or cooling off rights, the repayment of money arising in these circumstances (subject to any shortfall deduction where applicable) does not constitute "proceeding further with the business." However, since this could offer a route for laundering money, investment businesses should be alert to any abnormal exercise of cancellation/cooling off rights by any investor, or in respect of business introduced through any single authorised intermediary. In the event that abnormal exercise of these rights becomes apparent, the matter should be treated as suspicious and reported through the usual channels. In any case, repayment should not be to a third party. Redemption prior to completion of verification 14. Whether a transaction is a significant one‑off transaction or is carried out within a business relationship, verification of the customer should normally be completed before the customer receives the proceeds of redemption. However, a mutual fund, a fund manager or administrator will be considered to have taken reasonable measures of verification where payment is made either: § to the legal owner of the investment by means of a cheque where possible crossed account payee"; or § to a bank account held (solely or jointly) in the name of the legal holder of the investment by any electronic means of transferring funds. Switch transactions 15. A significant one‑off transaction does not give rise to a requirement of verification if it is a switch under which all of the proceeds are directly re‑invested in another investment which itself can, on subsequent resale, only result in either: § a further reinvestment on behalf of the same customer; or § a payment being made directly to him and of which a record is kept. Savings vehicles and regular investment contracts 16. Except in the case of a small one‑off transaction (and subject always to any exemptions identified in Part II) where a customer has: § agreed to make regular subscriptions to a mutual fund, and § arranged for the collection of such subscriptions (e.g. by completing a direct debit mandate or standing order), the mutual fund, fund manager or administrator should undertake verification of the customer (or satisfy himself that the case is otherwise exempt under Part II above). 17. Where a customer sets up a regular savings scheme whereby money subscribed by him is used to acquire investments to be registered in the name or held to the order of a third party, the person who funds the cash transaction is to be treated as the verification subject. When the investment is realized, the person who is then the legal owner (if not the person who funded it) is also to be treated as a verification subject. Reinvestment of income 18. A number of retail savings vehicles offer customers the facility to have income reinvested. The use of such a facility should be seen as entry into a business relationship; and the reinvestment of income under such a facility should not be treated as a transaction which triggers the requirement of verification. SECTION B: FIDUCIARY SERVICES19. For the purpose of these Guidelines "fiduciary services" comprise any of the following activities carried on as a business, either singly or in combination: § formation and/or administration of trusts; § acting as corporate and/or individual trustee; § formation and/or administration of Barbados and/or foreign‑registered companies; § provision of corporate and/or individual directors; § Opening and/or operating bank accounts on behalf of clients. 20. A "fiduciary" is any person duly licensed and carrying on any such business in or from within Barbados. Fiduciaries should comply with the provisions of Part II of these Guidelines. VERIFICATION21. Good practice requires key staff to ensure that engagement documentation (client agreement etc.) is duly completed and signed at the time of entry. 22. Verification of new clients should include the following or equivalent steps: § where a settlement is to be made or when accepting trusteeship from a previous trustee, the settler, and/or where appropriate the principal beneficiary(ies), should be treated as verification subjects; § in the course of company formation, verification of the identity of beneficial owners. § the documentation and information concerning a new client for use by the administrator who will have day‑to‑day management of the new client's affairs should include a note of any required further input on verification from any agent/intermediary of the new client, together with a reasonable deadline for the supply of such input, after which suspicion should be considered aroused. CLIENT ACCEPTANCE PROCEDURESAnnual Audit Statement 23. A service provider should obtain a separate report on its compliance with the client acceptance procedures from an independent auditor. Procedures for Professional Service Clients "PSC" 24. The definition of "PSC" is organisations or persons, such as law firms, accountants, banks, trust companies and similar professional organisations who contract the services of a service provider on behalf of its clients. 25. A service provider should obtain from each PSC which instructs a service provider, details of the business address, contact communication numbers and principals or professionals involved in the PSC. A service provider should obtain evidence of first hand involvement in the verification of those details. 26. A service provider should obtain satisfactory sources of reference to provide adequate indication of the reputation and standing of the PSC. 27. A service provider should retain records for a period of five (5) years following the discontinuation of the service provided to the PSC. 28. Before a service provider undertakes to form a company, on the instructions of a PSC the service provider should take reasonable steps to ensure that the PSC has adequate due diligence procedures in place. 29. The service provider shall have regard to the information referred to in this Part in future dealings with the End User Client or the PSC. Procedures for End User Clients "EUC" 30. The definition of "EUC" is a client of a service provider who contracts services of a service provider for the benefit of the EUC. 31. A service provider should maintain written procedures to ensure that the identity of each EUC is known. 32. A service provider should maintain records for a period of five (5) years following the discontinuation of the service provided to the EUC. 33. A service provider should maintain on its files a reference from a banking organisation being service provider of a recognised banking body or from a professional service organisation in respect of the EUC. 34. When a service provider is instructed by an individual, the service provider should maintain on its file a copy of the individual's passport or identity card with photo identification. 35. A service provider should maintain on its file contact communication numbers and addresses for each EUC and should annually remind the EUC that it should notify the service provider within a reasonable period of any change of such EUC's communication numbers and addresses and that it should advise the service provider of any changes in share ownership which require to be reflected in the share register of any company incorporated on behalf of the EUC. 36. The service provider shall obtain all requisite due diligence information at the time of entering into a relationship with the EUC. Additional Requirement Where Fiduciary Services are Provided 37. A service provider should to the extent relevant to the services being provided maintain on its files evidence of the opening of bank and investment accounts, and copies of a statement of those accounts. 38. A service provider should to the extent relevant to the services being provided maintain on its files in respect of clients for whom it provides fiduciary services: § copies of minutes of meetings of shareholders; § copies of minutes of meetings of directors; § copies of minutes of meetings of committees; § copies of registers of directors and officers; and § copies of registers of mortgages, charges and other encumbrances. 39. Where instructions are accepted by a service provider to act as trustee for a trust, the service provider should obtain satisfactory references in accordance with the above on the party giving the instructions for the engrossment or appointment of a new trustee. The service provider should satisfy itself that assets settled into the trust are not or were not made as part of a criminal or illegal transaction or disposition of assets.
APPENDICESAppendix 1 FATF MEMBERS AND OBSERVERSFATF MEMBERS The following list shows the countries, territories, and organisations that make up the membership of the FATF. For more on the status of each jurisdiction regarding compliance with anti-money laundering measures, relevant legislation, and other related information, select the appropriate hyperlink. 1. Argentina 2. Australia 3. Austria 4. Belgium 5. Brazil 6. Canada 7. Denmark 9. Finland 10. France 11. Germany 12. Greece 14. Hong Kong, China 15. Iceland 16. Ireland 17. Italy 18. Japan 19. Luxembourg 20. Mexico 21. Kingdom of the Netherlands 22. New Zealand 23. Norway 24. Portugal 25. Singapore 26. Spain 27. Sweden 28. Switzerland 29. Turkey 30. United Kingdom 31. United States OBSERVER BODIES AND ORGANISATIONS The following international bodies and organisations have observer status with the FATF. The regional FATF-style bodies have similar form and functions to those of the FATF, and some FATF members are also members of these bodies. The international organisations listed are those which have, among other functions, a specific anti-money laundering mission or function. To access, additional information on any of these bodies or organisations, select the appropriate hyperlink. FATF-Style Regional Bodies
Appendix 2 THE FORTY RECOMMENDATIONSIntroduction The Financial Action Task Force on Money Laundering (FATF) is an inter-governmental body whose purpose is the development and promotion of policies to combat money laundering - the processing of criminal proceeds in order to disguise their illegal origin. These policies aim to prevent such proceeds from being utilised in future criminal activities and from affecting legitimate economic activities. The FATF currently consists of 29 countries[1] and two international organisations[2] . Its membership includes the major financial centre countries of Europe, North and South America, and Asia. It is a multi-disciplinary body - as is essential in dealing with money laundering - bringing together the policy-making power of legal, financial and law enforcement experts. This need to cover all relevant aspects of the fight against money laundering is reflected in the scope of the Forty FATF Recommendations - the measures which the Task Force have agreed to implement and which all countries are encouraged to adopt. The Recommendations were originally drawn up in 1990. In 1996 the forty Recommendations were revised to take into account the experience gained over the last six years and to reflect the changes which have occurred in the money laundering problem[3]. These Forty Recommendations set out the basic framework for anti-money laundering efforts and they are designed to be of universal application. They cover the criminal justice system and law enforcement; the financial system and its regulation, and international co-operation. It was recognised from the outset of the FATF that countries have diverse legal and financial systems and so all cannot take identical measures. The Recommendations are therefore the principles for action in this field, for countries to implement according to their particular circumstances and constitutional frameworks allowing countries a measure of flexibility rather than prescribing every detail. The measures are not particularly complex or difficult, provided there is the political will to act. Nor do they compromise the freedom to engage in legitimate transactions or threaten economic development.
GENERAL FRAMEWORK OF THE RECOMMENDATIONS Recommendation 1 Each country should take immediate steps to ratify and to implement fully, the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention). Financial institution secrecy laws should be conceived so as not to inhibit implementation of these recommendations. Recommendation 3 An effective money laundering enforcement program should include increased multilateral co-operation and mutual legal assistance in money laundering investigations and prosecutions and extradition in money laundering cases, where possible. ROLE OF NATIONAL LEGAL SYSTEMS IN COMBATING MONEY LAUNDERING Scope of the Criminal Offence of Money Laundering Recommendation 4 Each country should take such measures as may be necessary, including legislative ones, to enable it to criminalise money laundering as set forth in the Vienna Convention. Each country should extend the offence of drug money laundering to one based on serious offences. Each country would determine which serious crimes would be designated as money laundering predicate offences. Recommendation 5 As provided in the Vienna Convention, the offence of money laundering should apply at least to knowing money laundering activity, including the concept that knowledge may be inferred from objective factual circumstances. Recommendation 6 Where possible, corporations themselves - not only their employees - should be subject to criminal liability. Provisional Measures and Confiscation Recommendation 7 Countries should adopt measures similar to those set forth in the Vienna Convention, as may be necessary, including legislative ones, to enable their competent authorities to confiscate property laundered, proceeds from, instrumentalities used in or intended for use in the commission of any money laundering offence, or property of corresponding value, without prejudicing the rights of bona fide third parties. Such measures should include the authority to: (1) identify, trace and evaluate property which is subject to confiscation; (2) carry out provisional measures, such as freezing and seizing, to prevent any dealing, transfer or disposal of such property; and (3) take any appropriate investigative measures. In addition to confiscation and criminal sanctions, countries also should consider monetary and civil penalties, and/or proceedings including civil proceedings, to void contracts entered into by parties, where parties knew or should have known that as a result of the contract, the State would be prejudiced in its ability to recover financial claims, e.g. through confiscation or collection of fines and penalties. ROLE OF THE FINANCIAL SYSTEM IN COMBATING MONEY LAUNDERIING: Recommendation 8 Recommendations 10 to 29 should apply not only to banks, but also to non-bank financial institutions. Even for those non-bank financial institutions which are not subject to a formal prudential supervisory regime in all countries, for example bureaux de change, governments should ensure that these institutions are subject to the same anti-money laundering laws or regulations as all other financial institutions and that these laws or regulations are implemented effectively. Recommendation 9 The appropriate national authorities should consider applying Recommendations 10 to 21 and 23 to the conduct of financial activities as a commercial undertaking by businesses or professions which are not financial institutions, where such conduct is allowed or not prohibited. Financial activities include, but are not limited to, those listed in the attached annex. It is left to each country to decide whether special situations should be defined where the application of anti-money laundering measures is not necessary, for example, when a financial activity is carried out on an occasional or limited basis. Customer Identification and Record Keeping Rules Recommendation 10 Financial institutions should not keep anonymous accounts or accounts in obviously fictitious names: they should be required (by law, by regulations, by agreements between supervisory authorities and financial institutions or by self-regulatory agreements among financial institutions) to identify, on the basis of an official or other reliable identifying document, and record the identity of their clients, either occasional or usual, when establishing business relations or conducting transactions (in particular opening of accounts or passbooks, entering into fiduciary transactions, renting of safe deposit boxes, performing large cash transactions). In order to fulfil identification requirements concerning legal entities, financial institutions should, when necessary, take measures: (i) to verify the legal existence and structure of the customer by obtaining either from a public register or from the customer or both, proof of incorporation, including information concerning the customer’s name, legal form, address, directors and provisions regulating the power to bind the entity. (ii) to verify that any person purporting to act on behalf of the customer is so authorised and identify that person. Recommendation 11 Financial institutions should take reasonable measures to obtain information about the true identity of the persons on whose behalf an account is opened or a transaction conducted if there are any doubts as to whether these clients or customers are acting on their own behalf, for example, in the case of domiciliary companies (i.e. institutions, corporations, foundations, trusts, etc. that do not conduct any commercial or manufacturing business or any other form of commercial operation in the country where their registered office is located). Recommendation 12 Financial institutions should maintain, for at least five years, all necessary records on transactions, both domestic or international, to enable them to comply swiftly with information requests from the competent authorities. Such records must be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of criminal behaviour. Financial institutions should keep records on customer identification (e.g. copies or records of official identification documents like passports, identity cards, driving licenses or similar documents), account files and business correspondence for at least five years after the account is closed. These documents should be available to domestic competent authorities in the context of relevant criminal prosecutions and investigations. Recommendation 13 Countries should pay special attention to money laundering threats inherent in new or developing technologies that might favour anonymity, and take measures, if needed, to prevent their use in money laundering schemes. Increased Diligence of Financial Institutions Recommendation 14 Financial institutions should pay special attention to all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. The background and purpose of such transactions should, as far as possible, be examined, the findings established in writing, and be available to help supervisors, auditors and law enforcement agencies. Recommendation 15 If financial institutions suspect that funds stem from a criminal activity, they should be required to report promptly their suspicions to the competent authorities. Recommendation 16 Financial institutions, their directors, officers and employees should be protected by legal provisions from criminal or civil liability for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, if they report their suspicions in good faith to the competent authorities, even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred. Recommendation 17 Financial institutions, their directors, officers and employees, should not, or, where appropriate, should not be allowed to, warn their customers when information relating to them is being reported to the competent authorities. Recommendation 18 Financial institutions reporting their suspicions should comply with instructions from the competent authorities. Recommendation 19 Financial institutions should develop programs against money laundering. These programs should include, as a minimum : (i) the development of internal policies, procedures and controls, including the designation of compliance officers at management level, and adequate screening procedures to ensure high standards when hiring employees; (ii) an ongoing employee training programme; (iii) an audit function to test the system. Measures to Cope with the Problem of Countries with No or Insufficient Anti-Money Laundering Measures Financial institutions should ensure that the principles mentioned above are also applied to branches and majority owned subsidiaries located abroad, especially in countries which do not or insufficiently apply these Recommendations, to the extent that local applicable laws and regulations permit. When local applicable laws and regulations prohibit this implementation, competent authorities in the country of the mother institution should be informed by the financial institutions that they cannot apply these Recommendations. Recommendation 21 Financial institutions should give special attention to business relations and transactions with persons, including companies and financial institutions, from countries which do not or insufficiently apply these Recommendations. Whenever these transactions have no apparent economic or visible lawful purpose, their background and purpose should, as far as possible, be examined, the findings established in writing, and be available to help supervisors, auditors and law enforcement agencies. Other Measures to Avoid Money Laundering Recommendation 22 Countries should consider implementing feasible measures to detect or monitor the physical cross-border transportation of cash and bearer negotiable instruments, subject to strict safeguards to ensure proper use of information and without impeding in any way the freedom of capital movements. Recommendation 23 Countries should consider the feasibility and utility of a system where banks and other financial institutions and intermediaries would report all domestic and international currency transactions above a fixed amount, to a national central agency with a computerised data base, available to competent authorities for use in money laundering cases, subject to strict safeguards to ensure proper use of the information. Recommendation 24 Countries should further encourage in general the development of modern and secure techniques of money management, including increased use of checks, payment cards, direct deposit of salary checks, and book entry recording of securities, as a means to encourage the replacement of cash transfers. Recommendation 25 Countries should take notice of the potential for abuse of shell corporations by money launderers and should consider whether additional measures are required to prevent unlawful use of such entities. Implementation and Role of Regulatory and Other Administrative Authorities Recommendation 26 The competent authorities supervising banks or other financial institutions or intermediaries, or other competent authorities, should ensure that the supervised institutions have adequate programs to guard against money laundering. These authorities should co-operate and lend expertise spontaneously or on request with other domestic judicial or law enforcement authorities in money laundering investigations and prosecutions. Recommendation 27 Competent authorities should be designated to ensure an effective implementation of all these Recommendations, through administrative supervision and regulation, in other professions dealing with cash as defined by each country. Recommendation 28 The competent authorities should establish guidelines which will assist financial institutions in detecting suspicious patterns of behaviour by their customers. It is understood that such guidelines must develop over time, and will never be exhaustive. It is further understood that such guidelines will primarily serve as an educational tool for financial institutions’ personnel. Recommendation 29 The competent authorities regulating or supervising financial institutions should take the necessary legal or regulatory measures to guard against control or acquisition of a significant participation in financial institutions by criminals or their confederates.
STRENGTHENING OF INTERNATIONAL CO-OPERATION Administrative Co-operation Exchange of General Information Recommendation 30 National administrations should consider recording, at least in the aggregate, international flows of cash in whatever currency, so that estimates can be made of cash flows and reflows from various sources abroad, when this is combined with central bank information. Such information should be made available to the International Monetary Fund and the Bank for International Settlements to facilitate international studies. Recommendation 31 International competent authorities, perhaps Interpol and the World Customs Organisation, should be given responsibility for gathering and disseminating information to competent authorities about the latest developments in money laundering and money laundering techniques. Central banks and bank regulators could do the same on their network. National authorities in various spheres, in consultation with trade associations, could then disseminate this to financial institutions in individual countries. Exchange of Information Relating to Suspicious Transactions Each country should make efforts to improve a spontaneous or "upon request" international information exchange relating to suspicious transactions, persons and corporations involved in those transactions between competent authorities. Strict safeguards should be established to ensure that this exchange of information is consistent with national and international provisions on privacy and data protection. Other Forms of Co-operation Basis and means for co-operation in confiscation, mutual assistance and extradition. Recommendation 33 Countries should try to ensure, on a bilateral or multilateral basis, that different knowledge standards in national definitions -- i.e. different standards concerning the intentional element of the infraction – do not affect the ability or willingness of countries to provide each other with mutual legal assistance. Recommendation 34 International co-operation should be supported by a network of bilateral and multilateral agreements and arrangements based on generally shared legal concepts with the aim of providing practical measures to affect the widest possible range of mutual assistance. Recommendation 35 Countries should be encouraged to ratify and implement relevant international conventions on money laundering such as the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. Focus of Improved Mutual Assistance on Money Laundering Issues Recommendation 36 Co-operative investigations among countries’ appropriate competent authorities should be encouraged. One valid and effective investigative technique in this respect is controlled delivery related to assets known or suspected to be the proceeds of crime. Countries are encouraged to support this technique, where possible. Recommendation 37 There should be procedures for mutual assistance in criminal matters regarding the use of compulsory measures including the production of records by financial institutions and other persons, the search of persons and premises, seizure and obtaining of evidence for use in money laundering investigations and prosecutions and in related actions in foreign jurisdictions. Recommendation 38 There should be authority to take expeditious action in response to requests by foreign countries to identify, freeze, seize and confiscate proceeds or other property of corresponding value to such proceeds, based on money laundering or the crimes underlying the laundering activity. There should also be arrangements for co-ordinating seizure and confiscation proceedings which may include the sharing of confiscated assets. Recommendation 39 To avoid conflicts of jurisdiction, consideration should be given to devising and applying mechanisms for determining the best venue for prosecution of defendants in the interests of justice in cases that are subject to prosecution in more than one country. Similarly, there should be arrangements for co-ordinating seizure and confiscation proceedings which may include the sharing of confiscated assets. Recommendation 40 Countries should have procedures in place to extradite, where possible, individuals charged with a money laundering offence or related offences. With respect to its national legal system, each country should recognise money laundering as an extraditable offence. Subject to their legal frameworks, countries may consider simplifying extradition by allowing direct transmission of extradition requests between appropriate ministries, extraditing persons based only on warrants of arrests or judgements, extraditing their nationals, and/or introducing a simplified extradition of consenting persons who waive formal extradition proceedings. Annex to Recommendation 9: List of Financial Activities undertaken by business or professions which are not financial institutions 1. Acceptance of deposits and other repayable funds from the public. 2. Lending[4]. 3. Financial leasing. 4. Money transmission services. 5. Issuing and managing means of payment (e.g. credit and debit cards, cheques, traveller’s cheques and bankers’ drafts.) 6. Financial guarantees and commitments. 7. T |
