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FAQ

Frequently Asked Questions

What is money laundering?

Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions.

Section 1 of the Anti-Money Laundering Act, 2008 (Act 749), as amended, states that a person commits an offence of money laundering if the person knows or ought to have known that property is or forms part of the proceeds of unlawful activity and the person:

  • (a) converts, conceals, disguises or transfers the property,
  • (b) conceals or disguises the unlawful origin of the property, or
  • (c) acquires, uses or takes possession of the property.

Stages of Money Laundering

Placement – This is the physical disposal of cash/assets derived from a criminal activity into the financial system.

Layering – Separating illicit proceeds from their sources through layers of financial transactions intended to conceal the origin of the proceeds.

Integration – It is the stage of giving legitimacy to illicit wealth through the re-entry of the funds into the economy.

Risk Assessment

The process of identifying the threats, vulnerabilities and impact of money laundering and terrorist financing at the national level, product, customer, geographical location, delivery channels, among others.

Beneficial Owner

This refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.

Terrorist Financing

This is the financing of terrorist acts, and of terrorists and terrorist organisations.

Terrorist Organisation

This refers to any group of terrorists that:

  • (i) commits, or attempts to commit, terrorist acts by any means, directly or indirectly, unlawfully and willfully;
  • (ii) participates as an accomplice in terrorist acts;
  • (iii) organises or directs others to commit terrorist acts; or
  • (iv) contributes to the commission of terrorist acts by a group of persons acting with a common purpose where the contribution is made intentionally and with the aim of furthering the terrorist act, or with knowledge of the group's intention to commit a terrorist act.

Financial Action Task Force (FATF)

Is an inter-governmental body that sets and promotes standards on money laundering and terrorist financing.

Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)

Is a specialized institution of ECOWAS that is responsible for strengthening the capacity of member states towards the prevention and control of money laundering and terrorist financing in the region. There are nine (9) other FATF-Style Regional Bodies.

The phrase ‘without delay’ means

Ideally, within a matter of hours of a designation by the United Nations Security Council or its relevant Sanctions Committee (e.g. the 1267 Committee, the 1988 Committee, the 1718 Sanctions Committee). It also means upon having reasonable grounds, or a reasonable basis, to suspect or believe that a person or entity is a terrorist, one who finances terrorism, or a terrorist organisation.

FATF Style Regional Body (FSRB)

These are regional bodies created to replicate the activities of the FATF. Activities such as Mutual Evaluations and capacity building workshops are organized by the regions. The following are FATF Style Regional Bodies:

  • Asia/Pacific Group on combating money laundering (APG)
  • Caribbean Financial Action Task Force (CFATF)
  • Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism of the Council of Europe (MONEYVAL)
  • Eurasian Group (EAG)
  • Middle East and North Africa (MENAFATF)
  • Eastern and Southern Anti-Money Laundering Group (ESAAMLG)
  • Financial Action Task Force on Latin America (GAFILAT)
  • Task Force on Money Laundering in Central Africa (GABAC)
  • Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)

Know Your Customer/Customer Due Diligence (KYC/CDD)

This refers to steps an institution undertakes in order to understand the money laundering/terrorist financing risk posed by a client. The following are minimum steps that may be considered under KYC/CDD measures:

  • Identifying the customer and verifying that customer's identity using reliable, independent source documents, data or information.
  • Identifying the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner, such that the institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements, this should include understanding the ownership and control structure of the customer.
  • Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship.
  • Conducting ongoing due diligence on the business relationship and scrutiny of transactions throughout the relationship, to ensure transactions are consistent with the institution's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.

Record Keeping

Financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) should be required to keep all records obtained through CDD measures (e.g. copies or records of official identification documents like passports, identity cards, driving licences or similar documents), account files and business correspondence, including the results of any analysis undertaken (e.g. inquiries to establish the background and purpose of complex, unusual large transactions), for at least five years after the business relationship is ended, or after the date of the occasional transaction.

Confiscation

This means the permanent deprivation of funds or other assets by order of a competent authority or a court.

Currency

Refers to banknotes and coins that are in circulation as a medium of exchange.

Express Trust

Refers to a trust clearly created by the settlor, usually in the form of a document, e.g. a written deed of trust.

Mutual Evaluation

Is an assessment of a country's measures to combat money laundering, the financing of terrorism and the proliferation of weapons of mass destruction. This includes an assessment of a country's actions to address the risks emanating from money laundering activities as well as designated terrorists or terrorist organisations.

National Risk Assessment

This is where countries identify, assess and understand the risks of money laundering and terrorist financing that they face, and then adopt appropriate measures to mitigate those risks.

Virtual Asset

Is a digital representation of value that can be digitally traded or transferred, and can be used for payment or investment purposes.

Politically Exposed Persons

These are persons with public functions both domestically and internationally, family members, friends and other associates of such public officials.

Self-Regulatory Body (SRB)

Is a body that represents a profession (e.g. lawyers, notaries, other independent legal professionals or accountants), and which is made up of members from the profession, has a role in regulating the persons that are qualified to enter and who practise in the profession, and also performs certain supervisory or monitoring type functions.

Shell Bank

This means a bank that has no physical presence in the country in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision.

Targeted Financial Sanctions

This means both asset freezing and prohibitions to prevent funds or other assets from being made available, directly or indirectly, for the benefit of designated persons and entities.

Predicate Offence

It is the grounds upon which a crime is committed. Predicate offences designated by the FATF include:

  • Participation in an organised criminal group and racketeering
  • Terrorism, including terrorist financing
  • Trafficking in human beings and migrant smuggling
  • Sexual exploitation, including sexual exploitation of children
  • Illicit trafficking in narcotic drugs and psychotropic substances
  • Illicit arms trafficking
  • Illicit trafficking in stolen and other goods
  • Corruption and bribery
  • Fraud
  • Counterfeiting currency
  • Counterfeiting and piracy of products
  • Environmental crime
  • Murder, grievous bodily injury
  • Kidnapping, illegal restraint and hostage-taking
  • Robbery or theft
  • Smuggling (including in relation to customs and excise duties and taxes)
  • Tax crimes (related to direct taxes and indirect taxes)
  • Extortion
  • Forgery
  • Piracy
  • Insider trading and market manipulation

Designated Person or Entity

Refers to:

  • Individuals, groups, undertakings and entities designated by the Committee of the Security Council established pursuant to resolution 1267 (1999) (the 1267 Committee), as being associated with Al-Qaida, or entities and other groups and undertakings associated with Al-Qaida;
  • Individuals, groups, undertakings and entities designated by the Committee of the Security Council established pursuant to resolution 1988 (2011) (the 1988 Committee), as being associated with the Taliban in constituting a threat to the peace, stability and security of Afghanistan, or entities and other groups and undertakings associated with the Taliban;
  • Any natural or legal person or entity designated by jurisdictions or a supra-national jurisdiction pursuant to Security Council resolution 1373 (2001);
  • Any individual, natural or legal person or entity designated for the application of targeted financial sanctions pursuant to Security Council resolution 1718 (2006) and any future successor resolutions, or by the Security Council Committee established pursuant to resolution 1718 (2006) (the 1718 Sanctions Committee); and
  • Any natural or legal person or entity designated for the application of targeted financial sanctions pursuant to Security Council resolution 2231 (2015) and any future successor resolutions.

Freeze

This means to prohibit the transfer, conversion, disposition or movement of any property, equipment or other instrumentalities on the basis of, and for the duration of the validity of, an action initiated by a competent authority or a court under a freezing mechanism, or until a forfeiture or confiscation determination is made by a competent authority.

Money or Value Transfer Services (MVTS)

Refers to financial services that involve the acceptance of cash, cheques, other monetary instruments or other stores of value and the payment of a corresponding sum in cash or other form to a beneficiary by means of a communication, message, transfer, or through a clearing network to which the MVTS provider belongs.

Designated Non-Financial Businesses and Professions

Means:

  • (a) Casinos
  • (b) Real estate agents
  • (c) Dealers in precious metals
  • (d) Dealers in precious stones
  • (e) Lawyers, notaries, other independent legal professionals and accountants – this refers to sole practitioners, partners or employed professionals within professional firms. It is not meant to refer to ‘internal’ professionals that are employees of other types of businesses.

Suspicious Transaction Report (STR)

This is a report filed by accountable institutions within twenty-four hours upon the grounds of forming the suspicion that an act may be linked to money laundering or terrorist financing.

Tipping-off

Is the fact that a suspicious transaction report (STR) or related information being filed with the FIU is disclosed to a third party.

Extradition

This means all possible measures taken by countries to ensure that they do not provide safe havens for individuals charged with the financing of terrorism, terrorist acts or terrorist organisations.

Non-Profit Organisation (NPO)

Refers to a legal person or arrangement or organisation that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of ‘good works’.

Terrorist Financing Abuse

Refers to the exploitation by terrorists and terrorist organisations of NPOs to raise or move funds, provide logistical support, encourage or facilitate terrorist recruitment, or otherwise support terrorists or terrorist organisations and operations.

Simplified CDD Measures

  • This includes verifying the identity of the customer and the beneficial owner after the establishment of the business relationship (e.g. if account transactions rise above a defined monetary threshold).
  • Reducing the frequency of customer identification updates.
  • Reducing the degree of on-going monitoring and scrutinising transactions, based on a reasonable monetary threshold.
  • Not collecting specific information or carrying out specific measures to understand the purpose and intended nature of the business relationship, but inferring the purpose and nature from the type of transactions or business relationship established.

Cross-Border Wire Transfer

Refers to any wire transfer where the ordering financial institution and beneficiary financial institution are located in different countries.

Originator

Refers to the account holder who allows the wire transfer from that account, or where there is no account, the natural or legal person that places the order with the ordering financial institution to perform the wire transfer.

Wire Transfer

Refers to any transaction carried out on behalf of an originator through a financial institution by electronic means with a view to making an amount of funds available to a beneficiary person at a beneficiary financial institution, irrespective of whether the originator and the beneficiary are the same person.

Physical Cross-Border Transportation

Refers to any in-bound or out-bound physical transportation of currency or Bearer Negotiable Instruments (BNIs) from one country to another country.

Correspondent Banking

Is the provision of banking services by one bank (the ‘correspondent bank’) to another bank (the ‘respondent bank’).

Cash Transaction Report (CTR)

This is a report that is submitted by accountable institutions when they conduct cash transactions exceeding a specific threshold. The Financial Intelligence Centre has the mandate to set specific thresholds for specific sectors.

Electronic Currency Transaction Report (ECTR)

This is a report submitted to the Financial Intelligence Centre by commercial banks on inflows and outflows exceeding US$1,000.00.

Compliance Reports

These are mandatory reports required to be submitted by accountable institutions to demonstrate their levels of compliance to the regulator or competent authorities. These reports are usually filed on a monthly, quarterly, half-yearly or annual basis.

Risk-Based Approach (RBA)

This is an approach adopted to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified, and resources are efficiently allocated.

Payable-Through Accounts

Refers to correspondent accounts that are used directly by third parties to transact business on their own behalf.

Mutual Legal Assistance

It is having an adequate legal basis for providing assistance and, where appropriate, having in place treaties, arrangements or other mechanisms to enhance international cooperation.

New Technologies

This means (a) the development of new products and new business practices, including new delivery mechanisms, and (b) the use of new or developing technologies for both new and pre-existing products.