Aspects of the products offered by the financial services industry have been identified as being attractive to criminals wanting to launder the proceeds of crime and to finance terrorism.
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Banks, Building Societies and Credit Unions provide products and services to personal and business customers.
These offer a range of products and services from the provision of basic bank account facilities, saving and investment products, and loan and credit products through to complex products for commercial business customers.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the banking sector include:
Banking businesses captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
Digital currency can mean a digital representation of either virtual currency or e-money and thus is often used interchangeably with the term “virtual currency”.
Decentralised, math-based virtual currencies have attracted increasing attention from an AML/CFT perspective because digital currencies are considered by some to be the future for payment systems.
Digital currencies may also provide a powerful tool for criminals, terrorist financiers and other sanctions evaders to move and store illicit funds, out of the reach of law enforcement and other authorities.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the digital currency sector include:
Digital currencies businesses captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
Financial planners and advisers give customers advice on their investment needs (typically for long-term savings and pension provision) and selecting the appropriate products.
Financial planners and advisers, either only give advice or they act on behalf of their customers in dealing with a product provider.
The typical customers of financial planners and advisers are personal clients (including high net worth individuals), trusts and companies.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the financial planning sector include:
Financial planners and advisers captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
Investment management includes both discretionary and advisory management of segregated portfolios of assets (securities, derivatives, cash, property etc.)
Discretionary managers are given powers to decide upon stock selection and to undertake transactions within the portfolio as necessary, according to an investment mandate agreed between the firm and the customer.
Advisory relationships differ, in that, having determined the appropriate stock selection, the manager has no power to deal without the customer’s authority. In some cases, the customer will execute their own transactions in light of the manager’s advice.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the investment management industry include:
Investment managers captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
Stockbrokers carry out transactions in securities with market counterparties, as agents for customers.
Some stockbrokers deal with high volumes of low value customer transactions, whereas others direct their services towards higher net worth customers, and thus have fewer customers.
Whilst stockbroking might be regarded as being of lower risk compared to many financial products and services, the risk is not as low as in providing investment management services to the same types of customer from similar jurisdictions.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the stockbroking sector include:
Stockbrokers captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
Superannuation and pension products and services present various levels of vulnerability. Lower risk products include eligible rollover funds and defined benefits funds where they do not allow members to make contributions.
Higher risk products include accumulation funds and post-preservation accounts, which allow relatively easier movement of funds.
However, specific characteristics make the sector vulnerable to ML/TF and predicate crimes.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the superannuation and pension fund industry include:
Superannuation and pension funds captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
Wealth or asset management is the provision of banking and investment services in a closely managed relationship to high net worth clients.
Services will include bespoke services tailored to a client’s needs and may be provided through a range of products available to the client.
The availability of complex products and services that operate internationally within a reputable and secure wealth management environment that is familiar with high value transactions is attractive to money launderers and other criminals.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the wealth and asset management industry include:
Wealth and asset management businesses captured by the AML/CFT obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with AML/CFT laws.
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