3. Regulations associated with AML/CFT

Money laundering and terrorism financing can only be illegal in jurisdictions where there are laws criminalising the acts of money laundering and terorism financing. While many may assume that all countries should already have these laws, that assumption is wrong. Not all countries have these legislations / regulations.

In today's post, I'll just highlight 2 examples, the law in the United States of America (called the Bank Secrecy Act, BSA) and the law in Malaysia (called the Anti-Money Laundering Anti Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) .

Bank Secrecy Act (BSA)

Also known as the Currency and Foreign Transactions Reporting Act, it was passed by the United States Congress in 1970.

Purpose:

- making money laundering more difficult to propagate,

- prevent banks from becoming unknowing intermediaries in illicit activity.

How?

BSA requires U.S. financial institutions to collaborate with the U.S. government in cases of suspected money laundering and fraud.

BSA requires banks to report transactions involving more than $10,000 in cash from one customer as a result of a single transaction or two or more related transactions that occur within a 24-hour period.

Cash: currency and coins of the United States and any other country or certain monetary instruments such as cashier's checks, bank drafts, traveler's checks or money orders. A personal check is not considered to be cash.

Other requirements:

- Banks to report suspicious activity that might indicate possible money laundering or fraud (Suspicious if it involves $5,000 or more in funds or assets that the financial institution suspects may indicate profit from illegal activity or transacted in order to hide illegal activity.)

- A variety of other institutions also required to report suspicious activity under the BSA (businesses that issue or redeem money orders, casinos and dealers of gemstones and precious metals.)

The BSA is sometimes referred to as an anti-money laundering law (AML) or jointly as BSA/AML. Several anti-money laundering acts, including provisions in title III of the USA PATRIOT Act, have been enacted up to the present to amend the BSA. The legislation is enforced by the Financial Crimes Enforcement Network (FinCEN). Reports filed with FinCEN are done so according to the Suspicious Activity Report (SAR) format.

(paraphrased from http://searchfinancialsecurity.techtarget.com/definition/Bank-Secrecy-Act-BSA)

Anti-Money Laundering Anti Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA)

The AMLATFPUAA provides for the offence of money laundering, the measures to be taken for the prevention of money laundering and terrorism financing offences, investigation powers and the forfeiture of property involved in or derived from money laundering and terrorism financing offences, as well as terrorist property, proceeds of an unlawful activity and instrumentalities of an offence. The First Schedule of the AMLATFPUAA contains a list of the reporting institutions under the AMLATFPUAA i.e. financial institutions and designated non-financial businesses and professions which are required to perform certain obligations which are designed to prevent money laundering and terrorism financing offences. The Second Schedule of the AMLATFPUAA lists serious offences from various legislation, which if committed, are likely to result in a person benefitting or deriving proceeds from the offence.

The AMLATFPUAA promotes a collaborative and multi-agency approach by setting out the powers and functions of:

  1. the competent authority which is responsible to oversee the performance of obligations by the reporting institutions, facilitate the enforcement of the AMLATFPUAA and co-operate with the foreign financial intelligence units;

  2. enforcement agencies which are responsible to investigate the offences under the AMLATFPUAA; and

  3. supervisory and regulatory authorities which are responsible to facilitate in the implementation of the AMLATFPUAA.

The Minister of Finance has appointed BNM as the competent authority under the AMLATFPUAA. The Financial Intelligence and Enforcement Department (FIED) of BNM is responsible to perform BNM's functions as the competent authority under the AMLATFPUAA.

(taken from http://www.bnm.gov.my/index.php?ch=en_legislation)

Point to ponder: What is the relevant regulation in YOUR home jurisdiction / country?

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