Legal and Regulatory Framework
Sources and Structures
Financial crime law draws on international standards (FATF Recommendations), regional directives, and national statutes and regulations, supplemented by guidance from supervisors. Know the FATF building blocks: criminalization of money laundering and terrorist financing, customer due diligence, recordkeeping, suspicious transaction reporting, beneficial ownership transparency, and international cooperation. Understand the roles of supervisors, financial intelligence units (FIUs), law enforcement, and self-regulatory bodies, and the difference between rules (binding) and guidance (expected practice, not always binding).
Traps and Rule of Thumb
Traps: assuming a report to the FIU discharges all obligations (sanctions, fraud reporting, and internal escalation may also apply); confusing supervisory and law enforcement functions; thinking guidance is optional when supervisors treat departure from it as a deficiency; and overlooking extraterritorial reach (e.g., where a currency's clearing or a parent's home law extends obligations). Also know record retention periods and data protection interplay.
Rule of thumb: For any scenario, identify which rule, which regulator, and which obligation - the most common error is answering a sanctions question with an AML rule, or vice versa.
Worked example: A bank in one jurisdiction serves a customer linked to a designated person elsewhere. The AML team may file a suspicious activity report, but the sanctions team must separately consider freezing and licensing obligations under the applicable sanctions regime; both duties can apply at once.