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IIBF AML/KYC study materials
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IIBF AML/KYC: Combating Financing of Terrorism (CFT)

IIBF AML/KYC · Work through your exam, one topic at a time.

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Combating Financing of Terrorism (CFT)

This section covers Combating Financing of Terrorism (CFT). The exam tests India's targeted financial sanctions framework under the UNSC resolutions and the Unlawful Activities (Prevention) Act (UAPA) 1967, the FATF Recommendations on terrorist financing, and the differences between terrorist financing and money laundering.

Core rules

  • UN Security Council Resolution 1267 (Al-Qaeda/ISIL) and Resolution 1373 require freezing of funds of designated persons and entities without delay and without prior notice.
  • India implements these through UAPA Section 51A and orders issued by the Ministry of Home Affairs. Reporting entities must screen customers, beneficial owners and transactions against the UNSC Consolidated List and the UAPA list, at onboarding and on an ongoing basis.
  • FATF Recommendation 5 criminalises terrorist financing; Recommendation 6 requires targeted financial sanctions related to terrorism and terrorist financing (UNSCR 1267 and 1373); Recommendation 7 extends targeted financial sanctions to proliferation financing; Recommendation 8 addresses non-profit organisations.
  • Terrorist financing can involve small amounts and legally sourced funds. Unlike money laundering, there is no requirement to conceal a criminal predicate, and no monetary threshold applies.
  • A positive match requires immediate freezing, reporting to FIU-IND and the designated authority, and no tipping off. False positives must be resolved promptly and documented.

Worked example

Screening throws up a customer whose name matches an entry on the UNSC Consolidated List, but the date of birth is different. The reasoning is: a name match alone is not a positive match; verify all identifiers (name, date of birth, nationality, address, ID numbers). If the identifiers do not match, record the false-positive resolution and continue. If they do match, freeze the funds without delay, do not inform the customer, and report to FIU-IND and MHA. The bank cannot keep the account operating while it seeks permission.

Traps

Do not rely on name-only screening. Do not screen only the customer and ignore beneficial owners. Do not treat PEP lists as sanctions lists - they are different controls. Do not assume CFT only concerns large transactions. Do not apply CDD thresholds to terrorist financing; suspicion is enough.