Anti-Money Laundering and Counter-Terrorist Financing
What the domain tests
This domain tests the risk-based approach, customer due diligence, beneficial ownership, enhanced due diligence, politically exposed persons, ongoing monitoring, suspicious transaction reporting and recordkeeping.
Core rules and concepts
- The risk-based approach tailors controls to the assessed money-laundering and terrorist-financing risk of the customer, product, channel and geography.
- Customer due diligence requires identifying the customer, verifying identity and understanding ownership and control. For legal entities, look through to beneficial owners, typically those with a specified ownership threshold or control.
- Enhanced due diligence applies to higher-risk cases, including politically exposed persons, correspondent relationships and higher-risk jurisdictions.
- Suspicious activity must be reported promptly to the financial intelligence unit; tipping off the customer is prohibited.
- Records of identification, transactions and reports must be retained for the required period.
Worked example
A company applies with nominee shareholders. The firm must look through the nominee to identify the underlying beneficial owner, verify that person’s identity, and assess the risk. If the ownership cannot be established, the firm should apply enhanced measures or decline the relationship. Accepting the nominee’s identity alone is insufficient.
Traps that cost marks
Accepting an identity document without verification; treating every PEP as an automatic refusal rather than a higher-risk case; failing to report attempted transactions; and ignoring beneficial ownership behind corporate structures.