PRACTICAL SOLUTIONS
implement. Uncooperative countries risk
being blacklisted.
Since banks deal with money matters,
most anti-money laundering laws and
guidelines affect the banking industry. It
therefore follows that banks must rethink
their way of doing business. In addition to revenue, banks must also think
about the Rs related to money laundering: REGULATION, RECORD KEEPING,
REPORTING, RISKS and REPUTATION.
The R of regulation
As noted above, countries have been
compelled to enact anti-money laundering laws and regulations to combat money
laundering and terrorist financing.
The financial sector has always been a
regulated industry. It is now more regulated and under more scrutiny than ever
before. Banks are about money and therefore a target of both criminals and regulators. The economic playing field has a lot
to do with banks. Talk about interest rates,
foreign currencies and foreign exchange
rates, international trade and payment systems (both local and foreign) in one way
or another involves transactions through
banks. All money matters concern banks.
We need not be surprised that much
of the anti-money laundering regulations
involve banks.
Because most anti-money laundering
regulation affects them, banks have no
choice but to think about these controls.
Anti-money laundering regulation has
changed much of what banks used to do.
Banks are now required to screen their prospective clients. Banks are now required
to know the nature of their customer’s
business, source of funds and income, and
keep identification records of the customer.
Previously, banks would not disclose
any information about their customers.
Not anymore. Regulation requires banks
to know their customers well enough to
report any transactions or activities that
are not consistent with what the customer
has declared.
Anti-money laundering regulation has
not only touched on offenses by banks as
legal persons but also officials and employees in their individual capacities if the
bank is found guilty. There is no hiding
behind the corporate veil.
The R of record keeping
Anti-money laundering regulations
now require banks, as a duty, to keep
business transaction records for longer
periods than before. This is the R of
RECORD KEEPING!
www.ACAMS.org
With regard to record keeping, we must
answer the following questions:
• What record needs to be kept?
• How should it be kept?
• Why should it be kept?
• How long should it be kept?
• What are the implications of keeping or
not keeping records?
In Zambia, the Prohibition and
Prevention of Money Laundering Act
(PPMLA) number 14 of 2001 clearly states
that a regulated institution shall:
Keep an identification record and a business transaction record for a period of ten
years after the termination of the business
transaction so recorded.
The PPMLA also explains that a business transaction record includes:
• the identification record of all persons
party to a business transaction
• a description of that transaction sufficient to identify its purpose and method
of execution
• the details of any bank account used for
that transaction, including bank, branch
and sort code
• the total value of that transaction
transactions, including the amounts and
types of currency involved to provide evidence for prosecution of criminal conduct,
if necessary. It is implied, therefore, that
the record should be retrievable and useful
to investigators. As in all investigations,
time is of paramount importance.
It is clear—records are documents that
require space. This space may be in a building or in a computer securely housed in
some building—with the objective of keeping such records/documents for a period of
at least five to 10 years! It is worth noting
that the five to 10 years’ requirement may
be extended for an ongoing investigation.
The cost implications are inevitable and
obvious. Banks must think of record keeping as a regulation requirement.
Banks must conduct a cost-benefit analysis. Failure to keep records as required by
the regulation is an offense with not only
financial penalties but possible imprisonment of guilty officials, which leads to the
reality that coupled with the financial cost,
is that of the bank’s reputation.
As noted above, the record to be kept
includes both identification and business
Know your
customer
Keep records of
personal details
CUSTOMER
Obtain
personalized
information
Keep records of
transactions
Verify certain
documents
Keep copies
of certain
documents
The diagram is adopted from the corporate version learner guide, March 2003 of
Standard Bank of South Africa.
The law further prescribes keeping the
form of the record as a hard copy or filed
within an electronic storage device. The
original documents should be in a safe and
secure place.
The record should be sufficient to permit
a reconstruction of individual business
transaction records. This encompasses
information about a customer and the
customer’s relationship with the bank, and
plays a critical role in the prevention and
prohibition of money laundering.
The diagram above illustrates identification as it relates to record keeping:
November / December 2008
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acams today
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