Contents
Page
Introduction
Background
Legal Framework
5-7
8-11
Appendix
12- 20
1.
INTRODUCTION
Over the past ten years, the banking industry and the financial services industry at large have
made significant strides in money laundering detection and prevention. However they continue to
be vulnerable to misuse by criminal elements for laundering illegally obtained funds to finance
terrorist activities amongst other things.
On the other hand, money-launderers have become more creative due to the expansion of
products and services offered by financial institutions, competition, more complicated financial
relationships, advancement in technology and increase in velocity of money flows worldwide.
The Bank of Zambia regulates the financial services sector in Zambia and requires all regulated
institutions to develop and implement effective anti money laundering programs. The Central
Bank issued The Prohibition and Prevention of Money Laundering Act (PPMLA) number 14 and
was enacted in November 2001, in the exercise of the powers contained in section 12 (4) of
PPMLA; the Bank of Zambia issued the Ant-Money Laundering Directives in 2004.
The International community has also realized that the problem of money laundering and
international terrorism requires a coordinated approach. The most significant is the Intergovernmental body, the Financial Action Task Force (FATF) on money laundering. It develops
and promotes policies to combat Money laundering, by focusing on:
Spreading the anti-money laundering message to all continents and regions of the globe.
Monitoring the implementation of its 40 anti money laundering recommendations
Reviewing and publishing money laundering trends and counter measures.
The key country in the forefront of the anti money laundering drive is the United States of
th
America. Following the 11 September 2001 attacks in Washington & New York; the PATRIOT
Act was passed, containing provisions to combat international terrorism and block terrorists
access to the US financial system.
Other approaches are:
Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the
Proceeds from Crime and on the Financing of Terrorism
Interpols activities in the areas of money laundering and terrorist financing
United Nations International Convention for the Suppression of the Financing of
Terrorism
2.
BACKGROUND
Definition
Money laundering is the criminal practice of filtering ill-gotten gains or dirty money through a
series of transactions so that funds are cleaned to look like proceeds from legal activities. It is
intended to conceal the source, ownership or use of funds.
Interpol defines money laundering as Any act or attempted act to conceal or disguise the identity
of illegally obtained proceeds so that they appear to have originated from legitimate sources.
Money laundering is adverse and often complex process that need not involve cash transactions.
It basically involves three independent steps that can occur simultaneously. These are:
a)
Placement
This is placing, through deposits or other means of proceeds into the financial system.
b)
Layering
This is separation of proceeds of criminal activities from their origin through the use of layers of
complex financial transactions.
c)
Integration
It involves using additional transactions to create the appearance of legality through say, the
purchase of assets.
Being a financial institution Intermarket Banking Corporation Zambia limited recognizes that it is
susceptible to money launderers endeavoring to use it as a conduit for introduction of illegally
obtained funds into the financial system.
Intermarket Banking Corporation Zambia limited has therefore put in place an effective antimoney laundering program, which helps minimize exposure to transactions, compliance and
regulatory risks.
OFAC
The Office of Foreign Assets Control (OFAC) of the U.S Department of Treasury is responsible
for administering a series of laws that impose economic sanctions against selected foreign
countries to further U.S foreign policy and national security objectives. Every financial institution is
required to comply with economic sanctions and embargo programs administered under
regulations issued by OFAC.
To keep financial institutions informed, OFAC regularly updates a list of designate countries and
especially designate nationals that are prohibited from conducting business with any U.S entity or
individual.
This should enable Banks to avoid transacting or starting relationships with the same.
Enforcement
The Central Bank issued The Prohibition and Prevention of Money Laundering Act (PPMLA)
number 14 and was enacted in November 2001, in the exercise of the powers contained in
section 12 (4) of PPMLA.
The Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the
Proceeds from Crime and on the Financing of Terrorism) outlines the category of activities under
this code:
A) participation in an organized criminal group and racketeering;
b ) terrorism, including financing of terrorism;
c ) trafficking in human beings and migrant smuggling;
d ) sexual exploitation, including sexual exploitation of children;
e ) illicit trafficking in narcotic drugs and psychotropic substances;
f ) illicit arms trafficking;
g) illicit trafficking in stolen and other goods;
h) corruption and bribery;
i) fraud;
j ) counterfeiting currency;
k) counterfeiting and piracy of products;
l ) environmental crime;
m) murder, grievous bodily injury;
n) kidnapping, illegal restraint and hostage-taking;
o) robbery or theft;
p ) smuggling;
q) extortion;
r) forgery;
s) piracy; and
t ) insider trading and market manipulation.
Block accounts and other assets of specified countries, entities and persons
Management shall maintain and update a listing of all such organizations, individuals and
countries. All new accounts including deposits, loans, trust and other relationships will be
compared with the lists provided.
3.2
The Risk & Compliance department shall institute processes, controls and measures to identify
and report suspicious transactions promptly. The aim will be to employ appropriate customer due
diligence to effectively evaluate transactions and determine whether to file a Suspicious
Transaction Report (STR) where required with Bank of Zambia.
The suspicious activities monitoring regime will focus on but will not be limited to the following:
a) Transactions involving funds from illegal activities or is conducted to hide illicit funds and
assets in a plan to violate or evade any law or regulation or to avoid transactions
reporting requirements under the Bank of Zambia anti-money laundering guidelines.
b) Transactions that have no business or apparent lawful purpose or is not the sort in which
the customer would normally be expected to engage and the banks knows of no
reasonable explanation for the transaction after examining available facts, including the
background and transaction purpose.
3.3 Roles and Responsibilities
1) Frontline Executives (FLEs) shall request for explanations from customers about suspicious
transactions and report all transactions they deem suspicious and not well explained to their
supervisors.
2) Managers
a) Reviewing of transactions reported by the FLEs
b) Generating reports for thresholds of transactions originating from the department / branch
for review in order to determine as to whether these should be referred to AMLRO.
c) Addressing cases that are proving too difficult for the FLEs
d) Block and refer any transaction that is deemed Suspicious after all investigations with the
relevant investigation wings.
3. Account relationship Managers will review in house reports to identify unusual loan activity
including;
Ascertaining the validity behind the reason for a cash secured loan
Loans that do not fit the customers general business profile
Premature cancellation of debt, particularly with cash
4.
3.3.2
3.3.3
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This document will be amended from time to time to meet with the changes put in place by
government institutions to curb this scourge.
Application of Policy.
1.
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Appendix I
1 Identifying Unusual or Suspicious Transaction-Retail
Indicators of what might constitute a suspicious transaction are listed below: This list is by no
means exhaustive but does suggest some potential situations that could be indicative of money
laundering taking place particularly where large sums of money are involved.
If a transaction is deemed suspicious it must be recorded on a suspicious Transaction form and
forwarded to the Money Laundering Reporting Officer (MLRO). The customer must not be made
aware that this form is being completed, as this would be tipping off, which is a criminal offense.
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Staff dealing with non-retail operations, are equally important to the companys strategy in the
fight against money laundering.
As money laundering is a necessary consequence of almost all profit generating income, it can
occur practically anywhere in the world. Generally, money laundering tend to seek out areas in
which there is a low risk of detection due to weak ineffective anti money laundering programmes.
Method popular to money launderers are the establishment of anonymous companies in the
countries where the right of secrecy is guaranteed. They are then able to grant themselves loans
out of laundered money in the course of a future legal transaction.
Laundering may also take the form of sending false export/import invoices that overvalue goods
allowing launderer to move money from one company and country to another with the invoices
serving to verify the origin of the monies place with financial services.
Indicators of what might constitute suspicious transactions are listed below: These are not in
tendered to be exhaustive and only provide examples of the most basic way that money can be
laundered.
Beware of a customer who provides insufficient or suspicious information.
A business that is reluctant to provide complete information regarding the purpose of the
business, banking relationship, officers or directors or its location.
A business that refuses to provide information to qualify customers for credit or other
financial services.
A customer who pursues a dealing relationship without references, a local address , or
identification (passport, drivers license or any recognized documentation of
identification) or refuses to provide any other information that a bank requests for.
Unusually large cash deposits made by an individual or company whose ostensible
business activities would normally be generated by Cheques and other instruments
A customer who presents unusual or suspicious identification documents that cannot be
readily be verified.
A customer who only provides a mobile phone number as a contact number.
A business that is reluctant to reveal details about its activities or to provide financial
statements.
A business that presents financial statements noticeably different from those of similar
businesses.
Conflict of interest by a bank employee such as deals done for friends, family or on the
good will recommendation of existing customers. Prior approval must be sought in all
instances.
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Customers who wish to maintain a number of trustee or clients accounts which do not
appear consistent with their type of business, including transactions which involve
nominee names.
Customers who have numerous accounts and pay in amounts of cash to each of them in
circumstances in which the total of credits would be large amount.
Any individual or company whose account shows virtually no normal personal banking or
business related activity, but is used to receive or disburse large sums which have no
obvious purpose or relationship to the account holder and/or his business( e.g.
substantial increase in turn over on account).
Customers who appear to have accounts with several financial institutions within the
same locality, especially when the institution is aware of a regular consolidation process
from such accounts prior to a request for onward transmission of the funds.
Matching of payments out with credits paid out in by cash on the same day or previous
day.
14
Large cash withdrawals from a previously dormant / inactive account, or from an account
which has just received an expected large credit from abroad.
Customer who together and simultaneously, use separate tellers to conduct large cash
transactions or foreign exchange transactions.
Greater use of safe deposit facilities by individuals. The use of sealed packets deposited
and withdrawn.
Customers who decline to provide information that in normal circumstances would make
the customer eligible for credit or for other banking or financial services that would be
regarded as valuable.
Large number of individuals making payments into same account without adequate
explanation.
Customers who maintain an unusually large number of accounts for the type of business
they purportedly conducting and/or use inordinately large number of funds transfers
among these accounts.
High velocity of funds through an accounts i.e, low beginning and ending daily balances,
which do no reflect the large volume of money flowing through an account..
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Numerous wire transfers received in an account but each transfer is below the
large cash reporting requirement in the remitting country.
i)
Customers sending and receiving wire transfers to/ from financial haven
countries, particularly if there are no apparent business reasons for such
transfers or such transfers are not consistent with the customers business or
history.
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b) Request to borrow against assets held by the financial institution or a third party,
where the origin of the asset is not known or the assets are inconsistent with the
customers standing.
c) Request by customer for a financial institution to provide or arrange finance
where the source of the customers financial contribution to deal is unclear,
particularly where property is involved.
d) A customer who is reluctant or refuses to state a purpose of a loan or the source
of payment, or provide a questionable purpose and/or source.
3.
Advances
4. ATM operations
When customer is applying for ATM card.
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A customers uses unusual or suspicious identification documents that can not readily be
verified.
A business is reluctant, when establishing a new account, to provide complete
information about the nature and purpose of its business, anticipated account activity,
prior banking relationship, names of its officers and directors, or information on its
business location.
Customers home or business telephone is disconnected.
A customer makes frequent or large transactions and has no record of past or present
employment experience.
Wire transfer activity to/from a financial secrecy haven or high-risk geographic location
without apparent business reason or when inconsistent with the customers business or
history.
Many small, incoming wire transfers of funds received , deposits made using cheques
and money orders. Almost immediately, all or most are wired to another city or country in
a manner inconsistent with customers business or history.
Large incoming wire transfers on behalf of a foreign client with little or no explicit reason.
Wire activity that is unexplained, repetitive, or shows unusual patterns.
Payments or receipts with no apparent links to legitimate contracts, goods, or services.
A rapid increase in the size and frequent of cash deposits with no corresponding increase
in non-cash deposits.
Inability to track the true account holder of correspondent or concentration account
transactions.
Significant turnover in large denomination bills that would appear uncharacteristic given
the banks location.
Significant changes in currency shipment patterns between correspondent banks.
Bank employees
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Appendix II
Internal Memorandum
To:
From:
(Branch Name)
Date:
Subject:
II
Account Number
III
IV
Telephones (s)
VI
VII
VIII
IX
XI
Please provide an account of what is unusual, irregular or suspicious about the transaction.
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Action
Taken
..
Appendix III
Internal Audit & Compliance
The Audit & compliance shall regularly confirm that the Banks policies, procedures and controls
as relating to the money laundering have been complied with.
An audit of the adequacy of money laundering control procedures and training should involve:
I.
III. Reviewing controls to ensure that adequate policies, management systems and appropriate
day to day operating instructions are in place. This should include an examination of information
and instructions that are disseminated by senior management to maintain an effective awareness
amongst staff.
IV. Meeting the money laundering officer responsible for receiving reports of suspicious
transactions and for sending these to competent authority. Visiting a sample of branches or
departments and questioning staff, to assess their level of knowledge and awareness of the
banks procedures to counter money laundering. Confirming that the banks internal guidelines and
procedures are followed from day to day
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V. Reviewing the reports of suspicious transactions to assess whether they are sufficiently
recorded.
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