It is a policy of The Kingdom Bank Corporation (‘TKB’) to take all reasonable steps necessary to identify, prohibit and prevent money laundering and any activity that facilitates money laundering and the funding of terrorist or criminal activities.
In this Policy “we”, “us”, “our” means TKB.
The purpose of this Policy is to set the principles and define framework of TKB‘s processes, procedures and systems aimed to identify, prohibit and prevent activities of possible money laundering and financing of terrorism. The Policy also serves as a means of informing the Representatives of TKB of the applicable laws of Commonwealth of Dominica (Dominica) preventing money laundering and financing of terrorism (Annexure 2). The Policy is further implemented in detail in TKB’s Anti-Money Laundering and Counter-Terrorism Financing Program consisting of Part A and Part B.
TKB’s AML/CTF Policy applies to all of its employees, officers and other representatives acting on behalf of TKB (hereinafter called Representatives).
The Representatives of TKB have at all times to be familiar with and comply with the up to date requirements set out in this Policy, other internal procedures of TKB and/or applicable laws of Dominica. It is a responsibility of Chief Compliance Officer to review the Policy periodically in order to ensure that it is up to date with the legal requirements and best practices. The Managing Director of TKB shall be responsible for making all the internal policies and procedures of TKB as well as amendments thereto available to all Representatives immediately after they have been adopted by relative governing body.
The Policy is in line with the national regulation of Dominica and further extends to applying and complying with International Standards on Combating Money Laundering and The Financing of Terrorism & Proliferation CFATF Forty Recommendations and Special Recommendations on Terrorism Financing, the CFATF Standards on AML Principles and best international banking practices on combating money laundering and terrorism financing.
Money laundering generally is the process by which money earned from illegal means is “washed” through legitimate systems and enterprises in order for it to be cleaned and eventually returned to the criminal in the form of legitimate money.
There are three stages in the money laundering cycle generally known as:
Money laundering is defined as:
– the conversion or transfer of property, knowing that such property is derived from any criminal offence or from an act of participation in such criminal offence or offences for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such criminal offence or offences to evade the legal consequences of his actions;
– the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from a criminal offense or offenses or from an act of participation in such an offense or offenses.
– the acquisition, possession or use of property, knowing at the time of receipt that such property was derived from an offense or offenses or from an act of participation in such offense or offenses.
Terrorism financing is defined in the United Nations International Convention for the Suppression of the Financing of Terrorism (1999) and is understood as activity by the person which by any means, directly or indirectly, unlawfully and willingly, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out:
For an act to constitute the terrorism financing it shall not be necessary that the funds were actually used to carry out an offense referred to in paragraph 1, subparagraph (a) or (b).
There are two primary sources of financing for terrorist activities. The first involves getting financial support from countries, organizations or individuals. The other involves revenue- generating activities. These are explained in further detail below.
Terrorism could be sponsored by a country or government, although this is believed to have declined in recent years. State support may be replaced by support from other sources, such as individuals with sufficient financial means.
The revenue-generating activities of terrorist groups may resemble other criminal organizations. Kidnapping and extortion can serve a dual purpose of providing needed financial resources while furthering the main terrorist objective of intimidating the target population. In addition, terrorist groups may use smuggling, fraud, theft, robbery, and narcotics trafficking to generate funds.
Financing for terrorist groups may also include legitimately earned income, which might include collection of membership dues and subscriptions, sale of publications, speaking tours, cultural and social events, as well as solicitation and appeals within the community. This fundraising might be in the name of organizations with charitable or relief status, so that donors are led to believe they are giving to a legitimate cause.
Only a few non-profit organizations or supposedly charitable organizations have been implicated in terrorist financing. In these cases, the organizations may in fact have carried out some of the charitable or relief work. Members or donors may have had no idea that a portion of funds raised by the charity was being diverted to terrorist activities.
This type of legitimately earned financing might also include donations by terrorist group members of a portion of their personal earnings.
Like criminal organizations, terrorists must find ways to launder or transfer illicit funds without drawing the attention of the authorities. For this reason, transactions related to terrorist financing may look a lot like those related to money laundering. Therefore, strong, comprehensive anti-money laundering regimes are essential to tracking terrorist financial activities.
Acts of terrorism pose a significant threat to the safety and security of people all around the world.
Business relationships with terrorist groups could expose the bank to significant reputational and operational risk, as well as legal repercussions. The risk is even more serious if the terrorist group is subsequently shown to have benefited from the lack of effective monitoring or willful blindness of a particular institution or intermediary that enabled them to carry out the terrorist activities.
The systems by which TKB detects transactions potentially related to terrorism closely resemble those designed to detect money laundering.
Should TKB become aware that a transaction or attempted transaction is related to the financing of terrorism or involves an individual or entity named as a terrorist pursuant to United Nations Security Council resolutions: the bank should immediately notify the Financial Services Unit of the Commonwealth of Dominica (FSU) and submit a suspicious transactions report, even if the bank declines the transaction as a result of its own due diligence.
Of note, money laundering schemes can also be utilized to fund terrorist groups.
Proliferation financing means the act of providing funds or financial service, which are used or will be used, in whole or in part:
Over the years, the global community recognized that weapons of mass destruction and their availability are detrimental to the security and sound economies of the world. Such weapons, whenever used, caused catastrophic and indiscriminative destruction to economies, infrastructures and wide spread loss of lives.
In order for terrorists and terrorist organisation to obtain such weapons of mass destruction, they should be able to have sufficient funds and have access to financial services to purchase such weapons. It is the responsibility of TKB to ensure that our business, services and delivery methods are not abused by terrorists and terrorist organisation in channeling the funds to the weapons sellers.
Similar to the terrorist financing methods, the terrorists and terrorist organisation may receive financial support from terrorist sympathizers and/or conduct revenue generating activities. The funds may be laundered through the formal financial system and used to purchase weapons.
Hence, TKB ensures that its AML & CTF program is strong, comprehensive and effective to detect and report proliferation financing to FSU in accordance with legal acts.
As a financial services provider, TKB acknowledges that ML/TF risks exist which could potentially result in its services and products being utilised to facilitate money laundering or terrorist financing schemes. In addition to the regulatory risks of non-compliance with the legislation, these ML/TF risks may have an impact upon the business, including the reputation and License of TKB.
The risk of being exposed to money laundering and the financing of terrorism varies across customers, countries, products, services and over time. High risk situations demand stronger controls than lower risk situations. To manage and mitigate these risks, a risk-based approach shall be applied. The guiding principle is that resources shall be directed in accordance with priorities, so that the greatest risks receive the highest attention.
As specified in the AML & CTF Act, TKB’s assessment of its ML/TF exposure must be risk-based. TKB has, and will continue to, assess and measure ML/TF risks based upon consideration of the risks posed by the following factors:
Pursuant to the AML & CTF Act, a Bank must have and comply with an AML & CTF Program. The AML & CTF Program adopted by TKB is divided into Part A (general requirements) and Part B (customer identification).
TKB has designed and will maintain its AML & CTF Program. The AML & CTF Program is applicable to all Representatives of TKB and documents the bank’s policies, processes and procedures:
The primary purpose of Part A of the AML & CTF Program is to identify, mitigate and manage the risk that TKB may reasonably face (inadvertently or otherwise) by facilitating money laundering or terrorism financing through the provision of its designated services.
The primary purpose of Part B of the AML & CTF Program is to set out the applicable customer identification and verification procedures for customers of TKB.
The AML & CTF Program is risk-based and seeks to identify, mitigate and manage the possible ML/TF risks posed to TKB. A secondary purpose of the AML & CTF Program is to document the controls and systems that were implemented in order to address these ML/TF risks. Any weakness in the AML & CTF Program may impact adversely on the management of the ML/TF risks identified.
In particular, the AML & CTF Program documents the risks associated with the types of customers, the types of designated services, the delivery methods, and the foreign jurisdictions involved. Furthermore, the AML & CTF Program describes the employee due diligence procedures, the employee risk awareness and a training program, and finally the procedures for independent review and feedback.
ML/TF schemes can be difficult to identify and criminals can be ingenious in formulating different schemes in order to facilitate their money laundering or terrorist financing agendas. Accordingly, in order for the AML & CTF Program to be effective and so that it accomplishes its purpose of identifying, mitigating and managing ML/TF risk, it shall be regularly reviewed, and if necessary, amended.
Furthermore, the AML & CTF Program allows for any significant changes in ML/TF risks, including changes to the risks faced by TKB resulting from:
Where such changes are proposed and they result in a change in the ML/TF risks, TKB will implement controls to mitigate and manage the ML/TF risks, prior to adopting of such new designated services, delivery methods or technologies.
The AML & CTF Program, and any addendums to it, is subject to Board of Directors oversight and approval.
Part B of the AML & CTF Program contains customer identification and verification procedures (commonly referred to as “Know your Customer” or “KYC” procedures), as well as customer approval and further ongoing monitoring procedures, which are risk-based, having regard to the ML/TF risks relevant to the provision of the services offered by TKB.
TKB carries out prescribed identification process each time before a person:
Risk-based customer identification procedures include inter alia identifying politically exposed persons (PEP). TKB means a private individual who is or has been entrusted with prominent public functions; the term includes the immediate family members, or persons known to be close associates, of such persons. TKB understands that providing financial services to TKB might pose higher money laundering risks therefore customers identified as TKBs are required enhanced level of due diligence measures to be applied.
Well-designed procedures are aimed to mitigate and manage the potential ML/TF risks faced by TKB and ensure that the company is reasonably satisfied as to the true identity of its customers.
When establishing correspondent relationships with other financial institutions TKB requires that the relevant financial institution applies appropriate due diligence measures, verification and monitoring procedures of its clients.
After conducting relevant KYC procedures, the decision to establish correspondent relationships is within designated senior management officer of TKB.
TKB shall not enter into or continue a correspondent banking relationship with a shell bank. Shell bank means a credit institution, or an institution engaged in equivalent activities, incorporated in a jurisdiction in which it has no physical presence, involving meaningful mind and management, and which is unaffiliated with a regulated financial group.
Furthermore, appropriate measures shall be taken to ensure that TKB does not engage in or continue correspondent banking relationships with a bank that is known to permit its accounts to be used by a shell bank.
TKB does not allow a person with whom it carries out a cross border correspondent banking relationship to establish accounts in TKB for use by that person’s customers.
TKB shall also implement comprehensive supervision procedures, ensuring that the identity and past history of prospective employees is verified. TKB recognises the potential risk as a result of staff turnover and has implemented procedures in order for new staff members (or existing staff members promoted with greater levels of AML & CTF responsibility) to be trained, monitored and subject to transactional limits. Comprehensive training in regards to the company’s policies and procedures must be completed at the various stages of employment.
Employees shall periodically undergo training in AML & CTF laws and internal policy and procedures.
Employee training is carried out under the supervision of the Chief Compliance Officer or AML & CTF Compliance Officer. Training will initially occur upon commencement of employment with TKB, and thereafter ongoing training will occur periodically (at least annually).
TKB will also ensure that in case any third parties are employed to carry on certain functions of TKB, TKB will carry on Training Program on AML & CTF laws and internal policy and procedures for the relevant third parties.
The Training Program will take into consideration the size of the company, its customer base, its products and services offered and its resources, and will include the following:
A review of AML & CTF Program will be undertaken at least annually also in case of important changes of legal acts.
TKB shall establish (or outsource to the third party provider) an independent internal audit function to test its AML and CTF processes, procedures and systems. The review/testing will be undertaken either internally by a person independent from business units and bank’s AML & CTF Compliance Officers – for instance internal auditor – or by an external service provider that will be retained to conduct such review.
The purposes of the review will be to:
The result of the review, including any report prepared, will be provided to the Board of Directors.
TKB will retain all records relevant to its AML & CTF Program and policies including:
The dedicated AML & CTF Compliance Officer’s duties include adherence and monitoring compliance with the AML & CTF obligations, receiving and investigating reports of suspicious matters/activities, reporting suspicious activities, overseeing communication and ensuring that proper AML & CTF records are kept.
Ongoing customer due diligence is an important component in mitigating and managing ML/TF risks (potential and identified).
TKB has set and implements procedures to adequately conduct ongoing customer due diligence:
TKB has established compliance team to cover various compliance issues within TKB including but not limited to AML & CTF oversight.
TKB shall appoint dedicated person (-s) as the AML & CTF Compliance Officer (-s) in order to ensure the execution of the functions as required by the FTRA and AML/CTF Act. AML & CTF Compliance Officer (-s) are part of TKB’s compliance team and report to the Chief Compliance Officer of TKB (who shall always be senior officer of TKB).
Chief Compliance Officer, on behalf of TKB’s management and Board of Directors, has the overall responsibility to ensure that the relevant control systems, processes and routines work in an efficient manner and that the staff receives adequate training on AML/CTF topic.
Staff training and awareness programs will educate Representatives as to the potential indicators for forming a suspicion that a prospective or existing customer is seeking to use services offered by the company for money laundering or terrorist financing purposes, thereby triggering reporting obligations.
Suspicion is formed if a representative considers that an existing or prospective customer is attempting to use services offered by TKB for ML/TF purposes and any one of the following conditions is met:
All the records are to be retained at least for 6 years relatively after the completion of transaction, after the date when the report, finding was made, after the closure or termination of the account, service or business relationship.
AML & CTF Program and addendums, together with any documentation relevant to the reason for amendment, are also to be retained for 6 years after the AML & CTF Program and/or amendments cease to be in force.
TKB will review all areas of its business to identify potential ML/TF risks that may not be covered in the procedures described above. The additional areas of ML/TF risks are in respect of new products, services, distribution channels and developing technologies. Additional procedures will be designed and will be implemented to identify, mitigate and manage potential ML/TF risk.
TKB will co-operate with all external authorities, including FSU. TKB will comply with any directions or notices received from such bodies and will actively search and retain records of any guidance issued or released in respect of perceived ML or TF risks.
The AML & CTF Compliance Officer, in conjunction with other representatives, will take all steps necessary to comply with any feedback, notices, orders, warrants etc. or to implement any directions issued by FSU.
In particular, AML & CTF Compliance Officer will have due regard to any feedback provided by FSU in respect of TKB’ performance in managing its ML/TF risks. Any feedback must be shared with Chief Compliance Officer and will be incorporated into ongoing monitoring programs and the AML & CTF Program will be amended (where appropriate).
Customer information will be collected and retained in accordance with obligations under the legislation.
TKB must not disclose any information to any other person:
The above does not apply if the disclosure is made to an authorized person as indicated in AML & CTF Act.
In 2011, the FSU under section 7 of the Money Laundering Prevention Act. No. 8 became the Money Laundering Supervisory Authority The Financial Services Unit aims to ensure that every financial institution conducts a risk assessment, whereby policies, procedures and controls can be developed as to prevent/ mitigate the ML/TF risks identified.
Subject to exceptions as per, a person must not disclose any information that identifies or is likely to identify any person who has:
A person is not liable to any civil or criminal action or other proceeding or damages for or in respect of an act done or omitted to be done in good faith in the exercise or performance, or purported exercise or performance of a power, function or duty conferred to him by the AML & CTF Act.
This method is designed to break up a large transaction into multiple smaller transactions in order to by-pass financial institution’s reporting requirements. The reporting is referred to as “threshold reporting”.
Deposit transactions exceeding this threshold must be reported to FSU. The money is deposited into one or more financial institutions by one person or a number of people.
The electronic transfer of money is a desirable money laundering technique given the fast movement of funds from one person or place to another.
Trusts can be complicated structures involving a number of trustees and beneficiaries. It is possible to create a number of layers through the use of trusts, thereby obscuring or making difficult the identity of the underlying controller of the trust.
The use of gateway intermediaries, such as lawyers and accountants is also attractive to money launderers. Money can be placed in holding accounts such as trust accounts which are in the name of the intermediary. The identity of the true owner of the funds is obscured and monies can be utilized for the purchase of assets such as real property. Those assets may then be sold to other persons and the sale proceeds received by the money launderer then become legitimate funds in the hands of the money launderer
Dominica is a member of the Carribbean Financial Action Task Force (CFATF). For more information about the assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CFT) measures in Dominica, please consult the CFATF website (www.cfatf-gafic.org)
The purpose of the AML and CTF Act is to bring Dominica’s anti-money laundering and counter-terrorist financing laws in line with the best international standard practice to combat money laundering and terrorism financing.
The AML and CTF Act also seeks to bring the Dominica legislation in line with the international standards set out by the Financial Action Task Force on Money Laundering (“CFATF”).
The Dominica Financial Services Unit (FSU) plays a role in ensuring compliance by the financial services sector with financial reporting obligations. Other anti-money laundering Regulators are the Public Prosecutors Office, the Reserve Bank of Dominica, the Dominica Services Commission, and the Dominica Police Force.
Pursuant to the legislation, FSU’s has extensive powers. Several from those include the following:
The main legal acts regulating AML & CTF in Dominica are Anti-Money Laundering and Counter-Terrorism Financing Act and its accompanying Anti-Money Laundering and Counter-Terrorism Financing Regulation together with all their later amendments (hereinafter referred as the Rules).
It is responsibility of General Counsel and Chief Compliance Officer or its dedicated employee to update all employees of any changes in these acts via e-mail and during dedicated trainings.
Client Due Diligence is the procedures related to the identification and verification of all clients, whether a natural or corporate person. CDD measures must be applied to all clients, whether a natural or corporate person. Initial identification and verification of clients must take place before the commencement of a business relationship. To discharge CDD responsibilities, must collect the following information from all individual clients, using at least a Passport or Valid Photo bearing government issued personal identification with unique identifier:
Clients due diligence standards may be applied on a risk sensitive basis depending on the type of a client, business relationship or transaction. Enhanced clients due diligence will be applied if and when a business relationship or a transaction by its nature entails a higher risk of money laundering or terrorist financing pursuant to:
Staff shall recognize the risk of being involved in money laundering as follows:
PEPs refer to one class of high risk customers. PEPs are those individuals who are or have been entrusted with prominent public functions. Examples of these include Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials. This list is not exhaustive and also includes family members or close associates of these persons. This definition is not intended to cover middle ranking or more junior individuals in the foregoing categories. Typically a person remains PEP for one year after he has ceased to occupy the prominent public function. The decision to start or continue a business relationship with PEP must be authorized by senior management and duly noted by the Compliance Officer or Money Laundering Compliance Officer using the PEP Acceptance Form.
Special attention should be paid to all complex and unusually large transactions and all unusual features of transactions which have no apparent economic or legal purpose. The purpose of the transaction should be investigated and the findings recorded. The procedures for staff monitoring or reporting unusual or suspicious activity are as follows:
The Compliance Officer as the person with primary responsibility for the investigation of all suspected “suspicious activity”, shall to the extent permissible by applicable domestic law have:
In accordance with AML & CFT Programme Record Retention, client identification records, new business and financial transaction records should be kept for a period of not less than seven years following the termination of a business relationship. Where necessary, these records may be kept for a longer period where investigations are ongoing and circumstances predate this period. All records must be kept in sufficient form to permit reconstruction of individual transactions so as to provide necessary evidence for potential prosecutions. The Guidance Notes permit that records can be retained in a format, including microfiche or other accessible computerized form, that would facilitate reconstruction of individual transactions (including the amounts and types of currency involved) within a reasonable time, so as to provide, if necessary, evidence for prosecution of criminal activity and to enable licensees to comply swiftly with information requests from the FIU. This applies whether or not records are stored off the premises of the licensee. The Money Laundering (Prevention) Act provides that covered financial businesses shall keep business transaction records of all business transactions for a period of seven years after the termination of the business transaction recorded. The Proceeds of Crime Act prescribes, in general, a seven year period. AML & CFT Programme states that it is to be followed as best practice unless the laws of a particular country are more stringent. Since the AML & CFT Programme is more stringent, in this case, the record keeping requirement of seven (07) years should be adhered to for all records.