Which is an indicator that there is an attempt to conceal a company's true beneficial ownership?
The company has a subsidiary in another jurisdiction, and the beneficial ownership of the subsidiary includes a local investor in that jurisdiction.
Recent changes to the company's ownership structure have been documented internally and are reflected in documents filed with local authorities.
Beneficial ownership information from the time that the company was formed several years ago does not match the current beneficial ownership information.
The person filling out an application on the company's behalf indicates that a beneficial owner is a nominee for another person not named in the company's documentation.
A beneficial owner is the natural person who ultimately owns or controls a legal entity or arrangement, such as a company, a trust, or a foundation. Identifying the beneficial owner is essential for preventing and detecting money laundering, terrorist financing, tax evasion, and other illicit activities that may involve the misuse of corporate vehicles. However, some individuals or entities may attempt to conceal the true beneficial ownership of a company by using various techniques, such as complex ownership structures, shell companies, bearer shares, or nominees. A nominee is a person or an entity that acts on behalf of another person or entity, usually for a fee or a commission, without disclosing the identity of the real owner or controller. Nominees can be used to protect or conceal the identity of the beneficial owner and controller of a company or asset. A nominee can help overcome jurisdictional controls on company ownership and circumvent directorship bans imposed by courts and government authorities. While the appointment of nominees is lawful in most countries, the use of nominees for money laundering purposes is illegal and a red flag for suspicious activity. Therefore, the person filling out an application on the company’s behalf indicating that a beneficial owner is a nominee for another person not named in the company’s documentation is an indicator that there is an attempt to conceal the company’s true beneficial ownership12.
The other options are not necessarily indicators of concealment of beneficial ownership, as they may have legitimate explanations or reasons. The company having a subsidiary in another jurisdiction with a local investor as a beneficial owner may be a normal business practice or a strategic decision, as long as the ownership information is transparent and accurate. Recent changes to the company’s ownership structure may reflect the company’s growth, development, or adaptation to market conditions, as long as they are documented and reported to the relevant authorities. Beneficial ownership information from the time that the company was formed several years ago not matching the current information may be due to natural changes in the company’s shareholders, directors, or managers, as long as they are updated and verified periodically.
What are theroles of a government Financial Intelligence Unit (FIU)? (Select Three.)
Investigate and, where appropriate, prosecute all suspicious transaction and suspicious activity reports received from reporting institutions or obliged institutions.
Analyze all suspicious transaction and suspicious activity reports received from reporting institutions or obliged institutions.
Disseminate analysis of suspicious transaction and suspicious activity reports to foreign judicial systems to enhance their anti-money laundering and terrorist financing investigations and prosecutions.
Disseminate the analysis of suspicious transaction and suspicious activity reports to local law enforcement agencies and foreign FIUs to combat money laundering.
Receive reports of suspicious transactions and suspicious activities from reporting institutions or obliged institutions.
Financial Intelligence Units (FIUs)serve as national centers for collecting, analyzing, and disseminating AML/CFT information.
Option B (Correct):FIUs analyze SARs and STRs to detect money laundering and terrorist financing risks.
Option D (Correct):FIUs disseminate financial intelligence to local and international law enforcement agencies and other FIUs.
Option E (Correct):FIUs receive SARs/STRs from financial institutions, which form the basis for their analysis.
Why Other Options Are Incorrect:
Option A (Incorrect):FIUs do not prosecute cases; they refer findings to law enforcement agencies.
Option C (Incorrect):FIUs share intelligence, but prosecution is handled by judicial authorities, not FIUs.
Best Practices for FIUs:
Enhance data-sharing agreements with domestic and international agencies.
Use AI and analytics tools to detect suspicious financial patterns.
Ensure secure handling of sensitive AML/CFT data.
What is the first step that an investigator should take when beginning a financial investigation into a potential suspicious activity?
Contacting the country's financial intelligence unit (FIU) officers to seek advice on whether the potential suspicious activity is indeed suspicious.
Determining whether the potential suspicious activity is consistent with the customer's transactional behavior, nature of business, and occupation.
Gathering and assessing internal sources of information, including information obtained from the customer, transactions, and value and volume.
Identifying and reviewing external information, including online presence, customer-related entities, and relevant media.
The first step in a financial investigation is to review and analyze allinternalsources of information related to the suspicious transaction.
Option C (Correct):Gathering and assessing internal data helps investigators establish a baseline for normal vs. suspicious customer behavior. This includes reviewing KYC (Know Your Customer) documentation, transaction history, and any previous alerts on the customer.
Option B (Incorrect):This is part of the investigation, but an investigator first needs togatherdata before determining consistency with expected behavior.
Option A (Incorrect):An FIU is typically contactedafterinternal analysis has been completed and a Suspicious Activity Report (SAR) is warranted.
Option D (Incorrect):External information is useful, but internal data should be reviewed first to confirm whether a case needs escalation.
Which step should financial institutions take when complying with sanctions requirements?
Adopt automatic screening systems to detect designated persons and entities.
Conduct enhanced due diligence for prohibited entities on the sanctions list.
Change the risk profile to "high-risk" if an existing customer becomes a sanctioned entity and continue monitoring further transactions.
Freeze the funds or assets of designated persons and entities once this decision is approved by the Board.
The financial institution should freeze the funds or assets of designated persons and entities once this decision is approved by the Board. This is to comply with the obligation to implement targeted financial sanctions imposed by the United Nations Security Council (UNSC) or other relevant authorities. Freezing means preventing any access, use, transfer, or disposal of the funds or assets by the designated persons and entities or by any other person on their behalf. The financial institution should also report the freezing action to the competent authority and the relevant sanctions committee12.
Option A is not a sufficient step to comply with sanctions requirements, but rather a tool to facilitate compliance. Adopting automatic screening systems to detect designated persons and entities can help the financial institution to identify potential matches and flag them for further investigation. However, screening systems are not infallible and may generate false positives or false negatives. Therefore, the financial institution should also conduct manual checks and verification of the screening results13.
Option B is not a relevant step to comply with sanctions requirements, but rather a measure to mitigate money laundering and terrorist financing risks. Conducting enhanced due diligence for prohibited entities on the sanctions list may be useful to obtain more information about the nature and purpose of the business relationship, the source and destination of the funds, and the beneficial ownership and control structure of the entity. However, enhanced due diligence does not replace the obligation to freeze the funds or assets of the designated persons and entities14.
Option C is not an appropriate step to comply with sanctions requirements, but rather a violation of the obligation to freeze the funds or assets of the designated persons and entities. Changing the risk profile to “high-risk” if an existing customer becomes a sanctioned entity and continuing to monitor further transactions may expose the financial institution to legal and reputational risks, as well as potential sanctions evasion or circumvention. The financial institution should terminate the business relationship with the designated person or entity and freeze their funds or assets without delay1 .
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