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The Wolfsberg Group is an association of thirteen global banks that aims to develop guidance and standards for the management of financial crime risks. The Group has issued a number of documents since its inception to provide financial institutions with an industry perspective on effective financial crime risk management.

These options involve transferring funds to another country, which could indicate cross-border movement of illicit funds, and cashing out winnings in checks under 10,000 USD, which could indicate structuring to avoid reporting thresholds. The other options do not seem as suspicious or relevant to money laundering.

 A financial institution located in a Financial Action Task Force (FATF) member country should address the following issues in its anti-money laundering program when dealing with customers located in countries/jurisdictions that are not members of FATF:

The requirement to identify the beneficial owners of accounts: Beneficial owners are the natural persons who ultimately own or control a customer or a legal entity. Identifying the beneficial owners of accounts is a key component of customer due diligence (CDD) and helps the financial institution to assess the risk profile of the customer, prevent the misuse of legal entities for money laundering or terrorist financing, and comply with the FATF Recommendations12.

The requirement for customer identification for the opening of new accounts: Customer identification is the process of verifying the identity of a customer using reliable and independent sources of information or documents. Customer identification is another essential element of CDD and helps the financial institution to establish a business relationship with the customer, prevent identity fraud, and comply with the FATF Recommendations13.

The financial institution’s obligation to report suspicious transactions: Suspicious transactions are transactions that have no apparent economic or lawful purpose, or are inconsistent with the customer’s known profile or business activities, or indicate involvement in money laundering or terrorist financing. Reporting suspicious transactions to the competent authorities is a core obligation of the financial institution under the FATF Recommendations14 and helps to detect and deter illicit activities and support law enforcement investigations.

The obligation to freeze funds involved in suspicious transactions is not an issue that should be addressed in the anti-money laundering program, as it is not a requirement under the FATF Recommendations. The FATF Recommendations require the financial institution to freeze funds or other assets of designated persons and entities that are subject to targeted financial sanctions related to terrorism, proliferation of weapons of mass destruction, or other threats to the international financial system1 . However, the financial institution is not obliged to freeze funds involved in suspicious transactions, unless it receives a specific order from the competent authorities or the courts.

References:

The FATF Recommendations, as amended November 2023

Interpretive Note to Recommendation 10 (Customer Due Diligence), paragraphs 5(b) and 6

Recommendation 10 (Customer Due Diligence), paragraph 1

Recommendation 20 (Reporting of Suspicious Transactions)

Recommendation 6 (Targeted Financial Sanctions Related to Terrorism and Terrorist Financing), Recommendation 7 (Targeted Financial Sanctions Related to Proliferation), and Recommendation 8 (Non-Profit Organisations)

An oil exploration company based in France does business with oil refineries in Iran, which is subject to comprehensive Office of Foreign Assets Control (OFAC) sanctions. What type of OFAC sanctions should be imposed against the French company?

A. Sectoral

B. Country-based

C. Secondary

D. List-based

Answer: C