AML-CFT FAQs

Section 6 (i) of the SA 2012 lists as one of the Commission’s functions, to ensure compliance with the Proceeds of Crime Act, any other written law in relation to the prevention of money laundering and combating the financing of terrorism or any other written law that is administered or supervised by the Commission.

  1. What is Money Laundering?
    1. Money Laundering (ML) is the process by which the direct or indirect benefits of a crime are channeled through financial institutions to disguise the true origin and ownership of the proceeds of criminal activities. There are three stages involved in the process of ML:
      1. The placement of the illegal proceeds into the financial system;
      2. The layering of the proceeds through a series of financial transactions aimed at obscuring their illegal source; and
      3. The integration of the funds into the financial system where they appear as the proceeds of legitimate business activity.
  2. What is Terrorist Financing?
    1. Terrorism is the unlawful threat of action designed to compel the government or an international organization or intimidate the public or a section of the public for the purpose of advancing a political, religious or ideological belief or cause. Terrorist Financing (TF), therefore, is where funds are generated through a legitimate source such as donations, or through illegal activities such as the drug trade or fraud. These funds are normally used to support the agenda or cause of a terrorist organization.
  3. What is the difference between Money Laundering and Terrorist Financing?
    1. With TF, the proceeds are used to carry out illegal activities designed to intimidate or cause disruption to public safety and are not necessarily from an illegal source. ML on the other hand, emphasizes the concealment of the proceeds of criminal activity from detection. With both these crimes, however, the perpetrators seek to mask the nexus between themselves and the sources of their funding.
  4. What are the specific laws relating to AML/CFT in Trinidad and Tobago?
    1. The Consolidated Acts and Regulations in the AML/CFT Legal Framework are as follows :
      1. Proceeds of Crime Act Chapter 11.27,  amended by 10 of 2009 17 of 2012, and 15 of 2014;
      2. Anti-Terrorism Act Chapter 12.07, amended by 2 of 2010,  16 of 2011, 14 of 2012 and 15 of 2014;
      3. Financial Intelligence Unit of Trinidad and Tobago Act Chapter 72.01, amended by 3 of 2011, 8 of 2011, 14 of 2012 and 15 of 2014;
      4. Financial Intelligence Unit (Amendment) Regulations, 2014; (Please note that the legislation listed at # 2 and # 3 are in force and will be laid in Parliament. They are subject to negative resolution);
      5. Financial Obligation (Amendment) Regulations 2014; (Please note that the above two (2) amendments to the Regulations are in force and will be laid in Parliament and subject to negative resolution) and
      6. Financial Obligation Regulations (Financing of Terrorism) Regulations 2011.
  5. What is a Compliance Programme and what is it required to have?
    1. A compliance programme sets out a registrant’s internal policies, procedures and controls to detect ML and TF and to manage and mitigate the risk of it occurring. A compliance programme includes approved policies and procedures for the prevention and detection of ML and/or TF transactions and the reporting of any suspicious activity/transaction to the Financial Intelligence Unit of Trinidad and Tobago (FIU).  The compliance programme should include policies and procedures for:
      1. Customer Due Diligence (CDD), including Enhanced Due Diligence (EDD)  and Simplified CDD;
      2. Identification, monitoring and reporting of suspicious activities/transactions;
      3. Record keeping;
      4. Effective screening and training of all staff inclusive of Directors; and
      5. Ongoing review and monitoring compliance with the AML/CFT programme.
    2. Risk-based systems and controls should be based on the nature, size and complexity of a reporting entity’s business, along with any money laundering and financing of terrorism risks it may face.
  6. How does the Trinidad & Tobago Securities and Exchange Commission (TTSEC) supervise AML/CFT?
    1. Regulation 2 of the Financial Obligations Regulations (the FORs), 2010 identifies the TTSEC as the Supervisory Authority for the securities sector. Regulation 40 (e) of the FORs mandates the TTSEC to adopt measures to ensure that its registrants are in compliance with its provisions. More directly, by virtue of section 6(i) of its enabling legislation, the TTSEC is obligated to ensure that its registrants comply with all laws relating to AML/CFT, and to take steps to mitigate the risk of exposure to ML/TF.
    2. TTSEC employs the following approaches, among others, to carry out its AML/CFT supervisory functions:
      1. AML/CFT Guidelines: The TTSEC has published Guidelines which outline the minimum requirements of registrants in fulfilling their AML/CFT obligations. The staff at the TTSEC is currently in the process of updating its Guidelines to better reflect recent legislative changes that were effected, in light of the Financial Action Task Force (FATF) recommendations and methodologies.
      2. On-Site and Off-Site Inspections: Prior to the enactment of the SA, 2012 the TTSEC was limited in its ability to do on-site inspections, other than inspections “for cause”. With the passage of the SA, 2012 in December, 2012, sections 89 and 90 authorised the TTSEC to conduct compliance reviews and issue deficiency letters or compliance directions as part of its routine functions. Pursuant to these directives, the Division of Compliance and Inspections (C&I) was created to carry out on-site inspections.
      3. Sectorial Risk Assessment: The TTSEC is now in the practice of capturing, through the use of surveys, data related to AML/CFT from its registrants. The Compliance and Inspections Division conducts a compliance risk assessment (“CRA”) of registrants, to provide details of their respective AML/CFT frameworks/programmes among other things.  The information gleaned from these assessments, enable the TTSEC to create a risk rating of registrants which were used to inform the priority listing of the division’s compliance reviews.
      4. Market Entry Surveillance: Persons defined under the SA 2012 that are seeking registration with the TTSEC must meet the prescribed standards in order to obtain or renew their registrations. Additionally, persons must satisfy the TTSEC’s requirements of the fit and proper criteria in order to be registered.
  7. What is a Suspicious Activity Report?
    1. A Suspicious Activity Report (SAR) is required to be filed with the FIU in the approved form , following the identification of a suspicious activity or potential suspicious activity. A SAR must be filed within fourteen (14) calendar days from the date the registrant determines that an activity/transaction is suspicious. Institutions must retain a copy of the SAR and the original or business record of any supporting documentation for five (5) years.  Directors, officers, employees and agents who report suspected or known criminal violations, or suspicious activity should not notify any person involved in the transaction that the transaction has been reported.
  8. What are the actions/activities which trigger suspicion?
    1. The following are considered as triggers:
      1. Cash, as a mode of payment/sale for securities;
      2. Intermediaries in the securities market;
      3. Physical holding and settling of transactions;
      4. Use of bearer shares;
      5. Frequent changes in bank mandates by registrant;
      6. Fund manager is also a shareholder in company;
      7. Large volume trades in  a short space of time; and
      8. Unregulated portfolio management
  9. What is the definition of a Politically Exposed Person (PEP)?
    1. The Financial Action Task Force (FATF) defines a PEP is as “an individual who is or has been entrusted with a prominent public function.” The FATF recognises that, due to their status and influence, many PEPs are in positions that can be platforms for committing ML and related predicate offences. These include corrupt practices and bribery, as well as TF related activity.
    2. Consequently, the FATF Recommendations require the application of EDD to business relationships with PEPs due to the potential risk associated with PEPs. It must be emphasised that these measures are preventative in nature. It is NOT to be inferred that all PEPs are involved in criminal activity or that they have been incriminated in any corruption.
  10. What obligations are placed on registrants?
    1. Basic obligations imposed on registrants include:
      1. Assessing the ML/TF risk that it may reasonably expect to face in the course of its business;
      2. Establishing, implementing and maintaining a Compliance Programme (procedures, policies and controls) to detect, manage and mitigate the risk ML/TF;
      3. Customer due diligence (identification and verification of identity) and ongoing CDD;
      4. Suspicious activity/transaction reporting; and
      5. Record keeping.
  11. Does a Compliance Officer who has already been approved by another regulator still need the approval of the TTSEC?
    1. Yes, he or she does. As a designated Supervisory Authority, the TTSEC requires documentation that supports all of the Compliance Officer applications it approves. Please see the  “Checklist for the approval of Compliance Officers” tab for a complete list of required supporting documentation.
  12. Can a person be approved as Compliance Officer of more than one financial institution?
    1. Section 3(1) of the Financial Obligations Regulations 2010 states that a Compliance Officer must be “a manager or official at the managerial level” of the financial institution. Therefore, a Compliance Officer must be employed by the entity that is registered with the Commission and seeking approval of its Compliance Officer, not any other company.
  13. What is CDD?
    1. CDD involves gathering information about a customer’s identity and verifying a customer’s identity. In most cases, registrants will also need to establish and verify the identity of any beneficial owner . CDD also involves establishing and verifying the identity of any person who acts on behalf of a customer.
  14. What is ongoing CDD?
    1. Ongoing CDD means regularly reviewing customers’ information and having systems to conduct account monitoring. It is required to ensure that the ongoing business relationship is consistent with the registrant’s knowledge about the customer’s business and risk profile as well as to identify grounds for reporting any suspicious activity/transaction.  This is required for all customers, including existing customers.
  15. What is EDD?
    1. EDD is the process of “digging deep” into a person’s history and relationships to verify their identity, for example looking into the following:
      1. A person’s background, or possible links to illicit activities;
      2. The true ownership of a person and their executives (otherwise known as “piercing the corporate veil”);
      3. Interviewing a person’s vendors or other contacts to gauge the reliability of its previous business relationships; and
      4. Looking into a person’s links to government owned entities.
    2. Enhanced Due Diligence (EDD) is usually defined as a one-time event requiring significant resources to confirm that the business relationship with the person is not risky.

SA, 2012, s. 6 The functions of the Commission are to-

(i) ensure compliance with the Proceeds of Crime Act, any other written law in relation to the prevention of money laundering and combating the financing of terrorism or any other written law that is administered or supervised by the Commission;

Under the SA 2012, a “person” includes an entity.

The following URL refers to a Guidance Note which is intended to provide assistance to Financial Institutions and Listed Business (Reporting Entities) in meeting their obligations to make a Suspicious Transaction or Suspicious Activity Report (STR/SAR) to the Financial Intelligence Unit (the FIU): http://www.fiu.gov.tt/content/Guidance%20note%20on%20STR-SAR%20Reporting%20Standard.pdf

The beneficial owner is the individual that ultimately owns or controls the customer or on whose behalf a transaction is conducted.

 

Leave a Reply