The purpose of this paper is to analyze the obligation of regulated entities to detect unusual and suspicious transactions and to report them to external control bodies, as…
Abstract
Purpose
The purpose of this paper is to analyze the obligation of regulated entities to detect unusual and suspicious transactions and to report them to external control bodies, as established by the Financial Action Task Force (FATF) recommendations, the European Community Directive and also the Spanish regulations for the Prevention of Money Laundering. This research paper also aims to create a model to identify and report suspicious transactions to improve financial institutions’ current procedures.
Design/methodology/approach
According to the Spanish regulations which comply with the FATF recommendations and the European Community Directive on the Prevention of Money Laundering, regulated entities must detect unusual and suspicious transactions. Within this framework, the present research work analyzes both criteria and procedures used by the regulated entities to report suspicious operations. It also assesses the efficiency of the reports sent to an external control body. For this purpose, both analytical and interpretative methods are used in this research paper.
Findings
In Spain, the current procedures followed by regulated entities to analyze unusual transactions are complex. This results in difficulties to report suspicious transactions involving money laundering. As a consequence, the cases of suspicious transactions reported to the external control body are often unclear and the related process is inefficient.
Originality/value
The creation of a harmonized model with the aim of detecting suspicious operations and analyzing them will improve the detection and the effectiveness of the suspicious operations procedure which are reported to the external control body. However, such unified model should take into account the currently used activities proposed by each financial institution.
Details
Keywords
Joel Harry Clavijo Suntura, Piedad Maribel Rosero Rosero and Gloria Esperanza Aragón Cuamacás
The purpose of this paper is to analyze politically exposed persons (PEPs) according to Financial Action Task Force (FATF) Recommendations and assess the identification process…
Abstract
Purpose
The purpose of this paper is to analyze politically exposed persons (PEPs) according to Financial Action Task Force (FATF) Recommendations and assess the identification process followed by financial institutions to create a harmonized regional model for PEPs identification in Latin America.
Design/methodology/approach
FATF Recommendation No.12 states that financial institutions should identify PEPs. To do so, the latter uses either an internal identification system or an external database. Within this framework, the purpose of the research work is to determine whether the procedure adopted by the regulated entities complies with the requirements of the regulations. Both analytical and interpretative methods have been used for this purpose.
Findings
In accordance with FATF Recommendation No.12, national and foreign PEPs, as well as officials of relevant international organizations, close relatives and closest associates must be identified. This wide range of people forms an hybrid type of PEPs. Because of the lack of a harmonized identification policy, it is likely that some people who meet these conditions may not be spotted.
Originality/value
PEPs control success relies on accurate and prompt identification. Therefore, it is crucial to create an inter-state model of harmonized identification at a regional level in Latin America. It includes not only the participation of the obligated subjects but also the sector entities associated to the concerned economic activity.
Details
Keywords
The purpose of this paper is to determine if customers due to diligence measures laid down in Financial Action Task Force (FATF) Recommendation no. 10 can be applied to customers…
Abstract
Purpose
The purpose of this paper is to determine if customers due to diligence measures laid down in Financial Action Task Force (FATF) Recommendation no. 10 can be applied to customers of currency exchange companies.
Design/methodology/approach
Currency exchange financial entities undertake financial transactions with occasional customers, for this reason, this research work is aimed at carrying out a study of the content of FATF Recommendation no. 10 regarding the applicability of due diligence measures to occasional customers. For this purpose, the analytical and interpretative methods have been used.
Findings
FATF Recommendation No. 10 about customer due diligence measures has been designed primarily for financial entities with regular customers, however, most customers of financial currency exchange companies are occasional customers. For such financial entities, customer identification is mandatory only for transactions above 15,000 USD/EUR, leaving a potential risk of money laundering for financial transactions below that threshold. Furthermore, within currency exchange companies, risk factor analysis and customers’ identity verification are performed only on regular customers.
Originality/value
Customer due diligence measures in currency exchange financial entities should not be subject to the transaction threshold. Moreover, it is necessary to adopt a centralized control system to avoid currency exchange companies infringement of their control systems.