Countries should For the purposes of assessing compliance with the FATF Recommendations, the word should has the same meaning as must. have national AML/CFT/CPF policies, informed by the risksProliferation financing risk refers strictly and only to the potential breach, non-implementation or evasion of the targeted financial sanctions obligations referred to in Recommendation 7. identified, which should be regularly reviewed, and should designate an authority or have a coordination or other mechanism that is responsible for such policies.

Countries should ensure that policy-makers, the financial intelligence unit (FIU), law enforcement authorities, supervisors and other relevant competent authorities, at the policymaking and operational levels, have effective mechanisms in place which enable them to cooperate, and, where appropriate, coordinate and exchange information domestically with each other concerning the development and implementation of policies and activities to combat money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. This should include cooperation and coordination between relevant authorities to ensure the compatibility of AML/CFT/CPF requirements with Data Protection and Privacy rules and other similar provisions (e. g. data security/localization).

Countries should For the purposes of assessing compliance with the FATF Recommendations, the word should has the same meaning as must. criminalise money laundering on the basis of the Vienna Convention and the Palermo Convention. Countries should apply the crime of money laundering to all serious offences, with a view to including the widest range of predicate offences.

Countries should review the adequacy of laws and regulations that relate to non-profit organizations which the country has identified as being vulnerable to terrorist financing abuse. Countries should apply focused and proportionate measures, in line with the risk-based approach, to such non-profit organizations to protect them from terrorist financing abuse, including:

1. by terrorist organisations The term terrorist organisation refers to any group of terrorists that: (i) commits, or attempts to commit, terrorist acts by any means, directly or indirectly, unlawfully and wilfully; (ii) participates as an accomplice in terrorist acts; (iii) organises or directs others to commit terrorist acts; or (iv) contributes to the commission of terrorist acts by a group of persons acting with a common purpose where the contribution is made intentionally and with the aim of furthering the terrorist act or with the knowledge of the intention of the group to commit a terrorist act. posing as legitimate entities;
2. to exploit legitimate entities as conduits for terrorist financing Terrorist financing is the financing of terrorist acts, and of terrorists and terrorist organisations., including for the purpose of escaping asset-freezing measures; and
3. to conceal or obscure the clandestine diversion of funds The term funds refers to assets of every kind, whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such assets. intended for legitimate purposes to terrorist organisations.

Financial institutions Financial institutions means any natural or legal person who conducts as abusiness one or more of the following activities or operations for or on behalf of a customer:
1) Acceptance of deposits and other repayable funds from the public.
2) Lending.
3) Financial leasing.
4) Money or value transfer services.
5) Issuing and managing means of payment (e.g. credit and debit cards,cheques, traveller's cheques, money orders and bankers' drafts, electronic money).
6) Financial guarantees and commitments.
7) Trading in:
a) money market instruments (cheques, bills, certificates of deposit, derivatives etc.);
b) foreign exchange;
c) exchange, interest rate and index instruments;
d) transferable securities;
8) Participation in securities issues and the provision of financial services related to such issues.
9) Individual and collective portfolio management.
11) Otherwise investing, administering or managing funds or money on behalf of other persons.
12) Underwriting and placement of life insurance and other investment related insurance.
13) Money and currency changing.
should For the purposes of assessing compliance with the FATF Recommendations, the word should has the same meaning as must. be prohibited from keeping anonymous accountsReferences to “accounts” should be read as including other similar business relationships between financial institutions and their customers. or accountsReferences to “accounts” should be read as including other similar business relationships between financial institutions and their customers. in obviously fictitious names.

Financial institutions should be required to undertake customer due diligence (CDD) measures when:

1. establishing business relations;
2. carrying out occasional transactions: (i) above the applicable designated threshold (USD/EUR 15,000); or (ii) that are wire transfers in the circumstances covered by the Interpretive Note to Recommendation 16;
3. there is a suspicion of money laundering or terrorist financing Terrorist financing is the financing of terrorist acts, and of terrorists and terrorist organisations.; or
4. the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data The term identification data refers to reliable, independent source documents, data or information..

The principle that financial institutions should conduct CDD should be set out in law. Each countryAll references in the FATF Recommendations to country or countries apply equally to territories or jurisdictions. may determine how it imposes specific CDD obligations, either through law or enforceable means Please refer to the Note on the Legal Basis of requirements on Financial Institutions and DNFBPs..

The CDD measures to be taken are as follows:

1. Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information.
2. Identifying the beneficial ownerBeneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement., and taking reasonable measures The term Reasonable Measures means: appropriate measures which are commensurate with the money laundering or terrorist financing risks. to verify the identity of the beneficial ownerBeneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement., such that the financial institution is satisfied Where reference is made to a financial institution being satisfied as to a matter, that institution must be able to justify its assessment to competent authorities. that it knows who the beneficial owner is. For legal persons Legal persons refers to any entities other than natural persons that can establish a permanent customer relationship with a financial institution or otherwise own property. This can include companies, bodies corporate, foundations, anstalt, partnerships, or associations and other relevantly similar entities. and arrangements this should include financial institutions understanding the ownership and control structure of the customer.
3. Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship.
4. Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds The term funds refers to assets of every kind, whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such assets..

Financial institutions should be required to apply each of the CDD measures under (a) to (d) above, but should determine the extent of such measures using a risk-based approach (RBA) in accordance with the Interpretive Notes to this Recommendation and to Recommendation 1.

Financial institutions should be required to verify the identity of the customer and beneficial ownerBeneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. before or during the course of establishing a business relationship or conducting transactions for occasional customers. Countries may permit financial institutions to complete the verification as soon as reasonably practicable following the establishment of the relationship, where the money laundering and terrorist financing risks are effectively managed and where this is essential not to interrupt the normal conduct of business.

Where the financial institution is unable to comply with the applicable requirements under paragraphs (a) to (d) above (subject to appropriate modification of the extent of the measures on a risk-based approach), it should be required not to open the account, commence business relations or perform the transaction; or should be required to terminate the business relationship; and should consider making a suspicious transactions report in relation to the customer.

These requirements should apply to all new customers, although financial institutions should also apply this Recommendation to existing customers on the basis of materiality and risk All references to risk refer to the risk of money laundering and/or terrorist financing. This term should be read in conjunction with the Interpretive Note to Recommendation 1., and should conduct due diligence on such existing relationships at appropriate times.