There are two main factors in having an effective AML/CFT policy: who are the beneficial owners of the money or goods and where did the money come from to execute the transaction.
Both of these are equally important to prevent criminals from introducing money obtained by illegal means into the economy. Let’s provide a couple of examples to illustrate the importance.
Recently CNN produced an article on the mysterious world of art auctions and how expensive art is bought and sold. It emphasizes the buyer side of things but it applies to the seller as well.
Art is usually auctioned by one of the big auction houses (such as Christies or Sothebys). Incredibly they are not required to provide the name of the actual buyer because art is not subject to anti- money laundering provisions in the Bank Secrecy act in the USA and in Europe.
Likewise, the seller is not required to identify the name of the buyer or to guarantee that the buyer is not laundering dirty money with the purchase, unlike stock purchases or bank transfers. The end buyer will typically purchase by using shell companies with a nominee director to prevent the regulating authorities from knowing the real owner. And when the transaction is completed the nominee will be listed on the provenance as the actual owner, so when the art is sold again, the real owner will not be disclosed as receiving the money from the new buyer.
The article is not stressing whether the money is clean or dirty, but rather the beneficial owner as the owners in a particular anti-money-laundering were believed to be Russians who are on an international sanctions list. However it could be just as easily emphasized on the cleanliness of the funds. The auction houses state that although they are not required to vet the buyer, they do have their own AML policy in place. But they do not look too hard at the buyer because they will make a nice commission on the sale and they are not legally required to do so.
Kevelex receives many requests from owners of offshore bank licenses, EMIs, stored value facilities and the like as well as owners of PSP’s, crypto exchangers etc. and anyone wishing to establish such entities in obtaining correspondent accounts.
Anyone wishing to obtain correspondent accounts, especially if they will be processing cross-border or international transactions, must of course provide much documentation supporting their request.
But the AML policy of the applicant is the most important document required (along of course with the passports of the applicants). This is because the correspondent bank is transacting on behalf of the bank representing the client sending the money. The correspondent bank is relying on its partner bank to do the due diligence on the client for them as they do not know who the client is.
If the client is laundering money, the correspondent bank ends up being complicit in the money laundering crime. The repercussions are enormous. The correspondent bank will be subject to large fines and have restrictions placed on them. The originating bank will lose its license in addition to financial penalties. In some cases it can be bring down entire national banking systems.
Look no further than Banco Ambrosiano in Italy in the early 1980’s (Vatican bank scandal) or ABLV Bank in Latvia.
These are just 2 examples of why an effective AML policy is essential in protecting yourself from money laundering crimes.
Art auction houses have been put on notice that the days of anonymity are coming to an end. Other potential money laundering businesses, like luxury car dealerships, gold houses, casinos, lawyers offering nominee services just to name a few are under international bank secrecy acts so if you are already in these businesses or wish to so, Kevelex should be contacted to assist in establishing an effective AML policy for you.