AML & CTF, Sanction FAQs

What is Money Laundering and Terrorist Financing?

In the Turks and Caicos Islands Money Laundering involves concealing disguising and otherwise hiding money derived from criminal property or criminal activity. It includes any involvement in arrangements to get, hold or use money or property from came from any crime as well as possessing and using money or other property which is derived from criminal activity.

There are generally three stages of money laundering and these are placement, layering and integration. The ultimate aim of these activities is to cover or hide the fact that the money or property came from criminal activity and to make it appear as if it is derived from legitimate sources. The financial services system and financial institutions are the most commonly use means of money laundering. The fact that many financial products involve possessing, controlling or acting as agent for property belonging to its clients makes the financial services industry and its products vulnerable to use by money launderers.

The commission of a money laundering offence is a crime under the Proceeds of Crime Ordinance. That law also details money laundering predicate offences.

Terrorist Financing is sometimes seen as the opposite of money laundering. Whereas money laundering involves converting money or property obtained from illegal means into appearing to come from legitimate sources, terrorist financing can occur where money from legitimate sources are used for terrorist activity or to support terrorist organisations.

Additionally, unlike in money laundering, the amount of money which may be used for terrorist activities are usually small. The funds may come from legitimate sources such as monies raised by charities but may also come from criminal activity such as weapons smuggling and human trafficking. Terrorist financing usually occurs both through the use of the formal financial system as well as informal financial systems such as Hawalas. Since the source of the money is legitimate it does not require concealing. However, what is concealed is the intended purpose or use of the funds.

What laws are in place in the TCI to prevent money laundering?

The laws in relation to anti-money laundering and terrorist financing include the Proceeds of Crime Ordinance, the regulations and code made pursuant to it and the Anti-Terrorism (Financial and Other Measures) (Overseas Territories) Order 2002. A more complete list of AML/CFT legislation can be found on our Legislation page.

What is the role of the Money Laundering Reporting Officer?

The requirements for financial businesses to appoint a Money Laundering Reporting Officer (MLRO) are articulated in regulation 22 of the Anti-Money Laundering and Prevention of Terrorist Financing Regulations with supporting obligation in the Anti-Money Laundering and Prevention of Terrorist Financing Code (the Code).

The role of the MLRO includes reporting SAR's internally from employees within the business and considering those reports and deciding whether a formal SAR has to be made to the FCU. The MLRO after liaising with the FCU will have to determine whether to continue the business with the client who is the subject of the SAR. The MLRO is usually the main point of contact between the business and the FCU as well as with the Financial Services Commission.

The MLRO may also be responsible for establishing the business's AML/CFT procedures and policies and for ensuring that these policies are followed. Additionally, the MLRO may provide internal training for employees.

What is a Suspicious Activity Report (SAR)?

Anti-Money Laundering (AML) refers to the legislative and other administrative measures that a country establishes to combat money laundering. The measures may also include requirements that financial institutions similarly establish procedures and policies to detect and prevent money laundering.

The POCO mandates that businesses through its MLRO must make a disclosure of knowledge or suspicion of Money laundering to the Reporting Authority through the Financial Crimes Unit (FCU). The filing of a disclosure or Suspicious Activity Report (SAR) is a key component of the AML policies which financial institutions must establish. It is an offence not to file a SAR.

Implementing a proper Know Your Customer (KYC) or Customer Due Diligence (CDD) policy assists financial institutions to identify suspicious or criminal activity which should be reported to the FCU so that a proper investigation can be conducted.

What is Customer Due Diligence?

Customer Due Diligence refers to the measures that financial businesses put in place to protect it and the country from the risk of being used for money laundering and terrorist financing.

CDD information generally comprises of identification and relation information and any other information that may be requested on a risk sensitive basis. It also involves verifying the identity of customers, updating information provided by customer and monitoring and conducting a risk assessment of each customer.

CDD measures should be applied to customers on a risk sensitive basis. CDD measures assists the MLRO and employees to assess whether an activity necessitates that a SAR be reported to the FCU. Additionally, it helps the business to be able to identify fraud and assist law enforcement authorities by providing when necessary information on customers and activities that may be the subject of an investigation.

Who is a Politically Exposed Person (PEP)?

The term "Politically Exposed Person" (PEP) is explained in the Anti-Money Laundering and Prevention of Terrorist Financing Regulations (the Regulations) and the Anti-Money Laundering and Prevention of Terrorist Financing Code (the Code). This term generally applies to persons who perform important functions such as Heads of State, those persons who hold Cabinet positions and other senior governmental positions and their spouse and families. It also covers persons who currently hold those positions as well as persons who have held such positions in the past and to persons who become politically exposed after a business would have already commenced.

PEP'S are considered as high risk and in addition to the normal CDD measures; financial institutions should also have policies in place for Enhanced Due Diligence (EDD) to cover persons who present a higher customer risk. The KYC procedures applied by financial institutions, particularly knowing the source of funds, is more stringent for PEP's than for regular customers.