Assignment I

Anti-money Laundering regulations

1. What is money laundering?
Money laundering is an illegal process of making large amounts of money generated by criminal activity, such as drug
trafficking or terrorist funding, appear to have come from a legitimate source.

2. What is Know your Customer (KYC)?

Know Your Customer (KYC) are a set of standards used within the investment and financial services industry to verify
customers, their risk profiles, and financial profile.

3. What is a Financial Crime Unit?

Financial Crime Unit is an institution which detect and prevent money laundering, the financing of terrorism and a
variety of other financial crimes while meeting their regulatory compliance obligations more effectively.

4. What is a PEP?
Political Exposed Person (PEP) – someone who has access to public influence or public money (for example – politician,
head of states, higher lever judicial bodies, etc.)

What is Customer Due Diligence in accordance with EU AML directives?

Customer Due Diligence is the processes used by financial institutions to collect and evaluate relevant information about
a customer or potential customer. It aims to uncover any potential risk to the financial institution of doing business with
a specific organisation or individual.
1. Normal Due Diligence – is applied to every natural or legal person intending to enter into business relations or to
act in any transaction.
2. Simplified Due Diligence – applicable when a customer, products or transactions involve a low risk of money
laundering or terrorist financing.
3. Enhanced Due Diligence - is still applied in addition to normal due diligence, but in business areas, activities,
products, services, distribution, or marketing - channels, business relationships and transactions that present a higher
risk of money laundering or terrorist financing. Furthermore, business relationships and transactions with customers
from high-risk countries, territories or jurisdictions or involving transfers of funds to or from such countries, territories,
or jurisdictions, including, in all cases, those countries in relation to which the Financial Action Task Force (FATF) require
the application of enhanced due diligence measures.

Case 1.
In this case my customer is a political exposed person (mayor of Spanish municipality) which had access to public money
and the due diligence applied to him will be enhanced due diligence. Large or small population of the municipality is an
important factor there because (as mentioned in art 14. (c) local entities with more than 50,000 inhabitants shall
likewise be considered politically exposed persons)
Case 2.
French student is living in Madrid, this means he is resident here, and the due diligence I will apply to him will be normal
due diligence.
Case 3.
A refugee is a high-risk client. Documentation required to him will be a residence card, Foreign Identity Card, Passport
or, in the case of citizens of the European Union or the European Economic Area, the official personal identity document,
letter or card issued by the home authorities.
Case 4.
A Syrian citizen is a high-risk client that’s why due diligence applied to him will be enhanced due diligence.
Documentation required from such client is:
- passport or another identification document
- source of funds and wealth
- purposes of the transactions
Case 5.
Case of Mr. Perez
a) Bank is obliged to provide information about their customers to competent authorities in case their customers
are related or suspected in money laundering or terrorist financing.
b) According to article 25 paragraph (1) obliged persons (in this case- bank) should keep the financial records of
their clients for a minimum period of 10 years.
c) In accordance with article 24 paragraph (1) bank shall not disclose to the customer (Mr. Perez) or third persons
the fact that information about him was requested and transmitted to FCU.
d) Documentation required from Mr. Perez: more information about his source of funds and wealth, purposes of
the transactions, etc.
e) According with FATF list Guinea Equatorial isn’t a high-risk country, but Mr. Perez is a high-risk client because his
transactions are unusually large.
f) In case of customer’s reluctance or refusal to provide the required information or documentation, bank shall
refrain from establishing or maintaining the business relationship or from executing the transaction.