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Financial Institutions

A financial institution is any entity that engages in financial transactions. This includes banks, credit unions, insurance companies, investment firms and money service business among others.
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Fortifying Financial Institutions Against ML/TF: Identifying and Mitigating Money Laundering and Terrorism Financing Risks

Financial institutions are exposed to significant money laundering and terrorism financing (ML/TF). They are required to understand the risks and take appropriate measures to mitigate those risks.
Financial institutions can be exposed to money laundering in various ways including:
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Structuring and Smurfing: For financial institutions that accept cash, criminals may use multiple individuals, called "smurfs," to deposit small amounts of money into accounts in order to avoid detection by financial institutions' AML systems.
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Shell companies: Customers may request to open accounts in the name of shell companies to move and conceal the proceeds of illegal activities by creating complex ownership structures that make it difficult, in some cases impossible to identify the beneficial owner.
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Trade-based money laundering: Criminals may use false invoicing and other techniques to move money across borders between banks to conceal the origin of funds.
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Tax evasion: Customers may request account opening and transfer funds with the purpose to avoid paying taxes.
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Financial institutions are also contracting with multiple customers and third-party providers that may expose them to significant ML/TF risks.

Regulatory Compliance

Financial institutions must establish appropriate governance arrangements, anti-money laundering measures and risk management procedures to mitigate their risks.
Due Diligence is an essential requirement to ensure that a financial institution does not offer its services or is collaborating with a customer or party that is associated to any type of criminal activity.
Effective screening, PEP checks and identification of the beneficial owners are essential to assist a bank understand the risks associated before entering into a business relationship with a customer or a third party.
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