The IBA WGR 2010 - Indicative List of High/Medium Risk Customers, Products and Jurisdictions

 Appendix-A of IBA Working Group Report 2010

 The following are indicative and can be expanded. The banks have the option to upgrade the risk categorization (ie.. medium to high ) for any specific industry /segment

 Characteristics of High risk Customers:

  

                   I.            Individuals and entities in various United Nations' Security Council Resolutions (UNSCRs) such as UNSC 1267 & 1988 [2011] linked to Al Qaida & Taliban.

                II.            Individuals or entities listed in the schedule to the order under section 51A of the Unlawful Activities (Prevention) Act, 1967 relating to the purposes of prevention of, and for coping with terrorist activities

             III.            Individuals and entities in watch lists issued by Interpol and other similar international organizations

             IV.            Customers with dubious reputation as per public information available or commercially available watchlists

                V.            Individuals and entities specifically identified by regulators, FIU and other competent authorities as high-risk

             VI.            Customers conducting their business relationship or transactions in unusual circumstances, such as significant and unexplained geographic distance between the institution and the location of the customer, frequent and unexplained movement of accounts to different institutions, frequent and unexplained movement of funds between institutions in various geographic locations etc.

          VII.            Customers based in high risk countries/jurisdictions or locations as identified by FATF from time to time. (refer appendix-C)

       VIII.             Politically  Exposed Persons(PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP isultimate beneficial owner

             IX.            Non-resident customers and foreign nationals

                X.            Accounts of Embassies / Consulates;

             XI.            Off-shore (foreign) corporation/business

          XII.            Non-face to face customers

       XIII.            High Net worth Individuals*

       XIV.            Firms with ‘sleeping partners’.

          XV.            Companies having close family shareholding or beneficial ownership

       XVI.            Complex business ownership structures, which can make it easier to conceal underlying beneficiaries, where there is no legitimate commercial rationale

    XVII.            Shell companies which have no physical presence in the country in which it is incorporated. The existence simply of a local agent or low level staff does not constitute physical presence

 XVIII.            Investment Management / Money Management Company/Personal Investment Company

       XIX.            Accounts for "gatekeepers" such as accountants, lawyers, or other professionals for their clients where the identity of the underlying client is not disclosed to the financial institution

          XX.            Client Accounts managed by professional service providers such as law firms, accountants, agents, brokers, fund managers, trustees, custodians, etc

       XXI.            Trusts, charities, NGOs and organizations receiving donations.

    XXII.            Money transfer Service Business: including seller of: Money Orders / Travelers‟ Checks / Money Transmission /Check Cashing / Currency Dealing or Exchange

 XXIII.            Business accepting third party checks (except supermarkets or retail stores that accept payroll checks/cash payroll checks)

 XXIV.            Gambling /Gaming including “junket operators” arranging gambling tours

    XXV.            Dealers in high value or precious goods (e.g.., jewel, gem and precious metals dealers , art and antique dealers and auction houses, estate agents and real estate brokers)

 XXVI.            Customers engaged in a business which is associated with higher levels of corruption (e.g.., arms manufacturers,dealers and intermediaries

XXVII.            Customers engaged in industries that might relate to nuclear proliferation activities or explosives.

XXVIII.            Customers that may appear to be Multi level marketing companies etc..

 

 

             *Parameters defining High Net worth Individuals (HNIs) to be decided by the bank

Characteristics of Medium Risk Customers

1.      Non-bank Financial Institutions

2.      Stock brokerage

3.      Import/export

4.      Gas station

5.      Car/Boat/Plane Dealership

6.      Electronics (wholesale)

7.      Travel agency

8.      Used car sales

9.      Telemarketers

10.  Providers of telecommunications service, internet café, IDD call service, phone cards, phone center

11.  Dot-com company or internet business

12.  Pawnshops

13.  Auctioneers

14.  Cash-intensive business such as restaurants, retail shops, parking garages, fast food stores, movie theatres, etc..,

15.  Sole practitioners or Law firms (small, little known)

16.  Notaries (small. Little known)

17.  Secretarial firms (small. Little known ones)

18.  Accountants( small, little known ones)

19.  Venture capital companies

 

Appendix-B of IBA Working Group Report 2010

Indicative list of High/Medium risk Products & Services

 

i). Electronics funds payment services such as electronic cash (e.g.., stored value and payroll cards), funds transfers(domestic and international), etc..

ii). Electronic banking

iii). Private banking (domestic and international)

iv). Trust and asset management services

v). monetary instruments such as Travelers Cheque

vi). Foreign correspondent accounts

vii) Trade finance( such as letters of credit)

viii). Special use or concentration accounts

ix). Lending activities, particularly loans secured by cash collateral and marketable securities

x). Non-deposit account services such as Non-deposit investment products and insurance

xi). Transaction undertaken for non-account holders (occasional customers)

xii). Provision of safe custody and safety deposit boxes

xiii). Currency exchange transactions

xiv). Project financing of sensitive industries in high –risk jurisdictions

xv). Trade finance services and transactions involving high-risk jurisdictions

 xvi). Services offering anonymity or involving third parties

xvii). Services involving banknote and precious metal trading and delivery

xviii). Services offering cash, monetary or bearer instruments; cross-border transactions, etc..

 

Appendix-C of IBA Working Group Report 2010

INDICATIVE LIST OF HIGH / MEDIUM RISK GEOGRAPHIES/ LOCATIONS/ COUNTRIES

 

                   I.            Countries/Jurisdictions i. Countries subject to sanctions, embargoes or similar measures in the United Nations Security Council Resolutions (―UNSCR‖).

                II.            Jurisdictions identified in FATF public statement as having substantial money laundering and terrorist financing (ML/FT) risks (www.fatfgafi.org)

             III.            Jurisdictions identified in FATF public statement with strategic AML/CFT deficiencies (www.fatf-gafi.org)

             IV.             Tax havens or countries that are known for highly secretive banking and corporate law practices

                V.            Countries identified by credible sources 1 as lacking appropriate AML/CFT laws, regulations and other measures.

             VI.            Countries identified by credible sources as providing funding or support for terrorist activities that have designated terrorist organisations operating within them.

          VII.            Countries identified by credible sources as having significant levels of criminal activity.

       VIII.            Countries identified by the bank as high-risk because of its prior experiences, transaction history, or other factors (e.g. legal considerations, or allegations of official corruption). ix. The list of Countries with risk classification is annexed as Annexure

 Locations

                   I.            Locations within the country known as high risk for terrorist incidents or terrorist financing activities (e.g. sensitive locations in Jammu and Kashmir, North east, Naxal affected districts)

                II.            Locations identified by credible sources as having significant levels of criminal, terrorist, terrorist financing activity

             III.            Locations identified by the bank as high-risk because of its prior experiences, transaction history, or other factors.

Happy Reading, 

Those who read this, also read: 

1. The IBA Working Group Report on AML/CFT  2010 : Alert Generation 

2. The IBA Working Group Report on AML/CFT  2010: Appendices D & E

3. The IBA Working Group Report on AML/CFT  2010 : Legal Framework  and Risk Assessment

4. The IBA Working Group Report on AML/CFT  2010 :  Alert Management

5. The IBA Working Group report on AML/CFT  2010  : Preparationof Alerts & Submissionof STRs