Hello, this is the payment team of Support Administrative Scrivener Corporation.
In recent years, there has been a strong demand for measures against money laundering and terrorist financing at financial institutions.
In this article, we will explain what is required of money laundering measures for funds transfer companies.
What is confirmation at the time of transaction in foreign exchange transactions?
As a specified business entity stipulated in the Act on Prevention of Transfer of Criminal Proceeds, a funds transfer business operator is required to engage in specified transactions (1) foreign exchange transactions involving the receipt and payment of cash exceeding 100,000 yen, and 2) continuous or repeated foreign exchange transactions. When concluding a contract (account registration)), you are required to carry out verification at the time of transaction.
Verification at the time of transaction means, in the case of individual customers, in addition to confirming the customer's identification information (name, residence, date of birth), the purpose of the transaction and occupation, and in the case of corporate customers, the identification information of the customer. (name, location of head office or principal office), identification information such as customer representative (name, residence, date of birth), transaction purpose, business content, and identification of the effective controller. This refers to confirming information (name, residence, date of birth).
If the transaction falls under "transactions requiring special caution" or "high-risk transactions" as explained below, it is necessary to take measures appropriate to the risk. In these cases, confirmation will be made at the time of transaction.
How to confirm personal identification information
In the case of non-face-to-face transactions, the methods for identifying personal information during transaction confirmation include, for example, the following methods.
(natural person) ① Method of receiving image information for identity verification (identity verification document with photo and customer's appearance taken by the software) from a customer, etc. or a representative, etc. using software provided by a specified business operator. ②Receive identity verification documents from customers, etc. or representatives, etc., and send transaction-related documents by registered mail, etc., as mail that does not require forwarding, to the address of the customer, etc. listed on the identity verification documents. how to
(Corporation) ①Receive a declaration of the name of the customer, etc. and the location of the head office or principal office from the representative of the customer, etc., and also receive registration information sent from the registration information provision service operated by the Civil Law Association, a general incorporated foundation. (When receiving the notification from a representative of a customer, etc. who is not registered as an officer with authority to represent the customer, etc., in addition to the above method, send transaction-related documents by registered mail to the head office of the customer, etc.) method of sending as mail that does not require forwarding, etc.) ②Receive a declaration of the name of the customer, etc. and the location of the head office or principal office from the representative of the customer, etc., as well as the name of the customer, etc. and the location of the head office or principal office published on the National Tax Agency corporate number publication site. A method of confirming the location and sending transaction-related documents to the customer's head office, etc. by registered mail, etc. as mail that does not require forwarding.
Documents that can be used as identity verification documents include a driver's license, residence card, and my number card. For foreigners who have a residence card with a period of stay, funds transfer companies are also required to manage the period of stay.
“Transactions that require special attention” in specific transactions
The following transactions other than eligible transactions that require special attention in customer management are referred to as "transactions requiring special attention." It should be noted that even transactions that are below the threshold or transactions that are allowed to be managed simply may fall under the category of transactions that require special attention as described below.
○ Transactions that are suspected of being money laundering ○ Transactions conducted in a manner significantly different from similar transactions
For example, specifically, the following transactions: ・Transactions that are conducted in an unnatural manner or frequency in light of the purpose of the transaction, occupation or business content, etc. ・Transactions related to accounts where large amounts of money are suddenly deposited and withdrawn even though there is usually no movement of funds. ・Abnormal transactions from the perspective of economic rationality
These transactions require detection through continuous transaction monitoring.
high risk trading
High-risk transactions are transactions that fall under any of the following:
○ Transactions with customers suspected of impersonation or falsifying matters related to confirmation at the time of transaction Specifically, it refers to the following transactions. ・In cases where there is a suspicion that the other party is impersonating the customer, etc. or their representative, etc., related to the confirmation at the time of transaction when concluding an ongoing contract that is the basis of the transaction (for example, concluding a deposit and savings contract). the transaction ・Transactions with customers, etc. or their representatives, etc. who are suspected of falsifying matters related to confirmation at the time of transaction when confirmation was conducted at the time of concluding an ongoing contract that is the basis of the transaction.
○ Transactions with customers residing or located in specific countries, etc. This refers to transactions with customers residing in specific countries where anti-money laundering measures are deemed to be insufficient (currently Iran and North Korea).
○ Transactions with foreign PEPs (Politically Exposed Persons) This refers to transactions with the following persons. ① Foreign head of state ② A person who holds the following position in a foreign country: ・Positions equivalent to the Prime Minister and other Ministers of State and Vice Ministers in Japan ・Positions equivalent to the Speaker of the House of Representatives, Vice-President of the House of Representatives, President of the House of Councilors, or Vice-President of the House of Councilors in Japan ・Position equivalent to a Supreme Court judge in Japan ・Position equivalent to Ambassador Extraordinary and Plenipotentiary, Minister Extraordinary and Plenipotentiary, Special Ambassador, Government Representative or Plenipotentiary in Japan ・Positions equivalent to the Chief of the Joint Chiefs of Staff, Vice Chief of the Joint Staff, Chief of the Ground Staff, Vice Chief of the Ground Staff, Chief of the Maritime Staff, Vice Chief of the Maritime Staff, Chief of the Air Staff, or Vice Chief of the Air Staff in Japan ・Central bank officer ・Officials of corporations whose budgets must be resolved or approved by the Diet. ③ Persons who were in ① or ② in the past ④ Family members from ① to ③ ⑤ A corporation in which ① to ④ are the effective controllers
When conducting high-risk transactions, in addition to the same confirmation items as regular specified transactions, we will also confirm the "asset and income status." In addition, given that these transactions have a high risk of being used for money laundering, we will use a more rigorous method to confirm "identification information" and "substantive controller" than when conducting ordinary specified transactions. It is supposed to be done.
Guidelines for Combating Money Laundering and Terrorist Financing
In terms of anti-money laundering measures required of actual funds transfer companies, they are required to develop a system based on the "Guidelines for Anti-Money Laundering and Anti-Terrorist Financing" (hereinafter referred to as "Money Laundering Guidelines") established by the Financial Services Agency. I am.
Below, we will explain the basic concept and important terms.
Basic idea
The Money Laundering Guidelines are the basic framework for anti-money laundering and terrorist financing measures that the Financial Services Agency requires of financial institutions, etc. Funds transfer companies, etc., are required to evaluate their own risks and take measures commensurate with the risks. That is required.
These guidelines serve as guidelines for complying with related laws and regulations, such as the Act on Prevention of Transfer of Criminal Proceeds (Criminal Proceeds Act) and the Foreign Exchange and Foreign Trade Act (Foreign Exchange Act).
Risk-based approach
The risk-based approach is a method for fund transfer companies to identify and assess their own money laundering and terrorist financing risks, and to take appropriate measures. This requires flexible and agile responses at each stage of risk identification, assessment, and mitigation.
This approach is carried out in the following steps: Identification of risks: We comprehensively and specifically examine the products and services we provide, transaction formats, transaction countries/regions, customer attributes, etc., and identify the money laundering and terrorist financing risks we face. Risk assessment: Evaluate the impact of identified risks on your company and consider specific responses that form the basis of risk reduction measures. Risk reduction: Based on the risk assessment, we will take specific mitigation measures according to the magnitude of the risk.
Customer management (CDD)
Customer due diligence (CDD) is a process by which financial institutions assess customer risk and monitor and confirm transactions based on that assessment.
CDD is implemented at each stage of the transaction, including the initiation, continuation, and termination, and requires stricter management, especially for high-risk customers.
At the start of a transaction: We verify the customer's identity and the purpose of the transaction. Ongoing: Regular customer information updates and transaction monitoring will be carried out. At the end of the transaction: Even after the transaction is completed, we will appropriately preserve records of customer information and transaction history.
Transaction monitoring/filtering
Transaction monitoring and filtering is an important means of detecting and reporting suspicious transactions. Funds transfer companies, etc. need to set scenarios and thresholds according to risk, and prepare a system to monitor transactions in real time.
Transaction monitoring: We set extraction criteria such as scenarios and thresholds that reflect our own risk assessment, and analyze detection results and suspicious transaction notification status based on those criteria. Furthermore, it is necessary to continually improve standards by evaluating the characteristics of reported transactions and the effectiveness of current extraction standards. Filtering: Verify whether the details of the transaction (including remittance destination, transaction parties, effective control persons, import/export items, etc.) match the latest sanctions list. In addition, we will confirm whether the detection criteria for sanctions targets are set appropriately according to the risks, and when a person is designated as subject to economic sanctions by a resolution of the United Nations Security Council, etc., we will check without delay and We will comply with laws and regulations related to sanctions and take other necessary measures depending on the risk.
Reporting suspicious transactions
Reporting suspicious transactions is an obligation based on the Act on Prevention of Transfer of Criminal Proceeds (Criminal Proceeds Act). Suspicious transaction reporting is an important means for fund transfer companies to strengthen their own risk management systems.
Detection of suspicious transactions: Identify suspicious transactions by comprehensively determining customer attributes and transaction status. We will utilize IT systems and manuals to develop a monitoring system. Implementation of notification: If we detect a suspicious transaction, we will immediately report it using the form. We will utilize the information obtained during the notification process to strengthen risk management.
Management involvement and understanding
Management involvement and understanding are essential to effectively implement anti-money laundering measures. Management must understand that money laundering risk can be a serious management risk, and must take the initiative in establishing governance for management.
Establish governance: Management develops policies and procedures for risk management and oversees their implementation. Forward-looking: It is necessary to maintain an attitude of predicting future risks and taking countermeasures. Company-wide initiatives: Management will be actively involved in ensuring that all employees are fully aware of the importance of risk management.
Business management (three lines of defense, etc.)
In business management, a "three lines of defense" model is adopted to implement anti-money laundering measures across the organization. This necessitates increasing the effectiveness of risk management.
First line of defense: This refers to the sales department. In terms of anti-money laundering and terrorist financing measures, sales branches and sales departments that engage in direct customer-facing activities are the first to face money laundering and terrorist financing risks, and are responsible for preventing them. Second line of defense: Refers to management departments such as compliance departments and risk management departments. These departments will independently check the autonomous risk management of the front lines, and at the same time they will also play the role of supporting the first lines. Third line of defense: refers to the internal audit department. The internal audit department is required to periodically verify, from an independent standpoint, whether the first and second lines are functioning properly and whether there is any room for further improvement. You will be asked for it.
Summary
Money laundering measures required of fund transfer companies are becoming stricter day by day.
For business operators who want to start a new funds transfer business, it is important to understand the regulations mentioned above.
We provide a "Funds Transfer Business Registration Support Service" that includes advice on money laundering measures.
Partial services can also be provided upon request.
The first consultation is free, so if you are interested, please contact us using the inquiry form below.
