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Banking Act - Anti-Money Laundering Regulations 2002

REPUBLIC OF THE MARSHALL ISLANDS

Anti –Money Laundering Regulations, 2002

BANKING ACT

The Banking Commissioner, Alfred Alfred, Jr., pursuant to Section 156 of the Banking Act, 17 MIRC, Chapter 1, as amended, hereby makes Regulations respecting matters related to the Anti-Money Laundering and Examination Procedures Manual.

Section 1. Persons associated with or who control financial institutions and cash dealers.

(a) Each financial institution and cash dealer shall identify, obtain the requisite information, retain records and file with the Banking Commissioner reports regarding persons affiliated with or who own or control the financial institution and cash dealer to the extent and in the manner required by this Section 1.

(b) Definitions. For the purposes of the recordkeeping and reporting requirements of this Section 1:

(1) Acting in concert-means knowing participation in a joint activity or parallel action towards a common goal of acquiring control of a financial institution or cash dealer, whether or not pursuant to an express agreement;

(2) Control - means:

(i) the power, directly or indirectly, to direct the management or policies of a financial institution or cash dealer; or

(ii) to vote 10% or more of any class of voting shares of a financial institution or cash dealer.

(3) Identify - means to ascertain the full name, address, nationality occupation, business or principal activity.

(4) Institution affiliated party - means any director, officer, employee or person who:

(i) owns or controls a financial institution or cash dealer, or

(ii) participates in the conduct of the affairs of a financial institution or cash dealer.

(c) Recordkeeping. Each financial institution and cash dealer shall

(1) adopt a methodology by which it will identify all persons who, acting alone or in concert with one or more persons, owned or controlled the financial institution or cash dealer at any time during the immediately preceding calendar year;

(2) adopt a methodology by which it will ascertain whether any institution affiliated party has been convicted of any offense involving dishonesty, breach of trust or money laundering; and

(3) record the information gathered pursuant to this subsection (c) (1) and (2) in a report no later than thirty (30) days following the end of the year.

(d) The compliance officer, as designated by each financial institution or cash dealer pursuant to Section 2 (Training), shall certify that the information collected and retained by the financial institution or cash dealer pursuant to subsection (c)(3) is true and accurate.

(e) Reporting - ownership/control reports.

(1) Information regarding ownership and control of financial institutions and cash dealers shall be reported by completing an Ownership/Control Report form (OCR) pursuant to the OCR's instructions, and collecting and maintaining supporting documentation as required by paragraph (c) of this Section 1.

(2) The OCR shall be filed with the Banking Commissioner, as indicated in the instructions to the OCR.

(3) The OCR shall be filed annually, no later than by February l.

(f) Retention of Reports. Each financial institution or cash dealer shall retain a copy of all reports together with any supporting documentation required by this Section 1 for a period of six (6) years from the date the report is filed with the Banking Commissioner.

Section 2. Training. Financial institutions and cash dealers shall develop written policies, procedures and controls, to the extent that such policies and procedures do not currently exist, for the detection and prevention of money laundering. Such programs shall include:

(a) centralization of information on the identity of customers, principal beneficiaries, authorized agents, beneficial owners, suspicious transactions and transactions exceeding $10,000 or its equivalent;

(b) designation of a senior officer to serve as the program's compliance officer;

(c) provide for on-going training and education for officers and employees; and

(d) an audit function, either internal or independent, to check and evaluate compliance with and effectiveness of the measures taken to implement Part 13 of Title 17 and its implementing regulations.

Section 3. Accounts, Recordkeeping.

(a) A financial institutions and cash dealer shall:

(1) establish and maintain one or more uniquely identifiable accounts on behalf of its customers;

(2) maintain all accounts in the name of account holder. No account shall be opened or maintained anonymously or with fictitious or incorrect names; and

(3) maintain records with respect to each account

(i) documenting all person with ownership in access to or signatory authority; and

(ii) statements, ledger cards or other documentation showing each credit to or debit from an account.

(b) Verification of account customer identity. A financial institution and cash dealer is required to verify the identity of all persons opening, establishing, having access to, or having a financial interest in all accounts.

(1) Verification will be by obtaining and verifying the following information:

(i) the name, address and occupation/business purpose;

(ii) citizenship and/or residency status;

(iii) the social security number, tax identification number or its equivalent;

(iv) the passport or alien identification number or the equivalent; and

(v) the nature of the representative capacity, if any.

(2) Accounts shall not be opened, kept or maintained if:

(i) an applicant for an account or a customer refuses to supply appropriate information;

(ii) attempts to obtain information to be, and/or verify information, supplied by the applicant or customer yields doubtful or questionable results; or

(iii) attempts to obtain and/or verify information regarding the identities of all persons acting, or appearing to act in a representative capacity yields doubtful or questionable results.

(3) In complying with subsection (b) (2), where an account is already opened, kept or maintained, a financial institution and cash dealer shall:

(i) report the existence of such account to the Banking Commissioner; and

(ii) exercise its commercially reasonable discretion in terminating or closing the account, in which event the financial institution or cash dealer must take all reasonable steps to ensure that the account in the process of being terminated or closed is not permitted to transact or establish any new business.

(4) No action, suit or other proceeding shall lie against any financial institution or cash dealer, or any officer, employee or other representative of the institution acting in the ordinary course of the person's employment or representation, in relation to any action taken in good faith by that institution or person pursuant to this Section 3.

(c) Verification - records to be examined. Financial institutions and cash dealers satisfy their requirement to verify customer records by obtaining from and examining:

(1) from individuals - original official unexpired documents bearing a photograph or reasonable alternative;

(2) articles of incorporation, charters, or their equivalents, or any other official documentation establishing that it has been lawfully registered and is in existence at the time of identification and which delineates the powers of their legal representatives; and

(3) the appropriate documentation for all persons acting, or appearing to act in a representative capacity including all the beneficiary (ies).

(d) Recordkeeping requirements.

(1) Financial institutions and cash dealers shall, throughout the existence of the business relationship, and for a period of six (6) years after the account has been closed or the business relationship with the customer has ended:

(i) obtain, maintain and retain copies of all documentation upon which they relied to verify their customer's identity, and

(ii) be able to identify the person who conducted the verification.

(2) All such records shall be filed or stored in a readily recoverable manner as to be accessible within a reasonable time.

Section 4. Transactions, Recordkeeping.

(a) Every financial institution and cash dealer shall retain records regarding all transactions to the extent and in the manner required by this Section 4.

(b) For the purposes of this Section 4, a transaction is:

a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, of assets, and includes a deposit, credit, withdrawal, debit, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument or investment security, purchase or redemption of any traveler's check or money order, payment or order for any money remittance or transfer, or any other payment, transfer, or delivery by, through, or to a financial institution or cash dealer, by whatever means effected

(c) Recordkeeping - All financial institutions and cash dealers shall retain records necessary to reconstruct all transactions and sufficient to identify:

(1) the name, address and occupation/business or principal activity of each person conducting or involved in a transaction or on whose behalf a transaction is conducted;

(2) the identity of all financial institutions and cash dealers involved;

(3) the nature and date of the transaction, together with all advices, requests, or instructions given or received;

(4) the type and identification numbers of all accounts involved;

(5) the type and amount of currency involved, if any;

(6) if a negotiable instrument other than currency involved

(i) the name of the drawer

(ii) the name of institution on which it is drawn

(iii) the name of the payee, if any;

(iv) amount and date of the instrument

(v) the number of the instrument, if any; and

(vi) details regarding all endorsements appearing on the instrument; and (7) name(s) of officers, employees and agent(s) and method(s) used to verify the information required by this subsection (c).

(d) Each financial institution or cash dealer shall, in addition to the records in Subsection (c), retain the following:

(1) Each check, clean draft, or money order drawn on the bank or issued and payable by it, except those drawn for $100 or less or those drawn on accounts which can be expected to have drawn on them an average of at least 100 checks per month over the calendar year or on each occasion on which such checks are issued, and which are:

(i) dividend checks,

(ii) payroll checks,

(iii) employee benefit checks,

(iv) insurance claim checks,

(v) medical benefit checks,

(vi) checks drawn on government agency accounts,

(vii) checks drawn by brokers or dealers in securities,

(viii) checks drawn on fiduciary accounts,

(ix) checks drawn on other financial institutions, or

(x) pension or annuity checks.

(2) Each item in excess of $100 (other than bank charges or periodic charges made pursuant to agreement with the customer), comprising a debit to a customer's deposit or share account, not required to be kept, and not specifically exempted, under paragraph (d)(1) of this section;

(e) Retention of records.

(1) A financial institution or cash dealer shall maintain either the original or a microfilm, electronic or other copy or reproduction of all records, documents, advice requests and instructions regarding any transaction subject to Section 4 recordkeeping requirements for a period of six (6) years from the date of the completion of the transaction; and

(2) all records shall be filed or stored in a readily recoverable manner as to be accessible within a reasonable time.

(f) Exemption. Nothing in this regulation shall be construed as requiring the production of any evidence of identity where there is a transaction or a series of transactions taking place in the course of a business relationship, in respect of which the applicant has already produced satisfactory evidence of identity.

Section 5. Reports of suspicious transactions.

(a) General.

(1) Every financial institution and cash dealer shall file with the Banking Commissioner, to the extent and in the manner required by this Section 5, a Suspicious Activity Report (SAR) of any suspicious transaction relevant to a possible violation of law or regulation. A financial institution or cash dealer may also file a SAR regarding any suspicious transaction that it believes is relevant to the possible violation of any law or regulation but whose reporting is not required by this section.

(A) Where a financial institution or casher dealer suspects that any transaction or any other activity could constitute or be related to terrorist financing, terrorist acts, a terrorist organization, an individual terrorist or to terrorist property the financial institution must report such suspicion to the Banking Commissioner within three working days of forming of such suspicion.

(2) For the purposes of reporting under this Section 5, a suspicious transaction is:

(a) a transaction which includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, of assets, and includes a deposit, credit, withdrawal, debit, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument or investment security, purchase or redemption of any traveler's check or money order, payment or order for any money remittance or transfer, or any other payment, transfer, or delivery by, through, or to a financial institution or cash dealer, by whatever means effected; and

(b) which is conducted or attempted to be conducted at a financial institution or cash dealer; and

(c) one which the financial institution or cash dealer knows, suspects or has reason to suspect that:

(i) involves funds or other assets derived from illegal activity; or

(ii) was conducted or attempted to be conducted

(A) in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets); or

(B) as part of a plan to violate or evade any Marshall Islands law or regulation or to avoid any transaction reporting requirement under Marshall Islands law or regulation; or

(iii) involves a transaction or transactions which:

(A) is/are complex or unusual; or

(B) present an unusual pattern; or

(C) has/have no apparent economic or lawful purpose; or

(D) is/are not the sort of transaction in which any person or entity involved would normally be expected to engage.

(b) Filing procedures

(1) A suspicious transaction shall be reported by completing a SAR form pursuant to the SAR's instructions, and collecting and maintaining supporting documentation as required by paragraph (c) of this Section 5.

(2) The SAR shall be filed with the Banking Commissioner, as indicated in the instructions to the SAR.

(3) The SAR shall be filed no later than three (3) working days after the date of initial detection by the financial institution or cash dealer of facts that may constitute a basis for filing a SAR. If no suspect was identified on the date of the detection of the incident requiring the filing, a financial institution or cash dealer may delay filing a SAR for an additional thirty (30) calendar days in order to identify a suspect. In no case shall reporting be delayed more than thirty three (33) calendar days after the date of initial detection of a reportable transaction. In situations involving violations that require immediate attention, such as, for example, ongoing money laundering schemes, the financial institution or cash dealer shall immediately notify the Banking Commissioner, or his designee, in addition to a later timely filing of the SAR.

(c) Retention of records. A financial institution or cash dealer shall maintain a copy of any SAR filed and the original or business record equivalent of any supporting documentation for a period of fifteen (15) years from the date of filing the SAR. Supporting documentation shall be identified, and maintained by the financial institution or cash dealer as such, and shall be deemed to have been filed with the SAR. A financial institution or cash dealer shall make all supporting documentation available to the Banking Commission and any appropriate law enforcement agencies upon request.

(d) Confidentiality of reports. Financial institutions and cash dealers, its employees, officers, directors, and agents shall not notify any person or entity other than those authorized by law, of the information, record or that an SAR has been prepared, or otherwise referred or furnished to the Banking Commissioner, Attorney General, court of competent jurisdiction, or other lawfully recognized person.

Section 6. Currency Transaction Reporting.

(a) Every financial institution and cash dealer shall obtain the requisite information and file with the Banking Commissioner reports of transactions in currency to the extent and in the manner herein required.

(b) For the purposes of obtaining, information and reporting under this Section 6, a transaction in currency is:

(1) a deposit, withdrawal, exchange of currency, or other payment or transfer;

(2) involving currency of any country of a value greater than US$10,000:

(i) in a single transaction; or

(ii) in multiple transactions taken by or on behalf of a single person within a 24 hour period when aggregated.

(c) Prior to concluding any transaction in currency all financial institutions and cash dealers shall obtain and verify the following information:

(1) the name, address, citizenship/residency status, social security number or passport number and occupation/business or principal activity of each person conducting or involved in a transaction or on whose behalf a transaction is conducted;

(2) the nature and date of the transaction;

(3) the type and identification numbers of all accounts involved;

(4) the type and amount of currency involved, and

(5) name(s) of officers, employees and agent(s) and method(s) used to verify the information required by this subsection (c).

(d) Verification - records to be examined. Financial institutions and cash dealers satisfy their requirement to verify information required by Section 6(c) records by obtaining from and examining:

(1) from individuals - original official unexpired documents bearing a photograph or reasonable alternative;

(2) articles of incorporation, charters, or their equivalents, or any other official documentation establishing that it has been lawfully registered and is in existence at the time of identification and which delineates the powers of their legal representatives; and

(3) the appropriate documentation for all persons acting, or appearing to act in a representative capacity including all the beneficiary(ies).

(e) Reporting - transactions in currency. Filing procedures.

(1) Information regarding transactions in currency not otherwise exempted pursuant to subsection (g) and (h) of this Section 6 shall be reported by completing a Currency Transaction Report form (CTR) pursuant to the CTR's instructions, and collecting and maintaining supporting documentation as required by paragraph (c) of this Section 6.

(2) The CTR shall be filed with the Banking Commissioner, as indicated in the instructions to the CTR.

(3) The CTR shall be filed no later than ten (10) working days after the date of transaction in currency.

(f) Retention of records. A financial institution or cash dealer shall maintain a copy of any CTR filed and the original or a microfilm, electronic or other copy or reproduction, or business record equivalent of any supporting documentation of a CTR for a period of six (6) years from the date of filing the CTR. Supporting documentation shall be identified, and maintained by the financial institution or cash dealer as such, and shall be deemed to have been filed with the CTR. A financial institution or cash dealer shall make all supporting documentation available to the Banking Commissioner and any appropriate law enforcement agencies upon request.

(g) Transactions eligible for exemption from filing report.

(1) A transaction to which a financial institution or cash dealer is party is also eligible for exemption if:

(i) the other party to the transaction is a government agency of the Marshall Islands; and

(ii) the amount of currency involved in the transaction does not exceed an amount that is reasonably commensurate with the lawful business activities of that agency.

(2) A transaction is eligible for exemption if the transaction is between a financial institution and cash dealer and another financial institution and cash dealer; or

(3) A transaction is also eligible for exemption if:

(i) the transaction is between a financial institution and cash dealer and another person (in this subsection called the "customer");

(ii) the customer has had, at the time when the transaction takes place, an account verified pursuant to Section 3 with the financial institution and cash dealer for one year;

(iii) the transaction consists of a deposit into, or a withdrawal from, an account maintained by the customer with the financial institution and cash dealer;

(iv) the transaction does not involve any party representing anyone in a representative capacity;

(v) the customer carries on a commercial enterprise (other than business that includes the selling of vehicles, vessels, aircraft, real estate brokerage, mobile home dealers, accountants, lawyers, doctors, pawnbrokers, title insurance/closing companies, trade unions, and auctioneers;

(vi) the account is maintained for the purposes of that business; and

(vii) the amount of currency involved in the transaction does not exceed an amount that is reasonably commensurate with the lawful business activities of the customer.

(4) A transaction is also eligible for exemption if:

(i) the transaction is between a financial institution and cash dealer and another person (in this subsection called the "customer");

(ii) the customer has had, at the time when the transaction takes place, an account verified pursuant to Section 3 with the financial institution and cash dealer for one year;

(iii) the transaction consists of a withdrawal from an account maintained by the customer with the financial institution and cash dealer;

(iv) the withdrawal is made for payroll purposes;

(v) the customer regularly withdraws, from the account, currency of a value not less than $10,000 to pay the customer's staff and employees; and

(vi) the amount of currency involved in the transaction does not exceed an amount that is reasonably commensurate with the lawful business activities of the customer.

(h) Exemption registry. A record of each exemption granted under this section and the reason therefore must be kept by a financial institution and cash dealer in an exemption registry.

(1) For an exempted transaction between a financial institution or cash dealer and a government agency of the Marshall Islands under subsection (g)(1)and (2), the exemption registry should include the reason for the exemption and the names and addresses of the financial institution or cash dealer and/or government agencies involved in the transaction.

(2) For exempted transactions between a financial institution and cash dealer and a customer, as defined in (g) (3) and (4), the exemption registry must include the following information:

(i) the reason for exemption;

(ii) the customer's name, business or residential address, and his/her occupation, business or principal activity;

(iii) a statement whether the exemption covers deposits, withdrawals or both;

(iv) a signed statement by the customer that states the following:

(A) the party believes that the transaction is eligible for exemption under Section 6(g), and

(B) the information provided by the party to the institution in relation to the transaction is, to the best of his or knowledge and belief, true and correct;

(v) the name and title of the person making the decision to grant the exemption; and

(vi) any other information mandated by the Banking Commission.

(3) Class transactions. An exemption can apply to a class of transactions between a financial institution and cash dealer and eligible parties designated under Section 6(g). For class transactions, the exemption registry must also include in, addition to the requirements of Section 6(h) (1) and (2), the following:

(i) the range of the amounts of currency involved in the class of transactions;

(ii) the range amount of the class of transactions;

(iii) the period during which the class of transactions is to be exempt; and

(iv) any other information mandated by the Banking Commission.

(4) Financial institution or cash dealer must monitor the exemptions they have granted on a continual basis. A change in circumstances may warrant removal from the registry or require amending the exemption record in the registry. In addition to monitoring, each financial institution or cash dealer must commission an annual review of its exemption registry. A financial institution or cash dealer must contact each customer who has an exemption to determine whether there is a change in the customer's situation since the last date of review.

(5) The Banking Commission has the right to review the exemption registry at any time. The Bank Commission may, by appropriate order, direct the deletion of any.

Section 7. Assessment of Civil Money Penalties.

(a) In addition to any criminal penalties authorized by the Banking Code, each financial institution and cash dealer, and any partner, director, officer, employee, or person participating in the conduct of the affairs of a financial institution or cash dealer who violates any provision of Part 13 of Title 17 or any of its implementing regulations shall forfeit and pay a civil money penalty to the extent and in the manner hereafter specified by this Section.

(b) For any willful violation of any recordkeeping, reporting or verification requirement of Part 13 of Title 17 or any of its implementing regulations, the Banking Commissioner may recommend to the Office of Attorney General that it assess upon any financial institution and cash dealer, and upon any partner, director, officer, or employee thereof, or person participating in the conduct of the affairs of a financial institution or cash dealer who willfully participates in the violation, a civil money penalty not to exceed $10,000 per violation.

(c) For any negligent violation of any requirement of Part 13 of Title 17 or any of its implementing regulations, the Banking Commissioner may recommend to the Office of the Attorney it assess upon any financial institution and cash dealer, and upon any partner, director, officer, or employee thereof, or person participating in the conduct of the affairs of a financial institution or cash dealer who participates in the violation, a civil money penalty not to exceed $500 per violation.

(d) Assessment

(1) The Banking Commissioner shall inform the Office of the Attorney General of a violation and provide a detailed recommendation on the amount of the civil money penalty that should be sought.

(2) Upon receipt of the recommendation, the Office of the Attorney General must determine whether there is sufficient evidence to have the assessment enforced by the High Court.

(3) If the Office of Attorney General decides to enforce the assessment, written notice must be provided to the entity(ies) or person(s) from whom payment is sought. The notice must be sent out before the enforcement action is filed with the High Court.

(e) All civil money penalties collected under this Section shall be paid over to the Treasury of the Republic of the Marshall Islands.

(f) The resignation, termination of employment or termination of participation in the affairs of any partner, director, officer, employee, or person participating in the conduct of the affairs of a financial institution or cash dealer shall not affect the jurisdiction and authority of the Banking Commissioner to issue any Notice of assessment against such person or entity if such Notice is served within six years of their resignation, termination of employment or termination of participation in the affairs of the financial institution or cash dealer.

Section 8. Exceptions and exemptions.

Subject to the provisions of the Act and these Regulations, the Banking Commissioner, in his/her sole discretion, may by written order or authorization make exceptions to or grant exemptions from the requirements of Sections 1- 7. Such exceptions or exemptions may be conditional or unconditional, may apply to particular persons or classes of persons, and may apply to particular transactions or classes of transactions. They shall, however, be applicable only as expressly stated in the order or authorization. Any exception or exemption shall be revocable in the sole discretion of the Banking Commissioner.

Section 9. Interpretation.

In these Regulations, unless the contrary intention appears:

"Act'' means the Banking Act, 17 MIRC, Chapter 1.

"Attorney-General" means the Attorney-General appointed pursuant to the Constitution of the Republic of the Marshall Islands.

"Banking Commissioner" means the Banking Commissioner appointed under the Act;

"Financial institution and cash dealer" means the financial institution and cash dealer as defined in the Act.