Standard Commerce Bank, Ltd. 1
Money Laundering & Terrorist Financing
Risk Assessment
25 Victoria Street (Corner of Bath Road)
Roseau, Commonwealth of Dominica
Implementation Date: May 2016
Version Number: 1.0
Last Updated: May 2016
Approved By: Alex Silver, Compliance Officer
Standard Commerce Bank, Ltd. is referred to as “SCB” or the “Bank” within this
document.
1
Table of Contents
Table of Contents ...................................................................................................................... 2
1 Risk Assessment ................................................................................................................. 4
2 Money Laundering Risk ................................................................................................... 4
3 Terrorist Financing Risk ................................................................................................. 4
4 What is an Inherently Risk for Money Laundering or Terrorist Financing .. 4
5 How Does SCB Assess Risk? ............................................................................................ 5
6 Executive Summary........................................................................................................... 6
6.1
6.2
SCB’s Business ....................................................................................................................... 6
SCB’s Risk ................................................................................................................................ 6
7 SCB’s Products, Services and Delivery Channels .................................................... 7
7.1
Products & Services ............................................................................................................. 7
7.1.1 Letters of Credit (LCs) ..................................................................................................................7
7.2
Delivery Channels ................................................................................................................ 8
7.2.1 Payment Methods (Incoming) ..................................................................................................8
7.2.2 Payment Methods (Outgoing) ...................................................................................................8
7.2.3 Non-Face-to-Face Transactions................................................................................................9
7.2.4 Marketing, Advertising & Customer Service .......................................................................9
8 Geography ......................................................................................................................... 10
8.1
8.2
8.3
Destination/Origin of Client’s Funds.......................................................................... 10
Location of SCB’s Customers.......................................................................................... 10
SCB Location: Dominica .................................................................................................. 11
9 Customers and Business Relationships .................................................................. 11
9.1
9.2
Low to Medium Customers & Business Relationships ......................................... 11
High-Risk Customers & Business Relationships .................................................... 11
10 New Developments......................................................................................................... 12
11 Affiliates ............................................................................................................................. 12
12 Operational Processes .................................................................................................. 12
13 Other Operational Factors ........................................................................................... 12
13.1
13.2
13.3
Employees ............................................................................................................................ 13
Suppliers: Financial Services & Correspondent Banking .................................. 13
Suppliers: Non-Financial ................................................................................................ 13
14 SCB’s Controls .................................................................................................................. 13
14.1
14.2
14.3
14.4
14.5
14.6
14.7
14.8
Geographic Controls ......................................................................................................... 14
Physical Controls ............................................................................................................... 14
Electronic Controls ........................................................................................................... 14
Transaction Based Controls .......................................................................................... 15
Customer Identification, Review and Recordkeeping Controls ....................... 15
Staffing and Hiring Controls .......................................................................................... 16
Affiliate Controls ................................................................................................................ 16
Supplier Controls (Financial & Non-Financial Suppliers) .................................. 17
2
14.9 Suppliers: Non-Financial Services Controls ............................................................. 17
14.10
Other Operational Process Controls ...................................................................... 18
15 Client and Business Relationship Risk Ranking .................................................. 18
15.1
15.2
15.3
15.4
Business Relationships ................................................................................................... 18
Low Risk Customers ......................................................................................................... 19
Medium Risk Clients ......................................................................................................... 19
High Risk Customers ........................................................................................................ 19
16 Transaction Monitoring ............................................................................................... 20
16.1
Enhanced Transaction Monitoring ............................................................................. 21
17 Enhanced Due Diligence ............................................................................................... 21
18 Updates to Client Information and Identification ............................................... 22
Appendix 1: Compliance Officer References ............................................................... 23
Appendix 2: Sample High-Risk Client Log .................................................................... 24
Appendix 3: Sample Enhanced Transaction Monitoring Log ................................ 25
Appendix 4: Country Risk Rating Methodology .......................................................... 26
Appendix 5: Country Risk Table ....................................................................................... 30
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1 Risk Assessment
Standard Commerce Bank, Ltd. (“SCB” or the “Bank”) is committed to preventing,
detecting and deterring money laundering and terrorist financing. This document,
in conjunction with SCB’s training programme, policy and procedural
documentation, forms part of the Bank’s anti-money laundering (AML) and counter
terrorist financing (CTF) compliance programme.
The aim of this Risk Assessment is to diagnose and document, the risk that SCB’s
business may be used to launder money or finance terrorism. In addition, SCB
considers the controls that the Bank has in place to prevent money laundering and
terrorist financing, and assess the effectiveness of the Bank’s controls (how well SCB
believes the Bank is doing). Finally, SCB describes the mechanism that the Bank
uses to rate the risk related to each of the Bank’s customers and business
relationships2, as well as the controls that the Bank has put in place for the Bank’s
higher risk customers.
Any questions or concerns about this document should be directed to the
Compliance Officer.
2 Money Laundering Risk
Money Laundering is any act intended to hide the fact that the funds were obtained
through criminal activity. Money laundering risk is the risk that a business could be
used to disguise or move criminal proceeds.
3 Terrorist Financing Risk
Terrorist Financing is funding any act of terrorism or committing any act, or
omission, that facilitates the funding of terrorism. Terrorist financing risk is the risk
that a business could be used to facilitate or disguise terrorist financing.
4 What is an Inherently Risk for Money Laundering or Terrorist
Financing
In order for an activity or asset to be attractive for money laundering or terrorist
financing, certain things are generally true:
1) The item or asset’s value is retained over time;
2) The item or asset’s value can be transferred easily from one person to
another (e.g., across international borders); and
3) The item or asset is difficult to trace as it passes from person to person.
For the remainder of this document, any reference to “customer”, includes SCB’s
business relationships, unless otherwise specified.
2
4
This is because both money laundering and terrorist financing depend on being able
to separate the source of the funds from the eventual purpose. Transferring
commercial value between individuals and/or organisations often takes place, in
order to make tracing the assets more difficult.
The ideal instrument for moving the assets retains its value over time and can be
transferred anonymously to any location, which may occur locally, as well as across
geographical borders.
5 How Does SCB Assess Risk?
As part of this assessment, SCB must consider several distinct factors, specifically
the Bank’s:
1) Products, Services and Delivery Channels: the specific goods or services
that the Bank buys and sells, as well as the ways in which the Bank serves
customers;
2) Geography: the areas in which SCB operates, including the Bank’s suppliers,
the Bank’s physical locations and the areas in which the Bank’s customers
are located;
3) Customers and Business Relationships: the individuals or organisations
that engage in transactional activity with the Bank;
4) New Developments: any changes to technology or other aspects of the
Bank’s business model that can have a significant impact on SCB’s risk;
5) Affiliates: any affiliated companies, including other companies that SCB
owns and companies that share a Beneficial Owner with SCB, and companies
that hold an ownership stake in SCB;
6) Operational Processes: work flow of the Bank, including anti-money
laundering, counter terrorist financing and risk mitigation related processes;
7) Other Factors: any element of the Bank’s business that is not considered in
the first three categories. The Bank considers SCB’s employees, investors
and suppliers, as additional risk factors.
SCB assesses the risk in each of these categories as High, Medium or Low. An overall
score for the entire business, is obtained by taking the average risk rating across
each of the four categories. To do this, SCB assigns a numeric score to each rating:
 High = 5
 Medium = 3
 Low = 1
SCB will consider the risk that money laundering or terrorist financing could occur,
both before SCB’s controls have been applied, and after. While a rating of High,
before controls have been applied is acceptable (the risk that would exist if there
were no controls in place), it is expected that SCB’s controls will reduce the
managed risk to Low levels in all categories. Where the risk after controls have
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been applied is Medium or High, the Compliance Officer will revise the controls
accordingly.
6 Executive Summary
6.1 SCB’s Business
Established in 2016, SCB3 is a privately owned and fully independent bank servicing
industrial and commercial entities as well as private individuals. Its international
trade specialists ensure clients leverage SCB’s financial resources, technology and
global banking network to manage and build their international businesses.
To that end, SCB offers a comprehensive range of trade and export finance products
designed to mitigate credit risks, yet preserve the necessary flexibility to navigate
complex cross-border transactions. The Bank, for instance, offers letter of credit
services including export and import letters of credit as well as standby letters of
credit. It will also discount deferred payment terms on export letters of credit. As
an alternative to traditional letters of credit, the Bank implemented a programme to
provide documentary collection to help facilitate payment when the buyer pays or
agrees to pay for goods.
SCB holds a banking license issued by the Ministry of Finance of the Commonwealth
of Dominica and is regulated by the Commonwealth’s Financial Supervision Unit.
6.2 SCB’s Risk
Based on the Risk Assessment that follows, SCB’s overall money laundering and
terrorist financing risk, before controls are applied (inherent), is Medium (3).
SCB’s controls effectively mitigate the risks to SCB; the risk that remains, once SCB’s
controls have been applied (residual/managed), is Low (1).
In the sections that follow, SCB outlines the specific risks that apply to the Bank’s
business, the controls that SCB has in place to combat money laundering and
terrorist financing, SCB’s mechanisms for risk ranking SCB’s customers and the
enhanced measures that are applied to SCB’s high-risk customers.
Category
Inherent Risk
(High/Medium/Low)
Rating
(1/3/5)
Managed Risk
(High/Medium/Low)
Rating
(1/3/5)
Standard Commerce Bank, Ltd. was incorporated pursuant to the Companies Act of
Dominica, No. 21 of 1994 on 23 October 2015 and received a banking license
pursuant to Section 5 of Dominica’s Offshore Banking Act No. 8 of 1996 on 18
January 2016.
3
6
Category
Inherent Risk
(High/Medium/Low)
Rating
(1/3/5)
Managed Risk
(High/Medium/Low)
Rating
(1/3/5)
Products,
Services and
Delivery
Channels
High
5
Low
1
Geography
Medium
3
Low
1
Customers
and Business
Relationships
Medium
3
Low
1
New
Developments
Low
1
Low
1
Affiliates
Low
1
Low
1
Operational
Processes
Medium
3
Low
1
Other Factors
High
5
Low
1
Total / Overall
Medium
3
Low
1
7 SCB’s Products, Services and Delivery Channels
In this section SCB considers the products and services that the Bank offers to SCB’s
customers, as well as the delivery channels used to render the products and
services. SCB also considers the methods of payment that may be used (both by
SCB’s business and by SCB’s customers). Each of these has an effect on SCB’s money
laundering and terrorist financing risk.
The average inherent money laundering and terrorist financing risk related to SCB’s
products, services and delivery channels is High (5).
7.1 Products & Services
SCB’s products and services are offered online, via SCB’s traditional website. The
risk associated with each product and service is described below. As an aggregate,
the inherent risk related to SCB’s products and services is High (5).
7.1.1 Letters of Credit (LCs)
A letter of credit is a promise of payment from the issuer (issuing bank) to the
beneficiary that the issuer will pay the beneficiary certain funds when the
beneficiary submits certain documents to the issuer or a party designated by them
in a specified manner, at a specified place, and within a specified time frame.
7
Authoritative sources including the Financial Action Task Force (FATF)4 and the
Wolfsberg Group5 have identified LCs as potential components of trade based
money laundering. While LCs are not anonymous, they can be used as a mechanism
to transfer value rapidly from one company and/or jurisdiction to another. LCs may
be used to create a complex and difficult to follow financial trail and/or to create the
semblance of legitimate business transactions. In instances of trade based money
laundering, schemes are generally reliant on collusion between a “buyer” and a
“seller.”
The risk of money laundering or terrorist financing through LC transactions, before
controls are applied, is Medium (3).
7.2 Delivery Channels
7.2.1 Payment Methods (Incoming)
SCB accepts the following methods of payment from SCB’s clients:

Electronic Funds Transfer/Wire Payments.
An assessment of the risk related to the method of payment that SCB accepts
appears below. Based on the average risk of the payment method accepted, the risk
of money laundering or terrorist financing, before controls are applied, is High (5).
7.2.1.1 Electronic Fund Transfers
Sending funds via electronic funds transfer (including email money transfers) or
wire, generally, requires an accountholder relationship with a financial institution.
The exception being, a transaction conducted through a non-bank financial
institution, in cash or via monetary instrument, where the funds being transferred
are not drawn directly for the client’s bank account. Typically, when establishing an
account with a financial institution, the client is identified and all transactions are
tracked and monitored. Although these transactions cannot be completed
anonymously, fund transfers, in particular international fund transfers, can
potentially be used to move funds from person to person, or country to country,
relatively quickly. The risk of money laundering or terrorist financing related to
electronic fund transfers and wire payments, before controls are applied, is High (5).
7.2.2 Payment Methods (Outgoing)
SCB uses the following methods when making payments to SCB’s clients:

Electronic Funds Transfer/Wire Payments.
An assessment of the risks related to each method of payment that SCB uses appears
below. Based on the average risk of the payment methods that the Bank uses for
http://www.fatfgafi.org/media/fatf/documents/reports/Trade_Based_ML_APGReport.pdf
5 http://www.wolfsbergprinciples.com/pdf/standards/Wolfsberg_Trade_Principles_Paper_II_(2011).pdf
4
8
SCB’s clients, the risk of money laundering or terrorist financing, before controls are
applied, is High (5).
7.2.2.1 Electronic Fund Transfers
Transmitting client funds via electronic funds transfer (including email money
transfers) or wire, requires an accountholder relationship with a financial
institution. The exception being, a transaction conducted through a non-bank
financial institution, in cash or via monetary instrument, where the funds being
transferred are not drawn directly for the client’s bank account. In establishing an
account, the client is identified and all transactions are tracked and monitored.
Although these transactions cannot be completed anonymously, fund transfers, in
particular international fund transfers, can be used to move funds from person to
person or country to country relatively quickly. The risk of money laundering or
terrorist financing through the payments that SCB makes to SCB’s clients or
suppliers by electronic funds transfer or wire before controls is High (5).
7.2.3 Non-Face-to-Face Transactions
SCB does not meet with clients face to face. All transactions are conducted in a nonface-to-face environment. By nature, non-face-to-face transactions provide less, and
less rich, opportunity for SCB’s staff members to interact with clients and observe
client behaviour. As such, non-face-to-face transactions can be considered higher
risk than transactions conducted face-to-face.
The risk of money laundering or terrorist financing related to non-face to face
transactions, before controls are applied, is High (5).
7.2.4 Marketing, Advertising & Customer Service
SCB’s products and services are marketed to clients via:






Word of mouth (from existing clients);
Affiliates and suppliers;
Web advertisement and website;
Social media;
Conferences and industry events; and
Press releases and newswires.
SCB serves and interacts with clients:
 Over the phone;
 Via SCB’s website and client portal; and
 Via email.
SCB’s delivery channel mix is generally comprised of “low-touch” options, which do
not involve face-to-face contact with SCB’s customers. While these provide little
opportunity to observe customer behaviour and demeanor, the electronic nature of
all customer contact ensures that all activity is tracked and logged.
9
Taken together, the risk of money laundering or terrorist financing via SCB’s
delivery channels, before controls are applied, is High (5).
8 Geography
In this section SCB considers the Bank’s geographic location as well as the locations
of SCB’s client base and suppliers. In order to do this, the Bank uses materials
published by KnowYourCountry.com. Country risk is rated numerically and divided
into three categories6:
Lower
Med - Low
Med
Med-High
Higher
80 – 100
70 - 80
60 - 70
50 - 60
<50
SCB provides payout services through Electronic Funds Transfers, via SCB’s banking
service providers, which is taken into consideration when determining a client’s risk
rating.
In addition, SCB’s customers access products and services remotely (via electronic
communication). As such, the location of SCB’s customers, including the countries
which funds are sent to and received from, will be of greater importance to the
assessment of SCB’s geographic risk.
The risk of money laundering or terrorist financing related to geography before
controls are applied, is Medium (3).
8.1 Destination/Origin of Client’s Funds
SCB facilitates transactions for all allowable regions (regions which are not blocked
or sanctioned).
The mix of sender and destination countries is mostly static. Based on recent
transaction data, countries are evaluated based on the know your customer risk
model.
Based on the global nature of SCB’s business, and the possible shift in the country
mix at any time, the risk of money laundering or terrorist financing related to SCB’s
clients’ transaction locations, before controls, is Medium (3).
8.2 Location of SCB’s Customers
SCB facilitates transactions for customers in all allowable regions (regions which are
not blocked or sanctioned).
A full description of the Know Your Country methodology is included as Appendix
4 of this document.
6
10
The mix of sender and destination countries is mostly static. Based on recent
transaction data, countries are evaluated based on the know your customer risk
model.
Based on the global nature of SCB’s business, and the possible shift in the country
mix at any time, the risk of money laundering or terrorist financing related to SCB’s
clients’ transaction locations, before controls, is Medium (3).
8.3 SCB Location: Dominica
SCB operates from a single office location in Dominica. While the Caribbean
Financial Action Task Force (CFATF) has cited Dominica as having strategic
deficiencies, an action plan was put in place. Since this time, the CFATF has noted
Dominica’s progress, in particular, the enactment of legislation and issuance of
relevant guidelines addressing AML and CFT deficiencies. The US Department of
State 2015 International Narcotics Control Strategy Report (INCSR) deemed
Dominica a ‘Monitored’ Jurisdiction. There are no international sanctions currently
in force against Dominica.
The risk of money laundering or terrorist financing related to THE SCB’s location,
before controls are applied, is Medium (3).
9 Customers and Business Relationships
SCB targets industrial and commercial entities as well as private individuals. Its
international trade specialists ensure clients leverage SCB’s financial resources,
technology and global banking network to manage and build their international
businesses. The overall risk of money laundering or terrorist financing risk related
to SCB’s customers and business relationships before controls are applied, is
Medium (3).
9.1 Low to Medium Customers & Business Relationships
All existing clients are associated with a Director of the Bank. All new clients will be
referrals from the existing client base. SCB will have a written agreement in place
with all clients.
The risk of money laundering or terrorist financing risk related to SCB’s regular
customers and business relationships, before controls are applied, is Medium (3).
9.2 High-Risk Customers & Business Relationships
Customers in this category have generally formed business relationships with SCB,
however, some customers may be considered high risk without the formation of a
business relationship. This includes instances where SCB has filed an STR, and
instances in which the Bank has not filed either an STR, but the Compliance Officer
wishes to monitor the customer’s activities more closely.
The risk of money laundering or terrorist financing risk related to SCB’s high-risk
customers and business relationships, before controls are applied, is High (5).
11
10 New Developments
SCB is a new bank, commencing operations in 2016. As such, there have not been
any significant changes to SCB’s technology, SCB’s business model, SCB’s geographic
location, SCB’s customers and business relationships or any other significant
developments that would affect SCB’s inherent money laundering and terrorist
financing risk.
The average inherent money laundering and terrorist financing risk related to new
developments is Low (1).
11 Affiliates
SCB has no affiliates or related entities, for the purpose of this risk assessment.
While all regulated entities are obligated to help detect, deter and prevent money
laundering and terrorist financing, related entities are also a source of risk.
Businesses and staff members may, knowingly or inadvertently, be co-opted by
criminal groups to assist in activities related to money laundering or terrorist
financing.
As SCB does not currently have any affiliates of related entities, the average money
laundering or terrorist financing risk related to SCB’s other factors, before controls,
is Low (1).
12 Operational Processes
Although addressed under specific functional reviews, SCB’s AML and CTF
Compliance Programme must also consider the overall risk of SCB’s business’
conduct, with regard to record keeping, decision making responsibilities for timely
and accurate regulatory reporting/supporting documentation, as well as key
manual and automated controls.
The money laundering or terrorist financing risk related to the relevant operational
processes, before controls are applied, is Medium (3).
13 Other Operational Factors
The additional operational factors that may affect SCB’s money laundering or
terrorist financing risk which include:




Employees;
Introducers;
Suppliers: financial services & correspondent banking; and
Suppliers: non-financial.
12
The average money laundering or terrorist financing risk related to SCB’s other
factors, before controls, is Medium (3).
13.1 Employees
Employees, for the purpose of this risk assessment, include all full and part-time
staff, as well as any contract and seasonal staff. While all employees are expected to
help the Bank detect, deter and prevent money laundering or terrorist financing,
employees are also a source of risk. Employees may, knowingly or inadvertently, be
co-opted by criminal groups to assist in activities related to money laundering or
terrorist financing.
The money laundering or terrorist financing risk related to employees, before
controls are applied, is Medium (3).
13.2 Suppliers: Financial Services & Correspondent Banking
SCB’s suppliers of financial services refer to SCB’s financial institution partners, as
well as correspondent banking relationships in foreign jurisdictions. Like
employees, suppliers may, knowingly or inadvertently, be co-opted by criminal
groups to assist in activities related to money laundering or terrorist financing.
Suppliers of financial services are desirable by criminals. Since they provide a
potential avenue to place illicit funds into the legitimate economy, as well as
disguise relatively large sums of money moving on an international scale.
The money laundering or terrorist financing risk related to financial service
providers and correspondent banking relationships, before controls are applied, is
High (5).
13.3 Suppliers: Non-Financial
SCB’s suppliers of non-financial services include, IT service providers, consultants,
accountants and external sales contractors (entities or individuals contracted to
connect SCB with potential clients). Like employees, SCB’s suppliers of nonfinancial services may, knowingly or inadvertently, be co-opted by criminal groups
to assist in activities related to money laundering or terrorist financing. While these
types of relationship do not directly relate to dealing with client funds, there is risk
related to the access to a client’s private information, such as banking and
identification details.
The money laundering or terrorist financing risk related to SCB’s suppliers of nonfinancial services, before controls are applied, is Medium (3).
14 SCB’s Controls
SCB takes the duty to prevent, detect and deter money laundering and terrorist
financing seriously, and because of this, SCB has developed controls to reasonably
ensure that the Bank is not used to launder money or finance terrorism. The
controls listed below include primary controls (designed specifically for this
purposes) and secondary controls (controls designed for other purposes that also
13
help us prevent, detect and deter money laundering and terrorist financing). The
controls described in this section are general and apply to SCB’s business, as a
whole. Specific regional processes are described in the Compliance Procedure
documents, aligned to the regulatory requirements for each jurisdiction in which the
Bank operates.
14.1 Geographic Controls
Geographic controls relate to SCB’s locations, customers’ locations and the locations
with which SCB’s transactions have a nexus, and include:






SCB does not conduct business in jurisdictions deemed to be non-cooperative
by the FATF (or similar regional bodies such as the CFATF);
SCB does not conduct business in jurisdictions that are subject to sanctions,
which would make such business illegal, or inadvisable.
SCB is aware of the locations of its customers and the nexus locations for all
transactions conducted.
Additional controls are applied on at the transaction level where the
transaction is assessed as being higher risk (geography is considered as part
of this assessment).
Additional controls are applied at the customer level where the customer is
assessed as being higher risk (geography is considered as part of this
assessment).
Additional controls are applied at the supplier level where the supplier is
assessed as being higher risk (geography is considered as part of this
assessment).
14.2 Physical Controls
Physical controls relate to the security of SCB’s facilities and paper documents, and
include:
 The SCB office has video surveillance (outside) a guard daily from 1800 to
0600.
 The SCB office is locked, both from the outside of the building and inside the
building. All filing cabinets have additional locks on them.
 Access to any AML or CTF related reports, investigations and regulatory
correspondence, that are stored on paper, is restricted to the Compliance
Officer and designate.
14.3 Electronic Controls
 Electronic controls include any measures that involve information stored
electronically, and includes the following elements:
 Access to any AML and CTF related reports or regulatory correspondence,
that is stored electronically, is restricted to the Compliance Officer and
delegates,
14
 Access to SCB’s electronic records systems (for both client and transaction
information) is restricted to staff members that have a legitimate reason to
access those systems,
 With regard to SCB’s IT systems, the Bank has in place firewalls, encryption
and other security measures to ensure that SCB’s information is not accessed
without proper authorization,
 Records of all client transactions are maintained electronically. All
transactions that we process are entered into SCB’s record keeping system.
SCB does not conduct “off the record” transactions under any circumstances,
 Access to SCB’s electronic records and transaction processing systems is
tracked via login and password, and
 Any changes to client records is tracked within the IT systems. The tracking
mechanism records information including the staff member login, the exact
time and the information that was changed.
14.4 Transaction Based Controls
 SCB does not conduct transactions that involve countries listed as noncooperative by the FATF.
 If the Bank conducts any transactions with countries included in OFAC’s
Trade and Economic Sanction Lists or OSFI’s UN Security Council Sanctions
Lists, additional processes and approvals are required.
 If the Bank conducts any transactions that involve jurisdictions listed as
high-risk by the FATF, that are subject to additional controls, which may
include verification related controls and specific transaction thresholds.
 Staff are trained to ask additional questions if the transaction that a client is
requesting seems unusual, given their transaction history, or where the
transaction doesn’t have an apparent purpose.
 All client accounts, as well as transactions that have a future value date, are
facilitated through an application and/or agreement process, both of which
contain the terms and conditions related the client’s obligations and
responsibilities.
 Future dated transactions have a limitation to how far in the future the
transaction can be requested (one year), as well as upfront information in
order to ensure the transaction is allowable. For example, not related to
non-cooperative/sanctioned countries or “listed” beneficiaries.
 Alterations to future dated transactions have specific limitations to what can
be changed, as well as approval requirements when certain information is
requested for change, such as the beneficiary, the bank account of the
recipient or the location of where the funds are destined.
14.5 Customer Identification, Review and Recordkeeping Controls
 Clients are required to be identified at account opening and all identification
records are maintained for at least seven (7) years.
15
 Clients are identified, where possible, when there is any suspicion of money
laundering or terrorist financing and all related identification records are
maintained for all statutory retention periods.
 If there is any doubt about the authenticity of identification or verification
documents that a client provides, additional documents will be requested.
Where additional information/documentation is provided but the concern
related to its authenticity still remains, all instances will be referred to the
Compliance Officer regardless of the dollar value of the transaction being
requested.
14.6 Staffing and Hiring Controls
These controls ensure that the staff that SCB hires (including part-time and seasonal
staff) are aware of the red flags that may indicate money laundering or terrorist
financing.
 All staff receive the required AML and CTF compliance training within 30
days of beginning employment, and at least annually, while they are part of
SCB’s staff.
 All staff have easy access to SCB’s AML and CTF Compliance Programme,
including internal reporting forms and appropriate staff procedures, as well
as access to compliance staff members for support.
 All staff are encouraged to submit reports to the Compliance Officer when
there is any suspicion of money laundering or terrorist financing.
 SCB screens all new staff using a process that includes interviews and
reference checks. Criminal background checks may also be conducted
depending on the position and jurisdiction of the individual.
14.7 Affiliate Controls
These controls ensure that any parent or subsidiary entities related to SCB, are
aware of the red flags that may indicate money laundering or terrorist financing.
 All staff have easy access to AML compliance programme documentation,
including internal reporting forms and appropriate staff procedures, as well
as access to compliance staff members for support.
 All staff are encouraged to submit reports to the Compliance Officer when
there is any suspicion of money laundering or terrorist financing.
 All staff are screened using a process that includes interviews and reference
checks. Criminal background checks may also be conducted depending on
the position and jurisdiction of the individual, ensuring any of the related
entities within the group are hiring trustworthy employees.
 Any discrepancies, issues or concerns between related entities, specific to a
client’s information or transactions, will be escalated to senior management
for determination, as well as the Compliance Officer, as required.
16
14.8 Supplier Controls (Financial & Non-Financial Suppliers)
These controls help the Bank to be certain that SCB’s suppliers of financial services,
such as other MSBs and financial institutions (which include correspondent banks),
are not individuals or entities with activities related to money laundering or
terrorist financing. The controls placed on SCB’s financial service providers,
financial institution partners and correspondent banking relationships, include the
following:
 SCB only deals with reputable suppliers that the Bank knows either by
association within the industry or through due diligence processes for
verifying (for example, by searching online) the supplier’s reputation.
 SCB does not deal with suppliers that are located in countries listed as noncooperative by the FATF or listed under relevant economic sanctions.
 If the Bank deals with a supplier in a country that is listed as high-risk,
enhanced due diligence measures must be applied and the Compliance
Officer is consulted on the decision before any agreements are signed.
 SCB will not enter into agreements with suppliers that are known to have
been convicted of offences related to money laundering, terrorist financing,
or other financial crime (such as Fraud).
 SCB only deals with suppliers that the Bank believes have effective AML and
CTF compliance controls in place, as evidenced during SCB’s due diligence
processes.
 All relationships with financial service providers, financial institutions or
correspondent banks will be subject to SCB’s normal transaction monitoring
process. Where the potential relationship is deemed to be high-risk, which
triggers the requirements to complete enhanced due diligence measures,
these relationships will also be subject to enhanced transaction monitoring.
 Where the information or documentation requested from the potential
service provider, during the due diligence or enhanced due diligence
processes, is not provided, deemed inadequate or believed to be fictitious,
the Compliance Officer must be consulted and SCB may refuse to enter into
the relationship.
14.9 Suppliers: Non-Financial Services Controls
These controls help us to be certain that SCB’s suppliers of non-financial services,
such as IT service providers, consultants and accountants, are not individuals or
entities with activities related to money laundering or terrorist financing.
 SCB only deals with reputable suppliers that the Bank knows either by
association within the industry or verifying (for example, by searching
online) the supplier’s reputation.
 SCB does not deal with suppliers that are located in countries listed as noncooperative by the FATF or listed under relevant economic sanctions.
 If the Bank deals with a supplier in a country that is listed as high-risk, the
Compliance Officer is consulted on the decision before any agreements are
signed.
17
 SCB will not enter into agreements with suppliers that are known to have
been convicted of offences related to money laundering, terrorist financing,
or other financial crime.
 SCB only deals with suppliers that the Bank believes have effective AML and
CTF compliance controls in place, where the supplier is legally obligated to
do so.
14.10 Other Operational Process Controls
 SCB’s AML and CTF Compliance Programme is subject to external review,
which must occur, at least once, every two years. An external review may
also be required more frequently, which would be triggered by changes to
local regulation, banking service providers or SCB’s business model.
 All client transactions are subject to a quality assurance process conducted
by the Bank’s staff and may be subject to additional quality assurance
measures, where applicable.
 SCB’s compliance team operates independently of any sales or audit
functions.
 SCB’s Compliance Officer has direct access to Senior Management and
reports regularly (quarterly) to the Board of Directors.
15 Client and Business Relationship Risk Ranking
SCB divides clients into High, Medium and Low risk categories based on their
activities.
Where the Bank conducts enhanced due diligence, including enhanced transaction
monitoring, for high-risk clients, the Bank will compare the client’s activities to the
stated nature and purpose of the relationship.
15.1 Business Relationships
SCB will have a business relationship with any customer that has completed two or
more transactions that require the customer to be identified.
In these cases, the Bank must collect and record information about the “nature and
purpose” of that business relationship.
When conducting enhanced due diligence for higher risk business relationships,
including enhanced transaction monitoring, the Bank will compare the activities
conducted, to the original stated nature and purpose of the business relationship
and record the results.
When a new customer sets up an account, the nature and purpose of the customer’s
business relationship with SCB recorded. This information is collected regardless of
the number of transactions conducted by the customer, and used in monitoring
customers’ transactions on an ongoing basis.
18
For the remainder of this section, and for simplicity, SCB uses the term customer to
refer to both customers and business relationships.
15.2 Low Risk Customers
Most of SCB’s clients are Low risk. These are clients that are conducting
transactions that appear to be within their means (the transaction makes sense for
the client) and do not appear to have any involvement with money laundering or
terrorist financing. They do not request transactions that involve FATF noncooperative countries or high-risk jurisdictions.
15.3 Medium Risk Clients
Some of SCB’s clients may pose a slightly higher level of risk, which the Bank will
consider to be Medium. These clients are not so high risk that they require
enhanced transaction monitoring or enhanced due diligence. These may include
clients that have been previously delegated as high-risk, but have been downgraded
out of the high-risk category over time. These include:
 Clients that have inquired about (but not completed) transactions involving
FATF non-cooperative jurisdictions within the past two years;
 Clients that are located in or appear to have ongoing ties to high-risk
jurisdictions;
 Clients that have triggered an internal report (an unusual transaction report)
within the past two years;
 Clients that initially refused to be identified, but subsequently provided
identification; and
 Clients that perform transactions on behalf of third parties and are able to
provide complete details about the third parties.
15.4 High Risk Customers
When the Bank defines clients as high-risk, it does not imply that the bank believes
that SCB’s clients are criminals or involved in money laundering or terrorist
financing activities. The Bank is merely acknowledging that, based on what is
known about the client and their transactions, they pose a greater risk. These
include clients for whom:
 SCB is aware that the client is under investigation by a regulator;
 A positive match has been indicated for the client under the listing screening
procedures;
 SCB is aware that an individual client is a Politically Exposed Person (PEP);
 A client’s occupation that is classified as a “gatekeeper”, meaning they
possess the ability to transact on behalf of, or have access to personal and/or
financial, of their clients. These occupations include:
o Accountants;
o Financial Advisors;
o Financial Planners;
o Investment Analysts;
19
o Investment Bankers;
o Lawyers;
o Immigration Consultants; or
o Real Estate Brokers/Agents.
 Non-individual clients whose line of business is considered vulnerable to
money laundering or terrorist financing, as a result of being a cash intensive
business, include the following categories:
o Money Services Businesses (MSBs);
o Pawn Shops;
o Dealers in precious metals, stones, or jewels;
o Restaurants;
o Convenience Stores;
o Privately owned Automated Teller Machines (ATMs);
o Vending machine operators; and
o Privately owned parking garages.
 Clients that have triggered an STR Suspicious , whether or not the
transaction was completed, within the past year;
 Clients that have triggered three or more STRs, whether or not the
transaction was completed, within the span of SCB’s relationship with the
client;
 Clients that appear to have ongoing financial ties with a FATF noncooperative jurisdiction;
 Clients that, where identification was required and requested, have
consistently refused to be identified, including clients that have altered a
transaction request in order to avoid client identification requirements;
 Clients that perform transactions on behalf of third parties but are unwilling
or unable to provide complete details about the third parties; and
 Clients that are organisations that seem to be deliberately structured in a
way that makes it difficult to determine who owns or controls the
organisation.
The Compliance Officer maintains a record of SCB’s high-risk clients. A sample highrisk client log can be found in Appendix 2 of this document. This appendix is
included as a sample only; Client Risk Rankings and notes on compliance related
activities for actual clients are housed in SCB’s IT systems, for privacy reasons.
SCB considers some clients to be too high-risk. In these instances, the Bank may
know, rather than suspect, that the client is involved in criminal activity. In these
instances, additional IT-based controls will be applied to prevent the client from
accessing SCB’s products and services.
16 Transaction Monitoring
The Compliance Officer, or delegate, monitors all SCB’s transactions for potentially
suspicious activity. Operational, Sales and Client Service staff escalate any unusual
20
activity to the Compliance Officer using the internal Unusual Transaction Form
(UTF).
In relation to SCB’s high-risk clients, enhanced transaction monitoring is conducted.
The Compliance Officer, or delegate, reviews the information that is on file about the
client, as well as records of the client’s activity for the past two years. If there is
activity that appears to be related to money laundering or terrorist financing, STRs
are filed.
High-risk client accounts are reviewed according to a schedule developed for the
Commonwealth of Dominica, and more frequently when triggered by client activity
(for example, where there is an internal report submitted to the Compliance
Officer). The Compliance Officer will maintain complete records of the reviews and
maintain these records for at least seven (7) years. A sample transaction
monitoring log can be found in Appendix 3 of this document. This appendix is
included as a sample only; notes about compliance related activities for actual
clients are housed in the Bank’s IT systems, for privacy reasons.
16.1 Enhanced Transaction Monitoring
For high-risk customers and business relationships, enhanced transaction
monitoring is conducted.
The Compliance Officer reviews the information that is on file about the customer,
as well as records of the customer’s activity, for the past two (2) years. If there is
activity that appears to be related to money laundering or terrorist financing,
appropriate reports are filed. In addition, IT system parameters consider the risk
ratings for all customers, and incorporates a lower threshold for alerts related to
high-risk customers.
High-risk customer accounts are reviewed at least annually, and more frequently
where triggered by certain customer activity (for example, where there is an
internal report submitted to the Compliance Officer). The Compliance Officer will
document complete records of these reviews and maintain them for at least seven
(7) years in the Bank’s IT platform.
Where potentially suspicious activity is detected, the Compliance Officer conducts
investigations, which can involve communication with the customer, or searches
online, in order to understand the nature of the transaction. Where there are
reasonable grounds to believe that a transaction is related to money laundering or
terrorist financing, the transaction is reported. Whether or not the transaction is
reported, the Compliance Officer maintains a record of the investigation process,
rationale for reporting, or not, as well as any applicable follow-up activity.
17 Enhanced Due Diligence
High-risk clients require a level of due diligence above and beyond what the Bank
does for regular clients. For this reason, when the Compliance Officer, or delegate,
21
performs enhanced transaction monitoring for high-risk clients, they will also
conduct a search through the IT system, for additional information and negative
media alerts.
Any results that are related to criminal activity or indicate that the client has
provided false or misleading information will be noted in the log. A report to may
also be required at the Compliance Officer’s discretion.
Additional enhanced due diligence activities may apply according to the client’s risk
characteristics (the reason that the client is considered to be high-risk). For
example, if there was doubt regarding the veracity of any KYC information provided
by the client, documentation substantiating the client’s claim would be requested.
18 Updates to Client Information and Identification
For all active7 clients subject to SCB’s Client Due Diligence (CDD)/Know Your Client
(KYC) processes, are reviewed on a periodic basis. The review may trigger updates
to their information on file. These periodic reviews include analysis of the client’s
identification documentation, previous 12 months of transaction history and, where
possible, any results from the searches conducted by the IT system (negative media
searches). These reviews are conducted on the following schedule, based on the
client’s risk rating:



High Risk – annually;
Medium Risk – every two years; and
Low Risk – every three years.
Reviews of client files may also be triggered by expired identification documents, or,
where the Compliance Officer has become aware of factors that would affect the
client’s risk rating, both positively and negatively.
Any requests for change, related to a client’s risk rating, must be approved by the
Compliance Officer, or a delegate, regardless of the adjustment being requested.
It is at the sole discretion of the Compliance Officer, whether or not additional
information is required in order to make the update. All instances related to
changing the risk rating of a client will be recorded and maintained by the
Compliance Officer. These records will include the rationale for the change.
“Active customer” means any customer that has conducted a transaction within the
past year.
7
22
Appendix 1: Compliance Officer References
In order to keep SCB’s Risk Assessment up to date, the Compliance Officer will use
these references:
Financial Action Task Force (FATF)
www.fatf-gafi.org/
The FATF publishes lists of countries that are non-cooperative and high risk. There
are also detailed evaluations of member countries.
Most AML and CTF legislation is based on the FATF’s recommendations (also
published on their website).
Caribbean Financial Action Task Force (CFATF)
The Caribbean Financial Action Task Force (CFATF) is an organisation of states and
territories of the Caribbean basin, which have agreed to implement common
counter-measures against money laundering.
http://www.fatf-gafi.org/pages/caribbeanfinancialactiontaskforcecfatf.html
Know Your Country
http://knowyourcountry.com/
This site is a resource that combines various country risk metrics into a single
numerical rating with a consistent methodology. The site is privately maintained.
Financial Services Unit of the Commonwealth of Dominica
The authority of the Financial Services Unit (FSU), which is a department within the
Ministry of Finance, covers the financial sector in Dominica with the exception of
Commercial Banks and Securities Business. The Financial Services Unit aims to
ensure that every financial institution conducts a risk assessment, whereby policies,
procedures and controls can be developed as to prevent/ mitigate the ML/TF risks
identified.
http://fsu.gov.dm/
23
Appendix 2: Sample High-Risk Client Log
The Compliance Officer or delegate will use this log to maintain a list of SCB’s highrisk clients. All logs (including clients that are no longer delegated as high-risk) will
be maintained for at least seven (7) years.
Client Name
(if known)
Jane Doe
Client
Reference
Number
12345
Jurisdiction
Dominica
High Risk Reason
Date
Suspicious Transaction
Report filed with on January
1, 2016. See report number
1122334455
01-Jan-16
24
Appendix 3: Sample Enhanced Transaction Monitoring Log
The Compliance Officer, or a delegate, will use this log to maintain a list of the
transaction monitoring that has taken place for high-risk clients. All logs (including
clients that are no longer delegated as high risk) will be maintained for at least
seven (7) years.
Client
Name (if
known)
Jane Doe
Client
Reference
Number
12345
Jurisdiction
Dominica
Date
Activity
Reviewed
By
Next
Review
Due By
01Jan-16
Reviewed client
activity for the
last two years
(no unusual
findings) and
Google search of
client's name
(no findings
related to
criminal
activity).
Compliance
Officer
01-Jan17
25
Appendix 4: Country Risk Rating Methodology
The KnowYourCountry.com risk-ranking tool has been designed to provide a
measure of the money laundering and terrorist financing risk of countries that the
Bank might have client relationships with and/or doing business with.
Based upon data collected from many international and government agencies,
KnowYourCountry.com has subjectively weighted the findings to provide a free
rating tool that is predominantly focused on money laundering and sanctions issues.
Please see below SCB’s weightings and a list of all data subject sources.
Indicator / sub-indicator
Weighting
Money laundering/terrorist financing risks
55
1.1. FATF Uncooperative / AML Deficient
25
1.2. FATF Compliance with 40+9 Rec
8
1.3. US DoS Jurisdictions of ML Primary Concern
15
1.5. US Secretary of State Report on International terrorism
5
1.6. EU Whitelist
2
2
International sanctions
15
3
Corruption risks
18
1
3.1. Transparency International – CPI /World Governance
18
Indicators – Control of corruption - Average
4
Governance related risks
4
4.1. World Governance Indicators
4
26
5
6
Narcotics Major List
3
5.1 Narcotics Major List
3
Financial transparency risks
5
6.1. Offshore Finance Centre
5
27
28
29
Appendix 5: Country Risk Table8
Lower
Med - Low
Med
Med-High
Higher
80 - 100
70 - 80
60 - 70
50 - 60
<50
Last updated on: Last Updated: 4 April 2016
8
0
Denmark
90.33
2
Finland
90.31
3
Sweden
90.05
4
New Zealand
88.51
5
Estonia
86.97
6
Norway
85.48
7
Malta
84.98
8
Slovenia
84.60
9
Iceland
84.16
10
Ireland
81.88
11
San Marino
81.70
12
Belgium
81.67
13
Lithuania
79.73
14
Netherlands
79.19
15
Germany
78.42
16
Andorra
78.09
17
United Kingdom
78.09
18
Austria
77.69
19
Anguilla
77.64
20
Bermuda
77.54
21
Aruba
77.02
22
Canada
76.85
23
France
76.43
24
Botswana
76.22
25
Hungary
76.07
26
South Korea
75.70
http://knowyourcountry.com/1ratingtable.html
30
27
Croatia
75.50
28
United States
75.36
29
Oman
75.22
30
Portugal
74.92
31
Georgia
74.78
32
Brunei Darussalam
74.60
33
Chile
74.60
34
Luxembourg
74.50
35
Poland
73.74
36
Namibia
73.72
37
Spain
73.49
38
Solomon Islands
73.47
39
Switzerland
73.41
40
Guernsey
73.40
41
Jersey
73.40
42
Vatican City State (Holy See)
72.93
43
Latvia
72.89
44
Fiji
72.84
45
Czech Republic
72.83
46
Mauritius
72.83
47
American Samoa
72.77
48
Singapore
72.75
49
Montserrat
72.66
50
Maldives
72.59
51
Macedonia
72.24
52
Australia
72.03
53
Lesotho
71.92
54
Tonga
71.77
55
Slovakia
71.73
56
Hong Kong
71.53
57
Cape Verde
71.27
58
Liechtenstein
71.22
59
Dominica
71.21
60
Qatar
71.11
61
Gibraltar
71.11
31
62
Micronesia
71.08
63
Marshall Islands
70.96
64
Isle Of Man
70.80
65
Cyprus
70.76
66
Uruguay
70.72
67
Italy
70.66
68
Cayman Islands
70.62
69
Malaysia
70.43
70
Greece
70.24
71
Sri Lanka
70.15
72
Swaziland
70.07
73
Romania
70.01
74
Barbados
70.00
75
Mongolia
69.89
76
United States Virgin Islands
69.89
77
Malawi
69.75
78
Zambia
69.70
79
Bulgaria
69.07
80
Burkina Faso
68.90
81
Argentina
68.74
82
Rwanda
68.67
83
Saudi Arabia
68.66
84
Niue
68.60
85
Ethiopia
68.40
86
Montenegro
68.30
87
Benin
68.16
88
South Africa
68.15
89
St Vincent & Gren
68.05
90
Senegal
67.91
91
Guam
67.83
92
Turkey
67.72
93
Niger
67.71
94
Nepal
67.52
95
Mozambique
67.40
96
Serbia
67.33
32
97
Bhutan
67.24
98
Timor-Leste
67.05
99
Jordan
66.80
100
Curacao
66.66
101
Monaco
66.48
102
Uzbekistan
66.47
103
Cook Islands
66.41
104
Nauru
66.41
105
Tuvalu
66.23
106
Mauritania
66.19
107
Togo
66.18
108
Armenia
66.18
109
Macau
65.59
110
Kuwait
65.41
111
Kyrgyzstan
65.38
112
St Lucia
65.27
113
Tajikistan
65.16
114
Costa Rica
65.11
115
Palau
65.07
116
U.A.E.
64.97
117
Bahrain
64.92
118
Kiribati
64.90
119
Jamaica
64.60
120
Mali
64.45
121
St Maarten
64.40
122
St Kitts & Nevis
64.40
123
Gabon
64.39
124
Grenada
64.29
125
Cuba
64.22
126
Taiwan
64.20
127
El Salvador
64.13
128
Puerto Rico
64.08
129
British Virgin Islands
63.96
130
Turkmenistan
63.85
131
Samoa
63.78
33
132
India
63.65
133
Seychelles
63.58
134
Trinidad & Tobago
63.51
135
Gambia
63.43
136
Albania
63.19
137
Peru
62.74
138
Madagascar
62.72
139
Suriname
62.61
140
Mexico
62.46
141
Djibouti
62.27
142
Vietnam
62.23
143
Brazil
62.08
144
Antigua and Barbuda
61.97
145
Belize
61.81
146
Algeria
61.50
147
Ghana
61.24
148
Japan
61.23
149
Kazakhstan
61.02
150
Colombia
60.96
151
Sao Tome & Prin.
60.79
152
Tanzania
60.74
153
Morocco
59.85
154
Bangladesh
59.46
155
Thailand
59.35
156
Turks & Caicos
59.35
157
Cameroon
59.11
158
Tunisia
58.96
159
Congo (Brazzaville)
58.60
160
Indonesia
58.50
161
Honduras
58.50
162
Chad
58.08
163
Nicaragua
57.99
164
Israel
57.70
165
Bahamas
57.22
166
Angola
56.98
34
167
Kosovo
56.87
168
Comoros
56.81
169
China
56.23
170
Kenya
55.46
171
Paraguay
55.40
172
Equatorial Guinea
55.39
173
Dominican Republic
55.19
174
Guinea
54.81
175
Moldova
54.54
176
Bolivia
54.53
177
Cambodia
54.50
178
Ecuador
54.21
179
Panama
54.04
180
Nigeria
53.99
181
Egypt
53.78
182
Russian Federation
52.75
183
Belarus
52.71
184
Guinea Bissau
52.63
185
Guatemala
52.50
186
Azerbaijan
52.30
187
Papua New Guinea
51.70
188
Philippines
51.70
189
Uganda
51.32
190
Vanuatu
51.16
191
Liberia
51.05
192
Pakistan
50.73
193
Sierra Leone
49.65
194
Gaza Strip
48.87
195
West Bank (Palestinian Territory, Occupi
48.87
196
Burundi
48.51
197
Cote D'Ivoire
47.24
198
Guyana
47.07
199
Ukraine
45.28
200
Lao People's Democratic Republic
44.04
201
Eritrea
43.67
35
202
Central African Rep
43.25
203
Sudan
43.25
204
Zimbabwe
43.06
205
Congo, the Democratic Republic
42.85
206
Bosnia-Herzegovina
42.31
207
Haiti
41.05
208
Venezuela
39.28
209
Libya
38.78
210
South Sudan
38.29
211
Lebanon
35.32
212
Syria
28.16
213
Somalia
27.29
214
Yemen
24.60
215
Myanmar
24.04
216
Iraq
20.49
217
North Korea
18.42
218
Afghanistan
17.95
219
Iran, Islamic Republic of
14.77
36