LAW FOR BANKING & FINANCE
UNIT ONE
LAW
 Strictest sense – Law is any rule or principle that is
generally imposed by the state and is expected to
be obeyed. It implies a penalty or inconvenience
imposed by the courts for disobedience
 Law is a societal norm the infraction of which is
sanctioned in threat or in fact by application of
physical force by a party possessing the socially
recognized privilege of so acting
Classifications of Law
 Criminal law – regulates crimes or wrongs
committed against the government – the main object
of the law is to punish the wrongdoer;
 Civil law – The object of civil law is the redress of
wrongs by compelling compensation or restitution:
the wrongdoer is not punished; he only suffers so
much harm as is necessary to make good the wrong
he has done. The person who has suffered gets a
definite benefit from the law, or at least he avoids
a loss.
Sources of Law
 Primary Sources of Law:
 The Constitution;
 Common law or case law – precedent (stare decisis)
 Statute
 Custom (to a lesser extent)
 International law
Secondary Sources of Law:
 Text writers and
 Text books
Statutes Affecting Banking
 Companies Act
 Banking Act/Financial Institutions Act
 Central Bank Law
 Bills of Exchange Act
 Confidential Relationship Act
 Bankers Books Evidence Act – bank books, ledgers;
 Proceeds of Crime Act (POCA)
 Money Laundering Regulations
 Financial Intelligence Act
Branches of Law
1. Common law
2. Equity
 Reception
Financial Action Task Force
 Financial Action Task Force (FATF) is an intergovernmental body established in 1989 by a Group of
Seven (G-7) Summit in Paris. The objectives of the FATF
are to set standards and promote effective
implementation of legal, regulatory and operational
measures for combating money laundering, terrorist
financing and other related threats to the integrity of
the international financial system. The FATF is therefore
a “policy-making body” which works to generate the
necessary political will to bring about national
legislative and regulatory reforms in these areas.
Financial Action Task Force
 FATF issued 40 Recommendations in relation to
money laundering and terrorist financing.
 CFATF is an organisation of twenty-seven states of
the Caribbean basin
Money Laundering
 Money Laundering is the process through which
criminals conceal the true origin and ownership of
the proceeds of criminal activities and filter those
proceeds into the legitimate financial system.
 Money Laundering is a three stage process
 PLACEMENT – LAYERING – INTEGRATION
3 stages of Money Laundering
 Placement
 Introducing the illicit funds into the financial cycle.
 Layering
 The moving and transferring of the funds in order to
disguise the origins and true ownership of the money.
 Integration
 This is when the criminal takes economic advantage of
the illicit funds as they appear to have come from
legitimate sources.
Compliance – Global Initiative
 Economic Development and Growth;
 Financial Stability and Transparency
 Consumer Protection
 Enhanced customer service
Regulatory Framework
 Proceeds of Crime Act (POCA)
 AML/CFT Legislation
 Companies Act
 Banking Act
The Companies Act and Banking Act contain specific
provisions that speak to the role, duties and
responsibilities of directors.
Objectives of Regulatory Framework
Common objectives of the regulatory framework
are:
 Increase the likelihood of a well run business of
integrity.
 Promote financial soundness, competency and
transparency.
 Fit and proper owners, directors and key persons.
 Legislation also provide for investigative,
intervention and sanction powers for failure to
comply.
Anti-Money Laundering Mechanisms
 At a minimum, the anti-money laundering program
should include:
 Written internal policies, procedures and controls;
 A designated AML compliance officer;
 On-going employee training; and
 Independent review to test the program.
 http://www.acams.org/aml-glossary/

Money Laundering Reporting Officer
 The person responsible for overseeing a firm’s antimoney laundering activities and program and for
filing reports of suspicious transactions with the
national FIU. The MLRO is the key person in the
implementation of anti-money laundering strategies
and policies.
The primary duties of the MLRO
 receive reports of any information or other matter, which comes to
the attention of a person handling relevant financial business, which
gives rise to an actual knowledge or suspicion of money laundering;
 consider and investigate such reports in light of relevant information
in order to determine if the information or other matter does give
rise to such knowledge or suspicion;
 have reasonable access to other information which may assist in
considering such report;
 make prompt disclosures to the regulatory authority in the standard
form if after considering a report there is knowledge or a suspicion
of money laundering;
 establish and maintain a register of money laundering reports made
by staff; and
 maintain a register of reports to the regulatory authority.
MLCO
 MLCO is usually a management level employee who
is responsible for monitoring and ensuring internal
compliance with the Laws relating to money
laundering. Such officer should:
 develop, maintain and report on internal anti money
laundering (“AML”) systems and controls;
 ensure regular audits of the internal AML processes;
 advise the FSP’s Board on compliance issues; and
 respond promptly to requests from relevant authorities.
Money Laundering Reporting Officer (MLRO) and
Money Laundering Compliance Officer (MLCO)
 Service providers shall appoint an officer who –
 Is an employee of the service provider/company
 Has appropriate skills and experience and is fit and
proper.
 Has sufficient independence to perform duties
objectively.
 Has sufficient seniority in the organizational structure of
the service provider.
 Has sufficient resources
Responsibilities of Board
 Identification and management of AML/CFT risk
 Ensuring that adequate resources are devoted to
AML/CFT efforts
 Ensuring that the service provider complies with
AML/CFT legislation
Policies, Systems and Controls
 Risk Assessment;
 Customer Due Diligence;
 Employee Training
 Record Keeping
Business Risk Assessment
A service provider should carry out and document risk
assessment to –
 Assess the money laundering and terrorist financing risks
that it faces;
 Determine how to manage those risks; and
 Design, establish, maintain and implement the AML/CFT
policies, systems and controls.
Customer Due Diligence
 CDD/Know Your Customer (KYC) is the due diligence that
financial institutions and other regulated companies must
perform to identify their clients and determine relevant
information pertinent to doing financial business with them.
 In terms of money laundering controls, CDD requires policies,
practices and procedures that enable a financial institution
to predict with relative certainty the types of transactions in
which the customer is likely to engage. CDD includes not only
establishing the identity of customers, but also establishing a
baseline of account activity to identify those transactions
that do not conform to normal or expected transactions.
Customer Due Diligence
 A service provider shall –
 Obtain CDD/KYC on every customer, third party and
beneficial owner comprising –
 Identification information on individuals, legal entities
and trusts and trustees; and
 Relationship information.
Customer Due Diligence
 Consider a risk-sensitive basis.
 Prepare and record a risk assessment of the
customer.
 Verify the identity of the customer, any third party
and beneficial owner.
 Update the CDD/KYC information periodically.
KYC and KYE
 Know Your Customer (KYC) – Anti-money laundering
policies and procedures used to determine the true
identity of a customer and the type of activity that is
“normal and expected,” and to detect activity that is
“unusual” for a particular customer.
 Know Your Employee (KYE) – Anti-money laundering
policies and procedures for acquiring a better
knowledge and understanding of the employees of an
institution for the purpose of detecting conflicts of
interests, money laundering, past criminal activity and
suspicious activity.
Employee Training and Awareness
 A service provider is required to –
 Provide basic AML/CFT awareness training to employees
whose duties do not relate to the provision of relevant
business.
 Establish and maintain procedures that will monitor and test
their effectiveness.
 Vet the competence and probity of employees whose duties
relate to the provision of relevant business at the time of
their appointment.
 Provide training to ALL employees.
 Provide employees with adequate training in the recognition
and handling of transactions.
Record Keeping
 For a specified period the following records are to
be kept –
 Transactions
 Suspicious transactions, etc.
 Policies, systems, and controls and training
Correspondent Banking Relationships
 Several reasons have been given by international banks
for withdrawing their correspondent banking services.
The main reasons were
 AML/CFT (anti-money laundering and counter-terrorism
financing); and
 CDD/KYC (customer due diligence and know your customer)
related concerns.
 The Caribbean is seen as risky business
 Source:
https://caribbeantradelaw.com/2016/01/30/caribbe
an-region-most-affected-by-loss-in-correspondentbanking-relationships-according-to-world-bank-survey/
Money laundering cases
 https://www.int-comp.com/ictviews/posts/2016/07/22/top-5-moneylaundering-cases-of-the-last-30-years/

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