GUIDELINES - O.N.P.C.S.B

1 SUSPICIOUS TRANSACTIONS GUIDELINES 1 ROMANIA NATIONAL OFFICE FOR THE PREVENTION AND CONTROL OF MONEY LAUNDERING SUSPICIOUS TRANSACTIONS GUIDELINES UP DATED EDITION SEPTEMBER 2004 Romanian Suspicious Transactions GUIDELINES have been up dated under the TWINNING PROJECT RO02-IB/JH-08 Program financed by the European Union under PHARE I N D E X1 Chapter I - Overview What is Money Laundering Money Laundering Stages Need to combat money laundering Economic system s vulnerability to money laundering Chapter II - Legal Commitments Reporting entities requirements in keepting with Law no. 656/2002 for the prevention and control of money laundering a) Requirement for client s identification b) Reporting entities requirement on setting up of internal procedures for prevention of money laundering c) Reporting entities requirement on designation of compliance officers d) Reporting obligation to the Office of: - Suspicious transactions, before and after their performing; - Cash deposit/withdrawal operations over the threshold of Euro ; - External transfers over th threshold of Euro e) Interdiction of performing transactions during the suspension period communicated by the Office; f) Requirement of all institutions to communicate all requested data and information on deadline for accomplishing the Office functions; g) Requirement for keeping documents related to the identification of the client and to the transactions under the Law no.

2 656/2002; 1 The updating of these GUIDELINES has been coordinated and supervised by Mr. Giuseppe Lombardo, Lawyer of the Ufficio Italiano dei Cambi and Member State Project Leader. The updating has been realised by Mr. Piero Ricca, Senior Financial Analyst, Mr. Francesco Pontarelli, Financial Analysts, and by Mr. Giovanni Lupi, Lawyer, from Ufficio Italiano dei Cambi. Suggestions from the Board of the National Office and from other Romanian Institutions involved in the Project have been taken also into consideration. Mr. Ferdinando Buffoni, Pre-Accession Adviser, Ministry of Economy and Finance, ensured close scrutiny to the work. Ms. Laura Banu, acting Chief Service of the National Office, looked after the Legal Commitments and revised the text. PART I GENERAL ASPECTS SUSPICIOUS TRANSACTIONS GUIDELINES 3 h) Interdiction of revealing and providing information to the clients in connection with money laundering, outside the legal provisions.

3 Requirements for financial-control and supervision authorities Chapter III - Know your Customer The need to know your customer Chapter IV - How to recognize suspicious transactions Suspicious transactions Suspicious behaviour Active participation of the reporting entity s employee Chapter V - Reporting suspicious transactions related to terrorism The international commitments The role of financial institutions and other reporting entities Chapter I - Banks 1. Specific identification issues for banks Trust, nominee and fiduciary accounts Client accounts opened by professional intermediaries Correspondent banking 2. Suspicious categories Customer behaviour Avoidance of reporting or record keeping requirement transactions Bank accounts Wire transfers Transactions involving foreign jurisdictions Loan operations PART II ANOMALY INDICATORS SUSPICIOUS TRANSACTIONS GUIDELINES 4 Investment related transactions Documentary business and guarantees Chapter II - Anomaly indicators or brokerage houses or security trading companies Chapter III - Anomaly indicators for finance companies Chapter IV - Anomaly indicators for insurance companies Chapter V - Anomaly indicators for casinos Chapter VI Anomaly indicators for lawyers, accountants and notaries (auditors)

4 Chapter VII - Anomaly indicators for exchange houses Chapter VIII - Anomaly indicators for the Money Transfer Services Chapter IX - Anomaly indicators for real estate agencies and auctioneers Annex Reporting format LegislationSUSPICIOUS TRANSACTIONS GUIDELINES 5 WHAT IS MONEY LAUNDERING? Money laundering is the activity through which the offender tries to conceal the actual origin and ownership of income derived from criminal activities. In order to enjoy the proceeds of their predicate offence, be it drug or arms trafficking, contraband, fraudulent bankruptcy or financial/bank fraud, offenders must find a way to conceal or disguise the unlawful nature of their profits and to introduce them into the legal business system. If successful, this activity will allow launderers to control this income and eventually will provide a legitimate cover to its source.

5 Money laundering is a process to convert the unlawful proceeds of a criminal activity into funds with an apparently legal source, whereby the undiscovered launderers can subsequently enjoy the fruit of their crime. It is a dynamic three-stage process, which requires first the movement of the criminally derived funds; secondly concealment of the money trail in order to avoid investigation; thirdly making the money available to criminals by once again disguising the criminal and geographical source of the funds. Definition Law 656/2002, art. 1 letter a): Money laundering means the offence provided for in article 23. Violations stipulated in art. 23: a) conversion or transfer of property, knowing that such property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of property or of assisting any person who is involved in the commission of such activity to evade the prosecution, trial and punishment execution; b) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect top, or ownership of property, knowing that such property is derived from criminal activity; c) acquisition, possession or use of property, knowing that such property is derived from criminal activity.

6 PART I - GENERAL ASPECTS CHAPTER I OVERVIEW SUSPICIOUS TRANSACTIONS GUIDELINES 6 Individuals and legal entities stipulated in art. 8: a) banks, branches of foreign banks and credit institutions; b) financial institutions; c) insurance and reinsurance companies; d) economic agents performing gambling and pawning activities, trading in works of art, precious metals and stones, dealers, tourism operators, services providers and any other similar activities involving movement of values; e) natural and legal persons providing legal, notarial, accounting, financial and banking advice, notwithstanding their professional secrecy legal provisions; f) persons with attributions in the privatisation process; g) post offices and legal persons who provide money transmission/remittance services in ROL or foreign currency; h) real estate agents; i) foreign exchange offices ( bureaux de change ); j) any other natural or legal person, for acts and deeds committed outside the financial and banking system.

7 Definition Council Directive 91/308/EEC of 10 June 1991: Money laundering means the following conduct, when committed intentionally: a) the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action; b) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity or from an act of participation in such activity; c) the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity; d) participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing paragraphs.

8 MONEY LAUNDERING STAGES There is more than one way to launder money. Methods can vary from the purchase and sale of a luxury object (for instance a car or a piece of jewellery) to passing the money through a complex international network of illegal businesses and shell SUSPICIOUS TRANSACTIONS GUIDELINES 7 companies (companies that exist only as legal entities without doing business or carrying on commercial activities). In the case of crimes such as drug trafficking or other offences such as smuggling, theft, blackmail etc., the proceeds are most often cash which, at the first stage, has to be introduced into the financial system, one way or another. The traditional banking operations of setting up deposits or the money transfer and crediting systems provide a vital money laundering mechanism especially in the first stage of introducing the cash in the financial system.

9 Despite the variety of methods, money laundering has three stages that can include numerous transactions made by money launderers, transactions that can alert the financial institutions to criminal activities, namely: 1. Placement: represents getting rid literally of cash obtained from illegal activities, in order to separate funds from illegal sources, which could be monitored by the law enforcement agencies. 2. Layering: it is the process of moving money from one account to another in order to disguise their origin; separation of criminal proceeds from their source by creating complex layers of financial transactions designed to deceive investigative bodies and to ensure anonymity. 3. Integration: returning laundered funds at the disposal of the offenders, having apparently legitimate origin creating an apparently legitimate justification for the criminally derived profits. If the structuring process is successful, the integration schemes will send the results of laundering back into the economy so as they will again enter the financial system as normal and clean business funds.

10 The three basic steps may be separate and distinct stages. They can occur simultaneously or, more commonly, they may overlap. The way in which the basic steps are used depends on the laundering mechanisms available and on the requirements of the criminal organisations. Certain weaknesses have been identified in the money laundering process, difficult to avoid by the money launderer and, consequently, easy to recognise, namely: placing cash in the financial system; taking cash across borders; SUSPICIOUS TRANSACTIONS GUIDELINES 8 transferring cash within and from the financial system. NEED TO COMBAT MONEY LAUNDERING In recent years there has been increasing recognition of the fact that fighting against organised crime is of crucial importance and that, whenever possible, offenders must be prevented from making their criminal proceeds legal by turning dirty funds into clean funds.