• AML/CFTR Part 3.5 AML/CFTR Part 3.5 Jurisdiction risk

    Note for Part 3.5

    This Part relates to the risks posed by the types of jurisdiction with which customers are (or may become) associated.

    Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.1 Risk assessment for jurisdiction risk

      (1) A firm must assess and document the risks of involvement in money laundering, terrorism financing and other illicit activities posed by the different types of jurisdictions with which its customers are (or may become) associated.

      Examples of 'associated' jurisdictions for a customer
      1 the jurisdiction where the customer lives or is incorporated or otherwise established
      2 each jurisdiction where the customer conducts business or has assets
      (2) The intensity of the CDD and ongoing monitoring conducted for customers associated with a particular jurisdiction must be proportionate to the perceived or potential level of risk posed by the jurisdiction.

      Examples of jurisdictions requiring enhanced CDD
      1 jurisdictions with ineffective AML/CFT regimes
      2 jurisdictions with impaired international cooperation
      3 jurisdictions subject to international sanctions
      4 jurisdictions with high propensity for corruption
      Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.2 Policies etc for jurisdiction risk

      A firm must have policies, procedures, systems and controls to address the specific risks of money laundering, terrorism financing and other illicit activities posed by the types of jurisdictions with which its customers are (or may become) associated.

      Examples of 'associated' jurisdiction for a customer

      See examples to rule 3.5.1 (1).

      Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.3 Scoring business relationships—types of associated jurisdictions

      A firm must include, in its methodology, a statement of the basis on which business relationships with customers will be scored, having regard to the types of jurisdictions with which customers are (or may become) associated.

      Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.4 Decisions about effectiveness of AML/CFT regimes in other jurisdictions

      (1) This rule applies to a firm in making a decision about whether a jurisdiction has an effective AML/CFT regime.
      (2) The firm must consider the following 3 factors in relation to the jurisdiction:
      (a) legal framework;
      (b) enforcement and supervision;
      (c) international cooperation.
      (3) In considering these 3 factors, the firm must have regard to the relevant findings about jurisdictions published by international organisations, governments and other bodies.

      Example of international organisation

      FATF
      Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.5 Jurisdictions with impaired international cooperation

      A firm must guard against customers or introductions from jurisdictions where the ability to cooperate internationally is impaired and must, therefore, subject business relationships from these jurisdictions to enhanced CDD and enhanced ongoing monitoring.

      Examples of impairment

      failings in the jurisdiction's judicial or administrative arrangements

      Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.6 Non-cooperative, high risk and sanctioned jurisdictions

      A firm must conduct enhanced CDD and enhanced ongoing monitoring in relation to transactions conducted under a business relationship if a source of wealth or funds of the relationship derives from a jurisdiction:

      (a) that is identified by FATF as a non-cooperative or high risk country or territory (however described); or
      (b) that is subject to international sanctions.
      Derived by QFCRA RM/2019-8 (as from 1st February 2020)

    • AML/CFTR 3.5.7 Jurisdictions with high propensity for corruption

      (1) A firm:
      (a) must assess and document the jurisdictions that are more vulnerable to corruption; and
      (b) must conduct enhanced CDD and enhanced ongoing monitoring for customers from high risk jurisdictions whose line of business is more vulnerable to corruption.

      Example of line of business more vulnerable to corruption

      arms sales
      (2) If a firm's policy permits the acceptance of PEPs as customers, the firm must take additional measures to mitigate the additional risk posed by PEPs from jurisdictions with a high propensity for corruption.
      Derived by QFCRA RM/2019-8 (as from 1st February 2020)