Circular No. 02/SBM/02 of 5 February 2002 - Prevention of Illicit Transactions

Maputo, 5 February 2002

CIRCULAR NO. 02/SBM/02 BANKING SUPERVISION AND MARKETS DEPARTMENT Subject: Prevention of Illicit Transactions

Within the scope of banking supervision, the Basel Committee has selected best practices as a fundamental principle to be observed by financial institutions.

In these terms and with a view to strengthening vigilance against the execution of illicit transactions through the financial system, entities subject to the supervision of the Bank of Mozambique must act in accordance with the principles and instructions indicated below:

1. Account Opening Without prejudice to what is provided for in the regulation of the Check Valorization Law, credit institutions must develop clear internal policies and procedures aimed at better knowledge of their clientele¹.

In this chapter, credit institutions must, regarding the acceptance of clients, observe the following factors: 1.1 Client antecedents; 1.2 Country of origin; 1.3 Branch of activity; 1.4 Description of the degree of risk relevant to each client; and 1.5 Other risk indicators deemed pertinent.

The decision regarding the acceptance of high-risk clients must be taken exclusively at the administration level or by whom this authority delegates.

¹ Including the description of those who are not permitted to open accounts or carry out transactions.

2. Client Identification Financial institutions must adopt effective measures to determine the identity of all clients requesting their services, for which official documents (identity card, passport, driver's license, among others) must be used. In the case of legal entities, financial institutions must request documents attesting to their legal existence, address, and identification of administrative and management members.

Particular attention must be paid to the holders of any type of bank account, and effective procedures must be adopted aiming at the periodic update of the registration of their complete identification, including the profession or activity exercised and permanent domicile.

Registrations must inform the public that no operation will be carried out for clients who do not present proof of their identity and domicile.

3. Legitimacy of Operations • In addition to conditioning the execution of operations to the complete identification of the client as per the previous number, institutions must not carry out operations when they do not show clarity regarding their legitimacy and legality; • Managers of institutions must ensure that their activity is conducted with high ethical standards and that laws, regulations, and instructions regarding financial transactions are strictly observed; • Special care must be taken with exchange operations, namely the purpose of payments and the origin of receipts from abroad; • In case of doubt regarding the legality of any operation, they must abstain from its execution and contact the Banking Supervision Department for due clarification.

4. Execution of Operations Financial institutions must pay special attention to the complexity, amounts, and all apparently suspicious transactions. • Institutions must only carry out operations through original documents; • All external trade operations must be carried out through the banking system, using the following payment modalities: ◦ Documentary credit; ◦ Documentary remittances; and ◦ Fund transfer. o The use of cash checks is prohibited. • In payments in national currency, account-to-account transfer modalities and the use of checks should be privileged; • In cash withdrawals, the nature of the operation must be duly justified whenever amounts equal to or greater than 300 million meticais are involved; Exceptional cases must be authorized by the Administration or by whom this authority delegates; • In withdrawals or payments in foreign currency, the use of banknotes per client must be limited, and alternative payment methods should be privileged;

Without prejudice to the observance of legally established deadlines on the matter, financial institutions must keep records and archives for at least 5 years of all information and transactions of their clientele, so that they can be easily provided to the competent authorities as soon as they are requested. Such records must allow the reconstruction of individual transactions (including amounts, types of currencies involved in the transactions, copies of identification documents, such as passports, identity cards, and driver's licenses).

Doubts arising from this circular will be clarified by the Banking Supervision Department.

BANKING SUPERVISION AND MARKETS JOANA JACINTO. DAVID Administrator