Instruction No. 15 (VAD MEC) - Vade Mecum on Combating Money Laundering and Terrorist Financing

VADE MECUM ON COMBATING MONEY LAUNDERING AND TERRORIST FINANCING

In the context of raising awareness among Financial Intermediaries regarding the risks of money laundering and terrorist financing to which they are exposed, the Central Bank of the Congo, acting in accordance with Article 6 of Law No. 005/2002 of May 7, 2002, relating to its constitution, organization, and functioning, Article 75 of Law No. 003/2002 of February 2, 2002, relating to the activity and control of Credit Institutions, and Article 19 of Law No. 04/016 of July 19, 2004, publishes below the minimum diligence measures to be implemented in the prevention and detection of acts of money laundering and terrorist financing.

I. GENERALITIES

I.1. Legal Definition of Money Laundering and Terrorist Financing

In accordance with the provisions of Law No. 04/016 of July 19, 2004, the acts listed below, committed intentionally, are considered to constitute the offense of money laundering:

1. the conversion, transfer, or manipulation of property with the aim of concealing or disguising the illicit origin of such property or of helping any person involved in the commission of the principal offense to escape the legal consequences of their acts;
2. the concealment or disguise of the true nature, origin, location, disposition, movement, or ownership of property;
3. the acquisition, possession, or use of property by a person who knows, suspects, or should have known that such property constitutes the proceeds of an offense.

Under the aforementioned law, the offense of terrorist financing is, on the one hand, providing, collecting, assembling, or managing by any means whatsoever, directly or indirectly, funds, assets, or property with the intention that they be used or knowing that they will be used, in whole or in part, to commit an act of terrorism, regardless of whether such an act occurs.

I.2. Typology of the Money Laundering Process

The manifestations of money laundering can take several forms. However, international experts in money laundering distinguish three phases in the process leading to laundering, namely placement, layering, and integration.

I.2.1. Placement

This is the conversion of funds from illicit trafficking into cash by introducing them into the banking system or the economic circuit.

Among common placement practices, one should mention, in particular:

• depositing cash into accounts;
• acquiring checks;
• the use of casino checks.

I.2.2. Layering

This is a concealment method that prevents any possibility of tracing back to the illicit origin of the funds.

One should mention:

• the splitting of payments across multiple accounts followed by consolidation at a few specific banks: "smurfing";
• a succession of financial operations to mask the fraudulent origin: repayment of fictitious loans, false invoices, etc.
• the purchase and resale of assets;
• international fund transfers.

I.2.3. Integration

This is the introduction of laundered funds into legal economic circuits to give them a lawful appearance.

This is the case with:

• investments in real estate;
• creation and purchase of businesses;
• stock market investments.

I.3. Legal Framework for Combating Money Laundering and Terrorist Financing

In accordance with the recommendations of the Financial Action Task Force (FATF), the legal framework established by Law No. 04/016 of July 19, 2004, on combating money laundering and terrorist financing, rests on three pillars as follows:

I.3.1. Preventive Pillar

Prevention is organized through the participation of professions that may be used by money launderers, among which Financial Intermediaries play an important role.

The aforementioned law obliges them to provide their assistance through suspicious transaction reports and collaboration with judicial authorities.

I.3.2. Repressive Pillar

The prosecution and repression of the offenses of money laundering and terrorist financing fall to the police and judicial authorities.

I.3.3. Financial Intelligence Pillar

The link between the first two pillars is ensured by the National Financial Intelligence Unit, which receives suspicious transaction reports from obligated entities and transmits them to judicial authorities after processing if serious indicators are confirmed.

I.4. Importance of the Vade Mecum

This vade mecum focuses on the vigilance obligations of obligated entities related to the monitoring of operations by providing them with an indicative list of suspicious or unusually complex operations requiring particular surveillance.

It is intended to alert obligated entities to Law No. 04/016 of July 19, 2004, on combating money laundering and terrorist financing, thereby enabling them to detect potentially suspicious transactions.

An indicator taken separately does not necessarily, by itself, contribute to establishing a sufficient suspicion of the existence of a money laundering operation. However, the combination of several of these elements may indicate its presence.

Furthermore, the examination of the client's explanations regarding the economic background of these operations is of great importance in assessing these indicators.

II. LEGAL OBLIGATIONS OF FINANCIAL INTERMEDIARIES

Law No. 04/016 of July 19, 2004, on combating money laundering and terrorist financing, subjects obligated Financial Intermediaries to several types of obligations.

II.1. Vigilance Obligations:

Obligated entities are subject to two types of vigilance obligations.

II.1.1. Vigilance Obligations Related to Customer Identification:

• Ensure permanent knowledge of the client to detect abnormal or suspicious operations;
• Carry out mandatory verifications based on probative documents.

These verifications, listed below, must be performed upon entering into a relationship as well as during the continuation of the relationship.

Mandatory verifications for a natural person:

• Official document currently valid with photo;
• Proof of address;
• Profile of the account operation considering professional activity and income.

Mandatory verifications for a legal entity:

• Articles of association or documents attesting to legal constitution;
• Identification of representatives.

Mandatory verifications for occasional clients:

• Verifications similar to those required for natural persons for any transaction equal to or greater than USD 10,000.00;
• Identification required even if the amount is below the set threshold, when the lawful origin of funds is not certain;
• Identification required in case of repetition of distinct operations, carried out in close periods and for amounts below the threshold set per operation.

II.1.2. Vigilance Obligations Related to Transaction Surveillance:

The exercise of surveillance implies taking into account three alert criteria, namely:

• Customer criteria;
• Transaction or account operation criteria;
• Country criteria.

From the application of these criteria arise the following obligations:

• Verification of the consistency of operations with the profile of activities and assets;
• Verification of the origin of funds when necessary;
• Implementation of a surveillance system for the detection of suspicious or unusually complex operations.

II.2. Obligations Related to the Implementation of Internal Control:

• Formalization of internal procedures, including the following procedures:
  • Procedure regarding referral to hierarchy upon the emergence of doubt;
  • Procedure regarding the suspicious transaction report to the Financial Intelligence Unit;
  • Procedure to follow after the suspicious transaction report;
• Designation of the prevention manager and correspondent of the Financial Intelligence Unit;
• Implementation of a surveillance system allowing verification of compliance with internal procedures;
• Retention of documents and supporting documents for all operations for 10 years.

II.3. Obligations Related to Staff Training:

The training and awareness of staff members of obligated entities regarding the prevention of money laundering and terrorist financing constitute an obligation incumbent upon them.

III. INDICATORS OF MONEY LAUNDERING

The strict compliance with vigilance obligations regarding the monitoring of operations by Financial Intermediaries implies the meticulous examination of certain operations presenting obvious risks of money laundering.

The indicative list of indicators made available to them serves to sensitize them to the detection of these operations.

III.1. General Indicators:

Operations initiated by clients presenting particular risks of money laundering and terrorist financing:

• When their structure indicates an illicit purpose;
• When their economic purpose is unrecognizable or when their purpose appears absurd from an economic point of view;
• When asset values are withdrawn shortly after being credited to accounts (pass-through accounts), provided that the client's activity does not justify such immediate withdrawal;
• When they fall outside usual activities or the circle of usual clients of a bank or agency, and one cannot understand the reasons why the client chose precisely this bank or agency to conduct their business;
• When they result in an account, previously largely inactive, becoming very active without one being able to perceive a plausible reason;
• When they are not compatible with the information and experience of the financial intermediary concerning the client or the purpose of the business relationship;
• When a client provides false or misleading information to the financial intermediary or, without plausible reason, refuses to provide the information and documents necessary, admitted by the practices of the concerned activity.

III.2. Specific Indicators:

III.2.1. Cash Operations:

• Cash for Cash

  • Exchange of large quantities of small denominations for larger denominations;
  • Frequent or significant foreign exchange operations from cash, without booking in the client's account.

• Cash Deposits

  • Unusually large cash deposits made by a person or company whose apparent activities should not normally generate revenues of this type;
  • Substantial increase in cash deposits from any person or company without apparent cause, especially if such deposits are subsequently quickly transferred to a destination that normally has no relation to the client's activity;
  • Significant increase without apparent cause in cash or negotiable value deposits by a client, particularly if these deposits are quickly transferred to other accounts opened by persons with whom this client is not in usual relation;
  • Repeated cash deposits, the amount of each deposit being negligible while the global amount is significant;
  • Deposits of large amounts to cover requests for bank checks, money transfers, or other immediately negotiable monetary instruments;
  • Purchase of bank checks for large amounts by occasional clients;
  • Deposits and withdrawals, primarily in cash, by an individual or company engaged in an activity that usually gives rise to payments or fund transfers by means of checks, wire transfers, and other instruments.

• Cash Withdrawals

  • Transfers of large sums of money to or from foreign countries, accompanied by requests for payment in cash;
  • Withdrawals of high amounts far exceeding the turnover of a company or the income of an individual;
  • Inflows and outflows of high amounts far exceeding the turnover of a company or the income of an individual;
  • Frequent inflows and outflows of funds on an account opened by an individual whose declared professional activity (e.g., office employee) does not justify such active account operation;
  • Cash withdrawals from an account previously dormant or from an account that has just received an important unexpected credit from abroad;
  • Cashing of checks, including traveler's checks, for large amounts.

III.2.2. Bank Account Operations

• Existence of multiple accounts and depositing cash into each of these accounts representing a significant global sum;
• Account of a person or company that reveals no actual normal personal activity or activity related to the business of the person or company, but is used to receive or withdraw large sums that have no obvious relation to the account holder's situation and/or activities;
• Deposits of large checks endorsed by third parties in favor of a client;
• Large cash transactions or significant foreign exchange operations conducted by clients acting together and in concert, but from different bank counters.
• Cashing of bearer checks issued from foreign networks;
• Submission of large declared checks representing a "gambling win";
• Submission, upon opening a new account, of a check for a high amount;
• Frequent withdrawals of large cash amounts, without the client's activity justifying such operations;
• Use of financing methods common in international trade, while the use of such instruments contradicts the client's known activity;
• Accounts used intensively for payments, while said accounts do not receive or receive few payments;
• Absurd economic structure of business relations between a client and the bank (large number of accounts with the same institution, frequent transfers between different accounts; excessive liquidity, ...);
• Provision of guarantees (pledges, sureties...) by third parties unknown to the bank, who do not appear in close relation with the client and who have no plausible and recognizable reason to provide such guarantees;
• Transfer to another bank without indication of the beneficiary;
• Acceptance of fund transfers from other banks without indication of the beneficiary's name or account number;
• Repeated transfers of large amounts abroad with instructions to pay the beneficiary in cash;
• Large and frequent transfers to or from drug-producing countries;
• Provision of caution or bank guarantees as security for loans between third parties, non-compliant with the market;
• Cash deposits by a large number of different persons into a single account;
• Unexpected repayment without convincing explanations of a compromised credit;
• Use of pseudonymous or numbered accounts in the execution of commercial transactions by artisanal, commercial, or industrial enterprises;
• Withdrawal of asset value shortly after being credited to an account (pass-through account).

III.2.3. Securities Operations

• Securities portfolio unrelated to known income or activity;
• Clients' recourse to wealth management services, while the origin of funds is not clear or has no relation to the client's apparent standard of living;
• Payment of securities in cash for large or unusual amounts;
• Securities received by transfers from risky countries;
• Significant operations on securities listed abroad;
• Securities deposited as collateral in favor of a third party who is not a client of the bank.

III.2.4. International Operations

• Operations with correspondents located in risky countries;
• Introduction of a client by a foreign agency, subsidiary, or another bank located in risky countries;
• Operations with countries where the bank's client does not have known or usual activity;
• Regular and significant payments, including electronic transactions whose reasons cannot be clearly identified, to risky countries (or clients who regularly receive significant payments from these countries);
• Formation of significant credit balances, incompatible with the client's known turnover, and subsequent transfer to an account abroad;
• Frequent requests for traveler's checks in foreign currencies or other negotiable instruments;
• Frequent submissions of foreign currency bank checks originating particularly from abroad.

III.2.5. Loan Operations

• Request for a loan secured by assets held by the bank or by a third party, when the origin of the assets is unknown, or when these assets are incompatible with the client's apparent standard of living;
• Request for a loan, accompanied by an offer of guarantee consisting of a certificate of deposit issued by a foreign bank.

III.2.6. Operations Performed by Correspondent Banks

• Atypical large withdrawals or deposits;
• Exceptional collection or transfer operations;
• Collections and transfers from risky countries;
• Unidentified ordering parties or beneficiaries of transfers.

III.2.7. Safe Deposit Box Operations

• Frequent access followed by counter operations.