Credit unions must remain vigilant to ensure they do not unwittingly hide or move terrorist funds. The Financial Action Task Force on Money Laundering (FATF) issued the enclosed guidance on April 24, 2002, to assist financial institutions in detecting terrorist financing. The guidance describes the general characteristics of terrorist financing and includes informative case studies. We believe this document will provide valuable guidance assisting in the identification and detection of possible terrorist financing.
The guidance points out that it is unlikely financial institutions will be able to detect terrorist financing as such. The distinction between criminal misuse of the financial system and terrorist financing is not easily recognized. Only when a known terrorist or terrorist organization has opened an account can a financial institution clearly identify terrorist financing. Therefore, you should focus on transactions that are unusual, suspicious, or otherwise indicative of criminal or terrorist activity.
Of special interest is Annex 1. This section includes lists of characteristics that have been linked to terrorist activity. When observing one or more of these characteristics in accounts at your credit union, extra consideration should be given to reporting the suspicious activity.
Please note, however, that the enclosed FATF guidance is not meant to replace the legal requirements for reporting suspicious activity. The Department of Treasury regulations for Suspicious Activity Report (SAR) filing are located at 31 C.F.R. 103.18. Forms and Instructions for SAR filing can be found on NCUA’s website at www.ncua.gov/Legal/GuidesEtc/Pages/Suspicious-Activity-Report.aspx.
Failure to effectively monitor such activity exposes a credit union to compliance and reputation risks. Closely following suspicious activity reporting requirements and supplementing those requirements with this FATF guidance can help deter those risks.
Both the enclosed guidance and a February 1, 2002, report on the trends of money laundering and terrorist financing called "Report on Money Laundering Typologies for 2001-2002" can be found on the FATF website. For more information on this guidance and the FATF, see their website at http://www1.oecd.org (opens new window)
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