NEW ANTI-MONEY LAUNDERING & TERRORISM FINANCING REGIME
Royal Decree 30/2016 (the “New Law”) has recently been promulgated setting out Oman’s new anti- money laundering and terrorism financing regime. The New Law, which provides a more comprehensive set of rules consistent with internationally approved standards, replaces the previous law issued under Royal Decree 79/2010 (the “Old Law”).
The New Law has largely come about as a result of a desire for the Sultanate to adhere to recognised international standards with regard to anti-money laundering and terrorism financing. Further, the New Law was issued in compliance with the requirements of various international agreements and treaties ratified by Oman in respect of anti-money laundering and terrorism financing.
The main obligations of financial Institutions, non-financial business and professions and non-profit associations and entities (together the “Entities”) under the New Law are as follows:
Entities should assess the money laundering and terrorism financing risks in their business (including risks of new products and technologies), document and update these so that these are available for review by the competent supervisory authorities. Entities should establish and implement enhanced due diligence measures in high risk cases, and may conduct simplified due diligence in low risk cases provided there is no suspicion of money laundering.
Due Diligence Measures
Entities should establish and implement due diligence measures including the following:
- Determine and verify the Identity of customers (KYC) based on documents issued by official authorities in the following cases:
- Before establishing a business relationship;
- Before executing a transaction or wire transfer for a customer with whom it does not have business relationship, if the value of the transaction executed in single or in multiple stages is equal or greater than the threshold specified by the supervisory authority;
- When there is suspicion of a crime of money laundering or terrorism financing;
- When there are doubts concerning the adequacy or accuracy of identity documents and information provided.
- Entities should identify and verify the identity of any person acting on behalf of the customer, and proof of their agency.
- Entities should identify the beneficial owners and take reasonable measures to verify their identity in a satisfactory manner. In case of legal entities, the ownership and control structures should be understood
- Entities should know the purpose of the business relationship, and obtain related information as appropriate.
- Entities must refrain from opening or maintaining anonymous accounts or accounts under fictitious names, numbers or secret codes, or providing any services to them.
- Entities may delay the completion of the process of verifying the identity of the customer or beneficial owner in accordance with law provided that:
- Verification is completed as soon as possible after the start of the business relationship or the execution of the transaction;
- Delaying the verification is necessary in order not to interfere with the normal flow of business; and
- The risks of money laundering or terrorism financing are subject to effective control.
- All Entities must continuously update the data and information, and monitor and scrutinise all relationships and transactions with customers and beneficial owners on an ongoing basis to ensure that information regarding such relationships and transactions are consistent with the information available on the customer, its commercial activities, risk profile and source of funds.
Politically Exposed Person
If the customer is a foreign or local politically exposed person (“PEP”) this represents a higher risk which then requires the following measures should be taken:
- Obtain approval from senior management before establishing or continuing a business relationship with such person.
- Take suitable measures to determine the source of the PEP’s funds.
- Implement enhanced monitoring of the business relationship.
- Entities may not establish or maintain business relationship or perform the transaction with the customer if they are unable to meet the specified requirements of law, and must immediately notify the National Centre for Financial Information (“Centre”).
- Report threshold transactions specified by the supervisory authority to the Centre.
- Reporting persons must notify the Centre immediately if they suspect, or have reasonable grounds to suspect, that the funds in question are the proceeds of crime, or are related to money laundering or terrorism financing. The reporting person shall not reveal to the customer, beneficial owner or to any person about the issue of the suspicious transaction report or alert them of any investigation in this regard.
Entities should develop and implement programme for combating money laundering and terrorism financing, including policies, procedures, internal regulation and controls to ensure the following:
- Establishing and applying high standards for hiring employees
- On-going training for employees to keep them up to date with all aspects and requirements of combating money laundering and terrorism financing
- The presence of an adequate audit function to verify compliance with policies, procedures, system and internal controls.
Maintenance of Records
Entities must retain all records and documents for a period of at least 10 years after the business relationship has ended or after a transaction is carried out, and make such records available to the relevant authorities when called for.
National Centre for Financial Information
The New Law establishes the Centre. Unlike the existing Financial Intelligence Unit (“FIU”), which is part of the Royal Oman Police, under the new law, the Centre will be a legal person with administrative and financial autonomy under the Inspector General of the Police and Customs. The responsibilities of the Centre will include, amongst others, all responsibilities previously held by the FIU.
The New Law has addressed the legislative shortcomings of the Old Law and has created a comprehensive framework for combatting money laundering and terrorism financing in line with approved international recommendations. It is expected that the New Law will have a major impact on how the concerned authorities will be able to act in relation to anti-money laundering and terrorism financing types of activities, in light of having been granted broader investigative powers.
(This article is compiled by Mr. Bhartesh B. Poojari, Senior Director in PKF L.L.C., the PKF member firm in the Sultanate of Oman.)