• Document: Wolfsberg Frequently Asked Questions ( FAQs ) on Selected Anti-Money Laundering Issues in the Context of Investment and Commercial Banking
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Wolfsberg Frequently Asked Questions (“FAQs”) on Selected Anti-Money Laundering Issues in the Context of Investment and Commercial Banking Preamble The Wolfsberg Group of International Financial Institutions (the “Wolfsberg Group”) 1 has published global anti-money laundering (“AML”) guidance, statements and principles with regard to private banking, correspondent banking, terrorist financing, monitoring pooled vehicles and the risk based approach. Whilst the Wolfsberg Group has not (until now), addressed investment banking or commercial banking per se, much of the published guidance is also relevant to these business segments. However, certain aspects of the business undertaken by financial institutions engaged in Investment and Commercial Banking (referred to hereafter as “Financial Institutions”) raise specific AML questions, in particular regarding:  who is the Financial Institution's customer in common transaction scenarios;  who should conduct due diligence on the customer in certain scenarios;  what level of due diligence should be conducted in such scenarios (including particularly whether a Financial Institution should "drill down" when dealing with certain types of customers such as institutional intermediaries and conduct any due diligence on their customer's customers); and  the Financial Institution's role in common and complex transactions. The following FAQs seek to address some of these questions and contain guidance that may be applied by Financial Institutions in the context of a reasonable risk-based approach to AML matters. These FAQs do not supersede applicable laws and regulations where they are more stringent. 1 The Wolfsberg Group consists of the following leading international financial institutions: ABN AMRO, Banco Santander, Bank of Tokyo-Mitsubishi-UFJ, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan Chase, Société Générale, and UBS. These FAQs were prepared by the Wolfsberg Group in association with RBC Financial Group and SEB Group. © The Wolfsberg Group 2006 Wolfsberg FAQs on AML Issues in Investment & Commercial Banking 1 Definition of Investment Banking and Commercial Banking and Scope of these FAQs For the purposes of these FAQs, investment banking and commercial banking are viewed as wholesale businesses. The clients and counterparties are corporate or institutional in nature. Retail brokerage, retail banking, private banking, and correspondent banking are not within the scope of these FAQs. More specifically, investment banking and commercial banking, whether conducted in a bank, broker-dealer or other entity, include, but are not limited to, the following activities: mergers and acquisitions; IPOs/underwriting; trading (including securities, derivatives, currencies, commodities); and credit/lending (including syndicated facilities). These FAQs consider selected issues with regard to these activities, as well as certain ancillary or “downstream” activities that merit consideration, namely, the activities of: administration companies (including transfer agents) supporting fund managers and funds; syndicated loan lenders, arrangers and agents; and paying agents and trustees with respect to debt securities. The FAQs below are grouped under several headings: A. Beneficial ownership, institutional intermediaries, and private funds; B. Investment banking and commercial banking transactions generally; C. Loan syndications, participations and trading; D. Letters of credit; and E. Other questions: custody; paying agents and corporate trustees; and escrow agents. A Risk-Based Approach It should be noted that, although investment banking and commercial banking have not historically been regarded as associated with money laundering risk, a Financial Institution should assess its customers for AML purposes using a risk based approach to determine the appropriate level and degree of due diligence 2 to be applied; these FAQs are predicated on the application of the risk based approach to customer relationships, interaction with other third parties and transactions executed by Financial Institutions. Factors generally relevant to risk-assessing customers are considered in the Wolfsberg Guidelines on a Risk Based Approach for Managing Money Laundering Risks. Management and Monitoring of Client Relationships Generally A Financial Institution should consider the role of its relationship managers in the client acceptance process. One relationship manager may have responsibility for the acceptance process with respect to a particular client, but it may not make sense for that relationship manager to continue to be responsible at all times for that client if, the client’s activities with the Financial Institution change over time. Additionally, a client may be referred to the 2 These FAQs generally use the term "due diligence" rather than "know your customer" (or “KYC”) because a Financial Instituti

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