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Anti-Money Laundering Awareness Training. July 2007. Overview. This training session has been designed to provide you with information and guidance as to how to comply with your anti-money laundering (AML) responsibilities. It covers the following: What is money laundering?

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Anti-Money Laundering Awareness Training


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    1. Anti-Money Laundering Awareness Training July 2007

    2. Overview • This training session has been designed to provide you with information and guidance as to how to comply with your anti-money laundering (AML) responsibilities. • It covers the following: • What is money laundering? • How does it affect Safaricom, its staff and Agents? • What are the rules & penalties? • How do we fight it? • AML Awareness Test AML Awareness Training

    3. The Origin The original meaning of money laundering was a method by which the proceeds of crime are converted into assets that appear to have a legitimate origin, so that they can be retained permanently or recycled to fund further crimes. Money laundering got its name from a string of laundries that the Mafia used in the USA to front their illegal business. What is money laundering? AML Awareness Training

    4. What is money laundering? Modern day money laundering The definition and scope of money laundering is a lot broader than the traditional ‘washing dirty money’ concept. It can be defined as: • Certain actions laid down in the Proceeds of Crime and Anti-Money Laundering Bill, October 2006 • These include concealing, acquiring, using or possessing the proceeds of crime or making arrangements for another person to acquire, use or possess criminal proceeds. • For the purposes of money laundering, the proceeds of crime include property or economic benefits a person would gain, directly or indirectly, as a result of an offence committed in Kenya or anywhere else, irrespective of whether committed before commencement of the Bill. So an offence of money laundering can be committed by a person merely having stolen goods in their possession. AML Awareness Training

    5. Common origins of illegal money: Fraud Extortion Forgery Theft People Trafficking Drugs Smuggling Tax Evasion Terrorism How big is it? Although it’s almost impossible to say the exact amount laundered, it is estimated by the Revenue & Customs in the UK that the amount is... UK£ 25 BILLION a year What is money laundering? AML Awareness Training

    6. What is money laundering? The 3 stages of money laundering The money laundering process is often described as taking place in three stages: PLACEMENT The physical disposal of the initial proceeds derived from illegal activity. LAYERING Separating illicit proceeds from their source by creating complex layers of transactions designed to disguise the audit trail and provide anonymity. INTEGRATION The provision of apparent legitimacy to criminally derived wealth. The laundered proceeds re-enter the financial system, appearing as normal funds. All three stages don’t have to occur for money laundering to have happened. If you suspect activity in any stage, always report your suspicion to the Money Laundering Reporting Officer (MLRO) – details of the MLRO are contained further on. AML Awareness Training

    7. Money obtained through subscription fraud Money used to buy drugs to sell on Proceeds of drug sales need laundering • Loss suffered by company; • - May have involved an innocent customer. • Cost of fraud impacts the price of mobile services for legitimate customers. • Shareholders lose revenue. • Social harm; • Drug users forced to commit other crimes to pay for the drugs • Users are likely to suffer ill health and possibly untimely death. • Subsequent health problems costs the Government significant sums. • Potential further harm caused to society; • More drugs purchased • Money used to fund other crime • Channelled into terrorist cells What is money laundering? Impact on Society This scenario demonstrates how money laundering supports numerous activities which harm the society as a whole: AML Awareness Training

    8. What is money laundering? Terrorist Financing Traditional Anti Money Laundering (AML) efforts have concentrated on criminal proceeds being laundered. The facilitation of the financing of prospective acts of terror is a different process of laundering the proceeds of crime but they do have features in common: When money is laundered it will be used to fund future criminal acts. The destination of money used to support terrorism has to be disguised in the same way that the source of laundered funds has to be disguised. Both often require assistance from financial products. Terrorist groups could be funded by criminal activities such as mobile phone related frauds BOTH HAVE TO BE REPORTED AML Awareness Training

    9. All firms, whether offering financial services or not, should apply the principles of the regulatory obligations across the firm’s activities in the appropriate way. The Safaricom Money Transfer product will be covered by Kenya money laundering legislation. As a result you, as an Agent or Safaricom employee, have personal and legal responsibilities. This training session has been designed to provide you with information and guidance as to how to comply with these responsibilities. How does it affect Safaricom and you? AML Awareness Training

    10. What are the rules & penalties? The legislation that affects you: • Proceeds of Crime & Anti-Money Laundering Bill 2006 The legislation covers ALL CRIME, no matter how small the financial gain. AML Awareness Training

    11. What are the rules & penalties? Proceeds of Crime & Anti-Money Laundering Bill 2006 The 3 principal offences above carry a penalty of 14 years imprisonment and/or Sh 5M fine for individuals and for corporates, a fine of Sh 25M or value of the property involved, whichever is higher. The Bill contains 3 principle money laundering offences: • Concealing – Concealing, disguising, converting or transferring criminal property. • Arrangements (including terrorism) - Entering an arrangement which facilitates the acquisition, use or control of criminal or terrorist property by another person. • Acquisition, use and possession - of known or suspected criminal proceeds (or funds) AML Awareness Training

    12. What are the rules & penalties? The 2 offences that Safaricom staff and agents ought to take note of are: • Failure to Disclose An offence is committed if you know or suspect or have reasonable grounds for knowing or suspecting that someone is engaging in money laundering and you did not report it a soon as practical to the Money Laundering Reporting Officer (MLRO). • Tipping Off A person commits an offence if they know that a disclosure has been made to the MLRO or the authorities, and makes a disclosure which is likely to prejudice any investigation. This includes dropping hints to the customer either intentionally or inadvertently and enteringinformation onto front end customer service systems. Proceeds of Crime & Anti-Money Laundering Bill 2006 These 2 offences carry a penalty of 7 years imprisonment and/or a fine not exceeding Sh 2.5M or in case of corporates, a fine of Sh 10M or the value of the property, whichever is higher. AML Awareness Training

    13. What are the rules & penalties? Summary: You can be prosecuted for any of the five offences, or a combination of all five. The 5 money laundering offences under the Proceeds of Crime Act are: • Concealing • Arrangements (including terrorism) • Acquisition, Use and Possession • Failure to Disclose • Tipping Off AML Awareness Training

    14. How do we fight it? Principal AML Controls • Know Your Customer (KYC) – Robust systems in place to verify the identity of our customers and understanding the nature of the relationship. • Recognition and Reporting of Suspicious Activity – All Safaricom staff and agents must be on the look out for suspicious activity and have the ability to report suspicions to the MLRO. • Education & Training of Staff and Agents – Giving you the knowledge to know what is suspicious and how to make a report. AML Awareness Training

    15. How do we fight it? Know Your Customer • The first step in any ML operation is opening the accounts where the proceeds of crime can be placed. This is why confirmation of identity and KYC is crucial. Front line Staff and Agents are our first line of defence against money laundering and terrorist financing. • By knowing your customer, you will be able to understand what is potentially suspicious. • Transactions that are not consistent with the known circumstances of the customer, should raise suspicions. AML Awareness Training

    16. How do we fight it? Reporting Suspicious Activity • The Proceeds of Crime &Anti-Money Laundering Bill makes it a criminal offence not make a report when you have reasonable grounds to suspect money laundering. • A sensible interpretation of ‘reasonable grounds for suspicion’ is that a reasonable and honest person would think that a customer’s behaviour was unusual - AND further think that the reason for this behaviour might be money laundering. • Unusual activity in isolation is not necessarily suspicious. Further investigation may reveal a logical explanation for the activity. • Where there is no logical explanation for an unusual transaction and the funds may be the proceeds of crime or being used to fund terrorism, it must be reported to the MLRO. The Suspicious Activity Reporting form is attached AML Awareness Training

    17. How do we fight it? Red Flags – Typical examples of suspicious activity • Frequent, large-scale cash transactions Criminals often accumulate large amounts of low-denomination notes (e.g. drug dealers). The criminal must enter these notes into the financial system to realise their true value. • A typical or uneconomical fund transfer to or from a foreign jurisdiction The transfer of criminal funds brings several benefits to laundering operations. We should be on the lookout for fund transfers with no approved reason and no supporting explanation. • Large or rapid movements of funds Money launderers often try to 'layer' funds by switching between several accounts in different institutions or jurisdictions in an attempt to throw the auditors off their trail. A legitimate customer, by contrast, will usually try to minimize bureaucracy and fees. • Unrealistic wealth compared with customer profiles Be wary of individuals with little or no apparent wealth, or no employment, who pay large sums of money into accounts. Often these funds are directly derived from crime, or are being 'looked after' while the real criminal is being investigated by police. • Defensive stance to questioning Inexperienced launderers may not have prepared a reasonable cover story concerning the origins of their illicit funds. An 'honest' customer will, in general, be willing to answer questions about his finances because he wants the service provider to tailor its service to his needs. The Suspicious Activity Reporting form is attached AML Awareness Training

    18. Complete a SAR form in soft copy and send to M-pesafraud@safaricom.co.ke . The form will automatically be receive by the MLRO. Do not display or communicate any suspicion to the customer or a colleague – if in doubt contact the Safaricom MLRO Do not tell the customer that you have reported them Do not add any memos on the system stating that a report has been made and remember to destroy any hard copies of the report that may have been produced. How do we fight it? Making a Suspicious Activity Report (SAR) AML Awareness Training

    19. How do we fight it? Suspicious Activity Reporting Form Attached is the Suspicious Activity Report AML Awareness Training

    20. How do we fight it? Who is the Money Laundering Reporting Officer (MLRO)? • The MLRO is the member of staff responsible for, among other things, the receipt, investigation and disclosure (where appropriate) of Suspicious Activity Reports to the Financial Reporting Centre. • The MLRO for Safaricom is Miriam Gikonyo. • The Fraud Manager for Safaricom is Edward Muchiri. • All Safaricom staff/Agents must use the Suspicious Activity Reporting (SAR) Form which will be sent to the above staff in Fraud management via M-pesafraud@safaricom.co.ke What is the 4D technique mentioned on the SAR form? The 4D technique will help you consider whether what you have seen may relate to criminal activity and is therefore suspicious or whether it is unusual but with a logical explanation. Unusual activity which is NOT suspicious should NOT be reported. The main headings of the 4D technique are as follows: • Details – What has happened? Do I need to know more? • Dates – When did it happen? Is it a one off transaction or a series of transactions? • Doubts – What made me suspect this relates to criminal activity? How well do I know the customer? Does anyone else know more? • Decision – You may decide; (i) That you are suspicious and therefore need to report the activity to the MLRO, (ii) Not to report it as you have concluded that there is a logical explanation for the activity, or (iii) Monitor the account to better understand the activity before making a final decision. AML Awareness Training

    21. How do we fight it? What happens next to the report? The Money Laundering Reporting Officer will: • Gather additional evidence and fully investigate the circumstances surrounding the suspicion. • Decide whether or not to report to the Financial Reporting Centre • Advice the reporter if any action needs to be taken and whether or not the matter has been reported to the Reporting Centre.. • Liaise with the Centre during their investigation. The Suspicious Activity Reporting form is attached AML Awareness Training

    22. Summary In this course you have learnt • The definition and process of money laundering. • How it affects Safaricom and you personally. • The legal requirements and consequences. • How to fight money laundering and terrorist financing as well as protect yourself and Safaricom. Be alert at all times - follow these AML Guidelines or contact Safaricom’s MLRO for advice AML Awareness Training

    23. Knowledge Test • You will now be asked 10 questions on the subjects covered in this course. • You will be given your score at the end and will be required to re-take the test until you meet the pass mark of 70%. Good luck! AML Awareness Training

    24. Thank you.