Circular No. 41/2011/TT-NHNN guiding the identification and updating of customer information based on risk for anti-money laundering work

CIRCULAR

Guidelines for identifying and updating customer information based on risk to serve anti-money laundering efforts

_____________________________

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

No. 06/2013/UBTVQH13 dated March 18, 2013;

Pursuant to Decree No. 96/2008/NĐ-CP dated August 26, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to Decree No. 74/2005/NĐ-CP dated June 7, 2005 of the Government on anti-money laundering;

Implementing Decision No. 287/QĐ-TTg dated February 24, 2011 of the Prime Minister amending and supplementing Decision No. 1451/QĐ-TTg dated August 12, 2010 on "issuing the National Action Plan against Money Laundering and Terrorist Financing";

The State Bank of Vietnam guides the identification and updating of customer information based on risk to serve anti-money laundering efforts as follows:

Section 1

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular provides guidelines for identifying and updating customer information based on risk to serve anti-money laundering efforts.

Article 2. Applicability

This Circular applies to:

1. Credit institutions and foreign bank branches established and operating under the Law on Credit Institutions.

2. Currency exchange agents, enterprises registered to engage in gold trading, and organizations providing payment services and payment intermediaries licensed by the State Bank.

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. Banking agency activities are the provision of banking, payment, and other services by a bank in a specific country or territory (hereinafter referred to as the Agency Bank) to another bank in another country or territory (hereinafter referred to as the Partner Bank).

2. Reporting entities are the entities specified in Article 2 of this Circular.

3. Money transfer or substitute value service is the service of transferring money or value (such as checks, drafts, payment cards, or other negotiable instruments) from one location to another by individuals or organizations not authorized or regulated by competent state agencies.

4. Politically Exposed Person is an individual entrusted with high-level public functions in a foreign government, including heads of state, government, senior government officials, judges, military officers; or senior managers of state-owned companies in a foreign country, senior political party officials; and family members or closely associated persons of such individual.

5. Shell Bank is a bank without a physical presence and not subject to supervision by any competent authority of any country or territory.

6. Introduced Business Activity is the business activity of reporting entities conducted through the introduction of intermediaries that are other members within the same group, holding company, financial organization, or service brokerage organizations.

7. Financial Task Force is an intergovernmental organization responsible for researching, issuing, and monitoring the implementation of international standards on anti-money laundering and terrorist financing.

Section 2

SPECIFIC PROVISIONS

Article 4. Basis for Determining Risk Level

1. The level of money laundering risk may be based on the following grounds:

a) Type of customer: resident or non-resident; organizational or individual customers; customers listed in warning lists; customers in real estate, pawnshop, casino, cash-intensive trade sectors, online commerce;

b) Type of product or service commonly used by customers: cash deposits, transfers, electronic money transfers, card transactions, currency exchanges;

c) Geographic location where the customer resides or has its main office: countries listed in sanctions resolutions of the United Nations Security Council; countries publicly listed as non-compliant or partially compliant with the Financial Task Force's recommendations on anti-money laundering and terrorist financing (hereinafter referred to as the public list); areas known for significant drug-related activities;

d) Other bases as stipulated internally by reporting entities.

2. Reporting entities may determine the level of money laundering risk based on the grounds set out in Clause 1 of this Article, but must pay attention to transactions and business relationships of customers with organizations or individuals from countries listed in the public list. In necessary cases, reporting entities must verify the basis and purpose of these transactions. If there is suspicion that the transaction is related to money laundering, the reporting entity must report the suspicious transaction to the Anti-Money Laundering Department.

Article 5. Classification and Identification of Customers Based on Risk Levels

1. Depending on the scale and scope of operations and transactions of customers, reporting organizations must review and classify customers into high, medium, and low risk levels.

2. For customers with high risk levels, reporting organizations must apply enhanced and stringent customer identification measures.

Article 6. Beneficial Owners

1. Reporting organizations have the responsibility to identify, update information, and retain records and documents about beneficial owners.

2. Information about beneficial owners must include personal customer identification information as stipulated in Point a Clause 2 Article 6 Circular No. 22/2009/TT-NHNN dated November 17, 2009 of the State Bank of Vietnam guiding the implementation of anti-money laundering measures, and information about ownership ratios within the organization or control over the organization by the beneficial owner.

Article 7. Politically Exposed Persons

1. Reporting organizations have the responsibility to identify customers who are politically exposed persons.

2. In cases where customers are politically exposed persons, reporting organizations must apply the following enhanced measures:

a) Obtain approval from the General Director (Director) or Deputy General Director (Deputy Director) authorized before establishing a relationship or immediately after a current customer is identified as a politically exposed person;

b) Implement measures to understand the source of funds and assets of the customer.

Article 8. Banking Agency Activities

1. Reporting organizations may not enter into agency contracts or conduct transactions with shell banks.

2. In banking agency activities, the reporting organization acting as the agency bank must:

a) Ensure that there is authorization from the General Director (Director) or Deputy General Director (Deputy Director) authorized before establishing a banking agency relationship with the partner bank;

b) Collect information to understand the activities of the partner bank and ensure that the partner bank is subject to management and supervision by competent authorities;

c) Annually assess the implementation of anti-money laundering measures by the partner bank;

d) Implement measures to ensure that the banking agency relationship is not abused for money laundering purposes;

e) In cases where customers of the partner bank can make payments through accounts opened at the reporting organization, the reporting organization must ensure that the partner bank has verified customer identification information, continuously monitored the customer, and is capable of providing customer identification information if requested.

Article 9. Electronic Transactions and Non-Face-to-Face Transactions

1. Reporting organizations must evaluate the money laundering risk level when applying electronic transactions in banking and payment transactions with non-face-to-face customers such as Internet banking services, mobile banking services, and bank cards.

2. Reporting organizations must ensure that the updating of information for customers mentioned in Clause 1 of this Article is no less effective than for face-to-face customers through procedures such as requesting certification, supplementing documents, and independent contact with the customer.

Article 10. Introduced Business Activities

1. Reporting entities conducting introduced business activities may identify customers through intermediaries but must ensure that:

a) The intermediary must collect, retain, and provide promptly all necessary customer identification information to the reporting entity upon request;

b) The intermediary has measures to comply with customer identification and information update requirements according to the Financial Action Task Force recommendations and is subject to management and supervision by competent state authorities.

2. Relying on intermediaries for customer identification does not exempt the reporting entity from its responsibility to identify and update customer information.

Article 11. Money Transfer or Value Substitution Services

1. Reporting entities must have measures to identify customers who provide money transfer or value substitution services.

2. When a reporting entity discovers that a customer provides money transfer or value substitution services, it must apply enhanced customer identification measures and report to the Anti-Money Laundering Bureau for handling in accordance with the law.

Section 3

IMPLEMENTATION

Article 12. Effective Date

This Circular takes effect from February 1, 2012.

Article 13. Handling Violations

1. Persons committing crimes related to money laundering shall be dealt with under the Penal Code of the Socialist Republic of Vietnam.

2. Individuals or organizations violating the provisions of this Circular but not reaching the level of criminal prosecution shall be administratively sanctioned in accordance with the law and Decree No. 74/2005/NĐ-CP dated June 7, 2005 of the Government on preventing and combating money laundering.

Article 14. Implementation Organization

The Director of the Office, the Head of Banking Inspection and Supervision, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally-administered cities, Chairmen of Management Boards, Chairmen of Board of Members, General Directors (Directors) of reporting entities are responsible for implementing this Circular./.