Designated NonFinancial Businesses and Profession DNFBP 1 Introduction
Designated Non-Financial Businesses and Profession (DNFBP)
1. Introduction • 1999: The beginning of the international movement to extend the reporting obligation beyond financial institutions and intermediaries. • 2003: Revisions to the FATF recommendations extending basic AML/CFT prevention and reporting obligations beyond financial institutions to a list of DNFBPs that includes lawyers, notaries and other independent professionals and accountants, dealers in precious metals and precious stones, real estate agents, casinos, trusts and company service providers.
2. Who are DNFBPs? • DNFBPs are casinos, real-estate agents, dealers in precious metals and stones, lawyers, accounts, and trust and company service providers(TCSPs). • Definition of “Financial Institution” uses a functional approach. • Definition of DNFBPs is more complicated; it uses a designation/category approach, which at first appears simpler. • Another difference is there also Qualitative and Quantitative requirements to determine What or When DNFBP entities are covered by recommendation 22. • Seems like a reasonable approach.
3. Types of DNFBPs by Rec 22 1) Casinos (which also includes internet-and ship-based casinos). When engaging in transactions of USD/EUR 3, 000 or more. 2) Real estate agents. When engaging in transactions for clients in buying and selling real estate. 3) Dealers in precious metals. When engaging in cash transactions of USD/EUR 15, 000. 4) Dealers in precious stones. When engaging in cash transactions of USD/EUR 15, 000.
3. Types of DNFBPs by Rec 22 (cont’d) 5) Lawyers, notaries, other independent legal professionals and accountants. when they prepare for or carry out transactions for their client concerning: Ø Buying and selling real estate; Ø Managing of client money, securities or other assets; management of bank, savings or other securities accounts; Ø Organization of contributions for the creation, operation or management of companies; Ø Creation, operation or management of legal persons or arrangements, and buying and selling of business entities.
3. Types of DNFBPs by Rec 22 (cont’d) 6) Trust and Company Service Providers refers to all persons or businesses that are not covered elsewhere under these Recommendations, and which as a business, provide any of the following services to third parties: Ø acting as a formation agent of legal persons; Ø acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons; Ø providing a registered office, business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement; Ø acting as (or arranging for another person to act as) a trustee of an express trust; Ø acting as (or arranging for another person to act as) a nominee shareholder for another person.
4. What FATF Recommendations are applicable to DNFBPs? • Risk-based approach is applicable to DNFBPs to the same extent as it is to financial institutions – separate (group) justification for each DNFBP is required • Specific Recommendations covered: Ø Ø Ø Rec. 10 - customer identification and CDD Rec. 11 - record keeping requirements Rec. 12 - special attention for PEPs Rec. 15 - special attention to new technologies Rec. 17 - use of intermediaries
4. What FATF Recommendations are applicable to DNFBPs? (cont’d) Ø Rec. 18 - internal compliance program requirement Ø Rec. 19 - special attention for transactions involving countries without full compliance with FATF recommendations Ø Rec. 20 - suspicious transaction reporting Ø Rec. 21 - safe harbor for good faith suspicious activity reporting and prohibition against “tipping off” Ø Rec. 35 - sanctions against non-compliance for DNFBPs
5. Regulation of DNFBPs • Scope of applicability of FATF Recs Ø If the Recommendation is applicable, it is applicable to the same extent as it is to financial institutions Ø Caveat – risk-based approach permits distinctions between financial institutions and DNFBPs Ø If there are distinctions, they need to be explained • Countries need to provide above analysis for each category of covered DNFBP, unless all DNFBPs are treated the same Ø Group DNFBPs similarly situated Ø Specify differences Ø Cross reference
5. Regulation of DNFBPs(cont’d) • No need to repeat analysis to the extent that treatment and requirements are the same Ø Specify differences Ø Cross reference
Q&A
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