Tuesday, April 8, 2014

UN Convention Against Corruption and Anti-Money Laundering

Last month, we discussed Oman’s ratification of the UN Convention against Corruption (the “UN Convention”) endorsed by Royal Decree 64/2013; the existing legislations in Oman against corruption; and the measures to be adopted by the Government in the public sector, private sector and the judiciary to prevent corruption in accordance with the guidelines specified in the UN Convention. In this article, we summarise certain aspects of Oman’s existing legislation relating to anti-money laundering and discuss the link between provisions of the existing legislation and the UN Convention.

Existing Legislation - Money Laundering

The Sultanate has enacted the following legislations concerning anti-money laundering:

  1. The Anti-Money Laundering and Combating of Terrorist Financing Law (the “AML-CTFL”) (promulgated by Royal Decree 79/2010); and
  2. The Executive Regulations of the Anti-Money Laundering Law (the “Executive Regulations”) (promulgated by Royal Decree 72/2004).
The AML-CTFL states that any person who intentionally commits (either directly or indirectly) any of the following acts shall be deemed to have committed the offence of money laundering:
  1. Transfers or exchanges funds with the proceeds of crime knowing that such funds are derived (directly or indirectly) from a crime or from an act(s) that is deemed participation in a crime, with the purpose of concealing the source of such proceeds;
  2. Conceals the nature, source, location, movement, ownership and rights of crime proceeds; or
  3. Acquires, owns, receives, manages, invests, is the guarantor of or uses the proceeds of crime.
Pursuant to the AML-CTFL the Royal Oman Police has established an independent Financial Investigation Unit (the “Unit”). The Unit has created a database on the basis of reports and information received from financial institutions, non-financial businesses and professions, non-profit organisations and other authorities (the “Institutions”) in relation to transactions suspected to be related to crime proceeds, money laundering or terrorist financing. The database created from such reports is exchanged between competent authorities within the Sultanate as well as with foreign entities.

The AML-CTFL includes an extensive list of obligations on the Institutions which include, but are not limited to:
  1. ensuring they transact with their counterpart institutions in the countries where they are registered;
  2. undertaking customer due diligence to identify and verify the identities of customers and beneficial owners;
  3. refusing to open anonymous accounts;
  4. continuing to follow up on customer transactions;
  5. keeping records and information on customer identities;
  6. verifying that their branches abroad comply with anti-money laundering measures; and
  7. establishing appropriate internal policies for surveillance, training and appointment of compliance officers in such institutions in accordance with the provisions of the competent Regulatory Authorities (formed pursuant to AML-CTFL).
The AML-CTFL sets out provisions by which the competent Regulatory Authority is obligated to adhere to, oversee and assist the Institutions’ compliance with the law.

Moreover, the public prosecution may require precautionary procedures such as confiscation and freezing of funds as well as a separate money laundering investigation.

Finally, the National Committee for Combating Money Laundering (the “Committee”) provides further mechanisms in the effort to combat money laundering. Some of its functions include: (i) considering international treaties pertaining to money laundering; and (ii) setting out guidelines for monitoring money laundering activities in coordination with the Unit and competent Regulatory Authority.

In furtherance of the AML-CTFL, the Executive Regulations include a wide interpretation of business activities or professions that fall under the purview of the law. The Executive Regulations offer a comprehensive outline to the employees of the Institutions for conducting business activities. More specifically, they provide for the appointment of a compliance officer to report money laundering related matters to the relevant authority.

Applicability of UN Convention

In order to prevent money laundering, the UN Convention advises that governments establish a comprehensive domestic regulatory and supervisory regime for financial institutions. It further suggests that appropriate administrative, regulatory, law enforcement and other authorities should have the ability to cooperate and exchange information at both national and international levels. In addition, movement of cash across borders should be appropriately monitored. Further, financial institutions are advised to include on forms, for the electronic transfer of funds, accurate and meaningful information of the originator and scrutinise transfers of funds that do not contain complete information.

Oman has substantial domestic legislation in place to prevent money laundering which also includes provisions for cooperation with various international organisations and the exchange of money laundering related information with other countries.

The policies adopted by Oman to safeguard against money laundering include many of the recommendations specified in the UN Convention such as implementing a thorough domestic regime as well as ensuring the existence of administrative apparatus to combat money laundering.