To adequately safeguard your business against any potential risks of money laundering and terrorism financing, it is important to know what these offences are and what steps should be taken when establishing new client relationships and managing existing ones.
Existing anti-money laundering legislation in Oman
Oman’s anti-money laundering and terrorism financing regime is largely governed by (i) the Law on Combating Money Laundering and Terrorism Financing promulgated by Sultani Decree No. 30/2016 (the “AML Law”) which repealed Sultani Decree No. 79/2010; and (ii) the executive regulations issued under Oman’s anti-money laundering law implemented in 2004 by Oman Sultani Decree No. 72/2004 (the “Executive Regulations”). The Executive Regulations shall continue to apply to the extent that it does not conflict with the AML Law, and until such time as new executive regulations under the AML Law have been issued.Money laundering offence
The AML Law describes a money laundering offence as having occurred if any person who knew or should have known or suspected that funds are the proceeds of a crime intentionally committed any of the following acts:- Converts or transfers such funds with the purpose of disguising or concealing the illegal nature or source of such proceeds or of assisting any person who committed the predicate offense to evade punishment for their acts;
- Disguise or conceal the true nature, source, location, method of disposal, movement, or ownership of the funds and their related rights; or
- Acquiring, possessing, or using such funds upon receipt.
Terrorism financing offence
Pursuant to the AML Law, a terrorism financing offence occurs if any person willingly collects or provides funds, directly or indirectly and by any means, with the knowledge that such funds will be used in full or in part to carry out a terrorist act, or by a terrorist individual or a terrorist organisation.Scope of the AML Law and Executive Regulations
The AML Law applies to financial institutions, non-financial businesses, professions and non-profit associations and bodies (collectively hereinafter referred to as “Relevant Entities”). This has been broadly defined in the AML Law and includes, among other things:- persons licensed to practice banking, financial or commercial activities (e.g., banks; exchange companies; investment companies; investment and credit funds; insurance companies);
- companies and professionals who provide financial services;
- traders in precious metals and stones;
- notaries public;
- law firms and accounting firms;
- businesses involved in the management of bank accounts;
- entities involved in establishment, operation and/or management of companies;
- any other arrangements or professions as determined by the National Committee for Combating Money Laundering and Terrorism Financing; and
- any charities or religious not-for-profit organisations.
Internal steps to be taken by a Relevant Entity
A Relevant Entity should assess the money laundering and terrorism financing risks it faces and, if applicable, establish electronic data monitoring systems for monitoring all electronic banking transactions. By carrying out a risk assessment, this should assist a Relevant Entity in classifying clients and services according to the degree of risk of money laundering and terrorism financing and to determine whether enhanced due diligence should be applied to a particular client.What client due diligence checks should a Relevant Entity be carrying out?
The AML Law and Executive Regulations specifically set out a number of obligations regarding checks a Relevant Entity is required to undertake, namely:- correctly identifying the relevant counterparties, clients and beneficiaries to a transaction;
- determining whether a client or beneficial owner is a politically exposed person (“PEP”) and carrying out further due diligence for PEPs; and
- undertaking further due diligence in respect of any party for whom it opens a bank account.
A Relevant Entity is not permitted to open anonymous accounts or accounts under assumed or fictitious names or numbers or codes, and shall not provide any services to such accounts.
All documents and records collated by a Relevant Entity that relates to the identity of clients and beneficiaries and their activities must be stored for a period of 10 years.
Who is a PEP?
For the purposes of the AML Law, a PEP is any natural person currently or formerly appointed to (i) a prominent position in the Sultanate of Oman or a foreign country or (ii) an international organisation. Family members and close associates of any of those persons in (i) or (ii) are also considered to be PEPs.A Relevant Entity should have appropriate risk management systems in place to determine if a potential client is a PEP. Enhanced due diligence measures must be applied when dealing with a PEP. In addition, senior management approval must be obtained to continue the relationship and steps must be taken to determine the source of the PEP’s funds.
When should a Relevant Entity carry out AML checks?
A Relevant Entity must apply due diligence measures to identify their clients, using reliable and independent sources, documents, data and information in the following cases:- before establishing a business relationship;
- before carrying out a transaction for a customer with whom the Relevant Entity does not have an established business relationship, the value of which is equal to or greater than a threshold applied by the applicable supervisory authority;
- before executing a wire transfer for a customer with whom the Relevant Entity does not have an established business relationship with, the value of which is equal to or greater than a threshold applied by the applicable supervisory authority;
- when there is suspicion of a crime of money laundering or terrorism financing; and
- when there are doubts concerning the accuracy or adequacy of information and/or documentation received from the potential and/or existing customer.
It is also important to monitor all existing relationships and client transactions on an ongoing basis to ensure that information regarding such relationships is consistent with the client due diligence information held on file for that client.
