Unofficial Translation by the courtesy of The Foreign Banks' Association This translation is for the convenience of those unfamiliar with the Thai language. To Managers Please refer to the Thai text for the official version. ------------------------------------------------------------------------ All Commercial Banks All Finance Companies and Credit Foncier Companies All Asset Management Companies 19 January 2007 No. ThorPorTor. PhoNorSor. (21) Wor. 105 /2550 Re: Policy Statement Re: Measures on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Financial Institutions In order to foster the observance of international standards as relates to financial institution s anti-money laundering and combating the financing of terrorism (AML/CFT) measures, the Bank of Thailand issues a guideline on know your customer and customer due diligence (KYC/CDD) practices, which are major components of AML/CFT measures, for all financial institutions to comply with. Meanwhile, finance companies, credit foncier companies and asset management companies shall adapt the policy statement to be commensurate with business that they are permitted to undertake. Please be informed and comply accordingly. Yours sincerely, (Mrs. Tarisa Watanagase) Governor Enclosure.: Policy Statement Re: Measures on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Financial Institutions Risk Policy Department Tel. 0-2283-6827, 0-2356-7339 Fax. 0-2283-5938 Note: [ ] BOT will arrange for a clarification meeting on..at. [X] No clarification meeting will be arranged. BOT Notification No 105-2550 (19-01-07)(Eng).doc.doc Page 1 of 5
Policy Statement Re: Measures on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Financial Institutions Introduction Money laundering and financing of terrorism pose serious threats to the economies, societies, national security as well as international community. Financial institutions that became a vehicle for money laundering and financing of terrorism activities incur risks to its operations and reputations as these activities may lead to severe damage. The Bank of Thailand (BOT) recognizes the importance of having AML/CFT measures which conform to international standards such as the Recommendations of the Financial Action Taskforce on Money Laundering (FATF) and Guidance of the Basel Committee of Banking Supervision to ensure that financial institutions would not become a vehicle or a channel for such money laundering and financing of terrorism activities. Objective In order to foster the observance of international standards as relates to financial institution s anti-money laundering and combating the financing of terrorism (AML/CFT) measures, the Bank of Thailand issues a guideline on know your customer and customer due diligence (KYC/CDD) practices, which are major components of AML/CFT measures, for all financial institutions to comply with. Scope of Application This Policy Statement is applicable to all types of financial services that financial institutions provide to customers. Definitions Customer means any natural person or juristic person who has relationship or conducting business with financial institutions or who is delegated or authorized to conduct activities related to relationship or business with financial institutions on behalf of another party; including the ultimate beneficiary of the relationship or business as well as a person having power of control or final decision making. BOT Notification No 105-2550 (19-01-07)(Eng).doc.doc Page 2 of 5
Know Your Customer (KYC) means a practice to know the customer, keeping of identification evidence, address and other relevant documents of the customer. Customer Due Diligence means a practice to obtain more extensive information related to the customer and in-depth details to authenticate such information. Details of Guideline 1. Board and Senior Management Responsibilities (1). The board of directors and management of financial institutions are responsible to support and cooperate with all parties in accordance with the AML/CFT measures under the legal framework and international best practices. Such responsibility will be an important part of effective risk management, promoting image and reputation of the banks as well. (2) The board of directors is responsible for formulating the AML/CFT policies by establishing appropriate KYC/CDD procedures that can be effectively implemented, by delegating clear responsibilities to ensure that the policies and procedures achieve the objectives of the regulations and rules of associated governmental entities, and to ensure that all staffs are fully aware and comply with such policies and procedures. (3) Financial institutions shall set up a unit independent from business units or have a compliance unit to monitor their compliance with the established polices and procedures, including assessing adequacy and appropriateness of the policies and procedures, reviewing operations of relevant staff, and reporting any discrepancy or noncompliance. The person who in charge for an independent unit or a compliance unit that has responsibilities to evaluate and review customer acceptance policy should be senior management and report to the financial institutions board of directors. 2. An Implementation of Anti-money Laundering and Combating Financing of Terrorism Measures 2.1 Customer Acceptance Policy (1) Financial institutions should establish a clear and written customer acceptance policy for anti-money laundering and combating financing of terrorism in line with the international standards. The policy should consider various factors such as background, country of residence or original transaction, social status, associated accounts, type of business, and other risk indicators, as well as defining the definition of BOT Notification No 105-2550 (19-01-07)(Eng).doc.doc Page 3 of 5
customers requiring special attention 1, grouping customers by their money laundering exposures, and specifying the process to monitor customer accounts on an on-going basis. (2) Financial institutions should establish enhanced policies and procedures for customers requiring special attention, non-residents, private banking customers, correspondent banks, and customers whose source of fund is unclear. Moreover, special attention should be given to all complex, unusual large transactions or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose. The process to open the account for any customer requiring special attention described above must be subject to the senior management approval. 2.2 Customer Identification and Verification (1) Financial institutions shall adapt the guidelines stated in the Notification of the Bank of Thailand Re: The Requirement for Commercial Banks on Practices in Accepting Deposits dated 24 December 2001 upon commencing any relationship or financial transaction with a customer, namely accepting deposits, granting credit facilities, conducting money transfer, undertaking securities or debt instrument related activities, any transactions through a corresponding bank, providing services and conducting any other similar transaction. (2) Financial institutions shall use their best effort to authenticate the identification document upon commencing any relationship or financial transaction with a customer. For customers requiring special attention, financial institutions should establish enhanced customer acceptance policies and procedures. Moreover, financial institutions shall establish risk mitigating procedures and measures for account opening of non-face-to-face customers and shall have effectively monitoring procedures no less than those for customers who are personally present. (3) Financial institutions must keep records of documents or copies of documents which are already certified by customers in the vault or safe place at the financial institutions from the opening date of the account or the date when relation begins, and retain those documents for at least 5 years from the closing date of those 1 Customers Requiring Special Attention means customers who are or have been entrusted with prominent public functions in a foreign country (Politically Exposed Persons : PEPs), or whose residence or source of fund is from countries that do not use or apply the Financial Action Task Force on Money Laundering (FATF) Recommendations or do not have anti-money laundering measures, or customers who undertake suspicious transactions, or customers whose names appear on the list of or who have relation with a person who may conduct predicate offense or offense on money laundering, or customers with high risk profession such as jewelry or precious metal, foreign exchange, or informal lending business, etc. BOT Notification No 105-2550 (19-01-07)(Eng).doc.doc Page 4 of 5
accounts or the date when relation ends for examining or supporting an investigation or prosecution by the Bank of Thailand or other related legally authorized persons. 2.3 On-going Monitoring of Accounts and Transactions Financial institutions should pay attention to monitor the movement of customer accounts and update their related information, particularly for customers requiring special attention, as well as keep records of transactions for at least five years from the transaction date for examining or supporting an investigation or prosecution by the Bank of Thailand or other related legally authorized persons. 2.4 Risk Management The board of financial institutions should pay attention to and arrange to have clear and appropriate risk management for anti-money laundering and combating financing of terrorism as well as communicate to all staffs to acknowledge and comply with so that their implementations will be effective. For example, (1) Establishing clear and written procedures for reporting suspicious transactions to the supervisory authorities as well as communicating to all relevant staffs to acknowledge and comply with. (2) Establishing clear guidelines on risk assessment, risk rating, and frequency of risk reviewing process for each group of customers. (3) Organizing trainings on AML/CFT policies and procedures to all relevant staffs on a regular basis to ensure that they are aware of the duties, importance, and impact or non-compliance penalty. BOT Notification No 105-2550 (19-01-07)(Eng).doc.doc Page 5 of 5