Designated Non-Financial Businesses and Professions

 

Designated Non-Financial Business Professions (DNFBP) are considered attractive channels for money laundering, financial crime and terrorist financing operations. Increased sophistication in money laundering techniques, such as the use of legal persons to disguise the true ownership and control of illegal proceeds, have brought these businesses under financial scrutiny. An increase in the use of professionals and trust-based business relationships to provide advice and assistance in laundering criminal funds is another concern for regulators.

It compelled FATF to include certain non-financial businesses and professional services within the purview of “reporting entities” for AML/CTF compliance.

“Designated Non-Financial Businesses and Professions” was first coined in the FATF 40 Recommendations of October 2003, and the scope was further enhanced vide the FATF 2012 Recommendations, and more recently, the Fifth Anti-Money Laundering Directive (5MLD) to include Virtual Asset Service Provider for crypto and virtual currencies.

Who is listed as Designated Non-Financial Businesses and Professions?

The following DNFBPs are required to follow AML compliance requirements:

–  lawyers, notaries, conveyancers other independent legal professionals;
–  accountants, auditors, and tax advisors;
–  real estate agents, developer, or brokers;
–  dealers in precious metals, jewels and stones;
–  dealers in vehicles;
–  trusts and company service providers;
–  casinos, online gaming and gambling establishments;
–  insurance firms, agents and brokers;
–  sports and betting operations; and
–  crypto-fiat exchanges and virtual currency custodian wallet services.

Designated Non-Financial Businesses and Professions

What are they required to do?

DNFBPs are regulated in the same way as credit and financial institutions, with each sector having specific regulations tailored to the risk exposure of the nature of business and industry.

Every country or jurisdiction is advised to devise and implement relevant policies, procedures, and controls based on the risk assessments in their territories, for the prevention and mitigation of potential Money Laundering and Terrorism Financing activities.

DNFBPs are required to:

1.  Establishing an AML/CTF compliance programme based on risk assessment for exposure by type of client, the nature of activities, a country in which the client operates, industry size of the transaction, and client relationships.

2.  Client identification and KYC;

3.  Customer Due Diligence (CDD);

4.  Training of staff and creating awareness of risk exposures;

5.  Appointment of a Digital Ethics or Compliance Officer;

6.  Ongoing transaction monitoring and Enhanced Due Diligence (EDD) for suspicious activities, international operations, or dealings with sanctioned individuals or countries.

7.  Maintaining customer records;

8.  Reporting obligations, as mandated by the country’s regulator;

9.  Periodic review of risk assessments and compliance programme;

10.  Monitoring and Reporting of:

11.  suspicious transactions and activities;

12.  transactions with PEPs, and sanctioned individuals;

13.  transactions with virtual currency exchanges if illegal under the regime;

14.  transactions with sanctioned entities or countries;

15.  trading in prohibited goods, or activities that pose risks of ML/TF;

16.  transactions that are beyond given transaction thresholds.