CFT under kyc aml regulations

So let me start this discussion by asking you a question. Do you know how the Russian and Ukraine conflict is getting funded in the proxy side? While you might say that it’s happening through conventional transactions. The reality is that the entire scheme is funded through crypto currencies. Hence, it makes sense to discuss, what is cft under kyc aml regulations.

What is cft under kyc aml regulations

So in brief CFT stands for combating the financing of terrorism. These are a set of measures which the finance organisations are expected to take, to prevent these organisations from using the mainstream financing routes.

Example of CFT Rule: Crypto Currency

So, what is the cft under kyc aml regulations in crypto currency? Any cryptocurrency exchange operating within the jurisdiction must implement a comprehensive customer identification and verification process. This process includes obtaining and verifying the customer’s personal information, such as their name, address, date of birth, and official identification documents. Enhanced due diligence measures should be applied to higher-risk customers. The exchange must also regularly update and monitor customer information and report any suspicious activities to the relevant authorities.

This rule ensures that individuals using cryptocurrencies for transactions on exchanges are properly identified and their activities are monitored for signs of potential terrorism financing or other illicit activities.

Example of CFT Rule: Transactions Reporting

So, what is the cft under kya aml regulations in case of suspicious transactions? Banks are required to monitor customer transactions for any unusual or suspicious activity that could indicate potential financing of terrorism. If such activity is detected, the bank is obligated to report it to the appropriate financial intelligence unit or law enforcement agency.

CFT Rules Vs KYC Rules

What is CFT under KYC AML regulations: RBI India

Now let us look at briefly,what is cft under kyc aml regulations given by RBI in India.

As per the master circular given by Reserve bank of India, dated July 2009;

Combating  Financing  of  Terrorism: Source RBI Circular

a)   In  terms of  PMLA  Rules,  suspicious  transaction  should  include inter alia transactions which give rise to a reasonable ground of suspicion that these may involve financing of the activities relating to terrorism. Banks are, therefore, advised to develop suitable mechanism through appropriate policy framework for enhanced monitoring of accounts suspected of having terrorist links and swift identification of the transactions and making suitable reports to the Financial Intelligence Unit – India (FIU-IND) on priority.

b)   As and when list of individuals and entities, approved by Security Council Committee established pursuant to various United Nations’ Security Council Resolutions (UNSCRs), are received from Government of India, Reserve Bank circulates these to all banks and financial institutions. Banks/Financial Institutions should ensure to update the consolidated list of individuals and entities as circulated by Reserve Bank.  Further, the updated list of such individuals/entities   can be accessed in the United Nations  website at  http://www.un.org/sc/committees/1267/consolist.shtml. Banks are advised that before opening any new account it should be ensured that the name/s of the proposed customer does not appear in the list. Further, banks should scan all existing accounts to ensure that no account  is held by or linked to any of the entities or individuals included in the list. Full details of accounts bearing resemblance with any of the individuals/entities in the list should immediately be intimated to RBI and FIU-IND.

c)  Banks are also advised to take into account risks arising from the deficiencies in AML/CFT regime of certain jurisdictions viz. Iran, Uzbekistan, Pakistan, Turkmenistan and Sao Tome and Principe, as identified in FATF Statement of February 25, 2009 circulated  to banks vide our circular letter DBOD.AML. No.20716/14.01.027/2008-09 dated June 03, 2009.

What is CFT under KYC AML regulations: FCA U.K

The U.K’s money laundering regulations require all crypto currencies asset firms to register with FCA & only firms with a detailed KYC & source of funds data are eligible to trade.

What is CFT under KYC AML regulations: Financial Crimes Enforcement Network (FinCEN)

Under the updated FinCEN guidelines, money service businesses (MSBs) are required to develop, implement, and maintain an effective written anti-money laundering program. MSBs also have to comply with the recordkeeping, reporting, and transaction monitoring obligations outlined in Chapter 10 of the U.S. Department of Treasury’s Money and Finance regulation.

Benefits of CFT Rules

So let me summarise the CFT Rule benefits to the entire world and their respective industries;