Supervision Department - AML/CFT Training
Concentration Account See Clearing Account. Concentration Risk Concentration risk primarily applies to the asset side of the balance sheet. As a common practice,
supervisors not only require banks to have information systems to identify credit concentrations, but also set
limits to restrict bank exposure
to single borrowers or groups of related borrowers. Without knowing exactly who the customers are
(through Know Your Customer policies) and their relationship with other customers, the bank is not able to
measure its concentration risk, which
is particularly relevant in the context of related counter-parties and connected lending. On the liability side,
concentration risk is associated with funding risk, especially the risk of early and sudden withdrawal of
funds by large depositors that could harm an institution‘s liquidity.
Confidentiality Keeping certain facts, data and information out of public
or unauthorized view. In the U.S., U.K. and many other jurisdictions, confidentiality is required when filing
suspicious transaction or activity reports — the filing institution‘s employees cannot notify a customer that
a report has been filed. In another context, a breach of confidentiality can occur when an institution
discloses client information to enforcement agencies or a financial intelligence unit in violation of the
jurisdiction‘s bank secrecy laws.
Confiscation Includes forfeiture where applicable, and means the permanent deprivation of funds or other assets by order
of a competent authority or a court. Confiscation or forfeiture takes place through a judicial or
administrative procedure that transfers the ownership of specified funds or other assets to the state. Upon
transfer, the person(s) or entity(ies) that held an interest in the specified funds or other assets at the time of
the confiscation or forfeiture lose all rights, in principle, to the confiscated or forfeited assets. Confiscation
or forfeiture orders are usually linked to a criminal conviction or a court decision whereby the confiscated
or forfeited property is determined to have been derived from or intended for use in a violation of the law.
Confiscation is a central strategic tool that is required in order to take effective action against money
laundering and terrorist financing. It is crucial
that criminal justice systems make provisions for efficient and effective methods of tracing, freezing and
eventually confiscating proceeds of criminal activity. Mutual legal assistance treaties can provide for
confiscation of assets in one jurisdiction based upon prosecutions elsewhere.
Constructive (Involuntary) Trust Liability The imposition of trustee obligations upon a financial institution deemed to ―know‖ that property in its
possession belongs to a person other than its client. A financial institution can face the risk of breach
Supervision Department - AML/CFT Training
of trust if it handles or transfers the funds in a manner detrimental to the interests of the rightful owner.
Anti-money laundering specialists should be especially vigilant when there is suspicion that funds may have
been derived from a victim of crime, resulting in the victim‘s loss of funds or property.
Core Principles Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision,
the Objectives and Principles for Securities Regulation issued by the International Organization of
Securities Commissions, and the Insurance Supervisory Principles issued by the International Association
of Insurance Supervisors.
Corporate Vehicles Defined in FATF‘s Consultation Paper as:
(a) Private limited companies and public limited companies whose shares are not traded on a stock
(b)International business companies/exempt companies.
Limited partnerships and limited liability partnerships.
Occasionally it is difficult to identify the persons who are the ultimate beneficial owners and controllers of
corporate vehicles, which makes the vehicles vulnerable to money laundering. FATF gives such vehicles
special focus in the revised 40 Recommendations on Money Laundering of 2003, under the section
pertaining to CDD for legal persons and arrangements (Recommendation 5).
Correspondent Banking The provision of banking services by one bank (the ―correspondent bank‖) to another bank (the ―respondent
bank‖). Large international banks typically act as correspondents for thousands of other banks around the
world. Respondent banks may be provided with a wide range of services, including cash management (e.g.,
interest-bearing accounts in a variety of currencies), international wire transfers of funds, check clearing
services, payable-through accounts and foreign exchange services.
Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime The Convention was adopted by the Committee of Ministers of the Council of Europe in September 1990,
which addressed all types of criminal offenses and thereby has greater impact than the Vienna Convention.
The offense of money laundering was extended to include money laundering associated with
all serious offenses, not just drug trafficking. In May 2005, a revised convention was adopted.