Speaker 1: When having your own small business, there are certain AML CTF obligations that you need to follow to remain compliant, which sometimes you think may not apply to you. But what are those obligations, and which ones apply? In today's video we will be taking a look at what is AML CTF, what constitutes a small business, and what small businesses need to follow AML CTF regulations. Hello and welcome to another KYC Lookup video where we bring you AML related content to help you enhance your knowledge in the fight against money laundering. Before diving into today's video, be sure to subscribe so you don't miss out on any future videos. Oh, and don't forget to leave us a comment with any suggested topics you would like us to cover in the future. So, on to today's video. What is AML and CTF? AML and CTF stands for Money Laundering and Combating of Terrorist Financing, respectively. They are two distinct but related concepts and regulatory frameworks aimed at preventing criminal activities, such as money laundering and terrorist financing. Key components of an AML program include Customer Due Diligence, CDD. Conducting thorough checks on customers to verify their identities and assess the level of risk associated with a business relationship. Suspicious Activity Reporting, SAR. Financial institutions are required to report any transactions or activities that raise suspicion of money laundering to relevant authorities. Transaction Monitoring. Regulatory monitoring and analysing transactions to identify unusual patterns or behaviours that may indicate money laundering. AML Compliance Programs. Developing and implementing internal AML policies, procedures and training to ensure employees understand their roles in combating money laundering. CTF efforts include Freezing assets of individuals or entities suspected of supporting terrorism. Implementing strict controls on cross-border movements of funds. Enhancing information sharing between financial institutions and law enforcement agencies to identify and prevent terrorist financing activities. Collaborating with international parties to combat terrorism financing globally. What constitutes a small business? The definition of a small business can vary depending on the country, industry and context. Different countries and organisations may have their own criteria for classifying businesses as small. Here are some of the common factors that are often considered when determining whether a business is classified as small. Number of Employees. One of the most common criteria is the number of employees. In many countries, a business is considered small if it has a limited number of employees. This number can vary significantly but it is typically below a certain threshold, such as 50 employees in the United States or 250 employees in the European Union. Annual Revenue. Another criterion is the annual review or turnover of the business. Small businesses typically have lower annual revenues compared to larger enterprises. The revenue threshold can vary widely based on the country and industry. Total Assets. Some countries or industries may use the total value of assets as a measure to determine the size of the business. This criterion considers the value of physical assets, intellectual property and other holdings. Legal Structure. The legal structure of a business can also be a factor in determining its size. For example, a sole proprietorship or a small family-owned business may be considered small in comparison to a large corporation. Industry Classification. In certain industries, businesses with a certain market share or level of influence within the industry may be considered small, even if they have significant revenue or a substantial number of employees. An Independence. A small business is typically independent and not part of a larger corporate group or conglomerate. What are the AML-CTF compliance regulations for small businesses? AML-CTF, Anti-Money Laundering and Combating the Financing of Terrorism, compliance for small businesses is essential to prevent illicit activities, such as money laundering and terrorist financing. While specific regulations may vary by country, the general principles for AML-CTF compliance remain consistent. Here are some key considerations for small businesses. Know Your Customer, KYC. Implement robust KYC procedures to verify the identity of customers and understand the nature of their business activities. This may include obtaining identification documents, proof of address and other relevant information. Risk Assessment. Conduct a risk assessment to identify and understand the money laundering and terrorist financing risks associated with their business. The risk assessment will help tailor your AML-CTF policies and procedures according to your specific risk profile. AML-CTF Policies and Procedures. Develop and implement AML-CTF policies and procedures that address the identified risks. These should cover customer due diligence, reporting suspicious transactions, employee training and record keeping among other aspects. Reporting Suspicious Transactions. Train employees to recognise and report suspicious transactions to the appropriate authorities, as required by law. Reporting such activities promptly can help prevent criminal activities and protect your business from potential liabilities. Record Keeping. Maintain adequate records of customer information, transactions and AML-CTF measures taken. These records should be kept securely and made available for inspection when required by regulatory authorities. Employee Training. Ensure that all employees are educated about AML-CTF regulations and the specific policies and procedures in place. Regular training can help create strong compliance culture within the organisation. Monitoring and Reporting. Implement monitoring mechanisms to track transactions and identify any unusual or suspicious activities. If necessary, submit Suspicious Activity Reports, SARS, to the appropriate Financial Intelligence Unit or regulatory body. Compliance Officer. Designate a competent individual within the organisation to act as the AML-CTF Compliance Officer. This person will be responsible for overseeing and coordinating the implementation of AML-CTF measures. Regulatory Compliance. Stay up-to-date with AML-CTF laws and regulations, applicable to your jurisdiction and industry. Compliance requirements may change over time, so it is essential to be aware of any updates or amendments. And Third-Party Risks. Be cautious when dealing with third-party businesses or partners. Conduct due diligence on your business associates to ensure they are compliant with AML-CTF regulations. It's important to note that AML-CTF regulations can vary significantly between countries and industries. Small businesses should seek advice from legal and financial experts, with knowledge of the specific regulatory environment in which they operate. Compliance with these regulations is crucial, not only to avoid legal consequences, but also to contribute to global efforts to combat money laundering and terrorist financing. What Small Businesses Need to Follow AML-CTF Regulations The specific AML-CTF anti-money laundering and combating the financing of terrorism regulations and requirements for small businesses vary from country to country. The scope and thresholds for the compliance can depend on factors such as the nature of the business, the industry it operates in, and the country's regulatory framework. However, in many jurisdictions, small businesses operating in certain industries are obliged to comply with AML-CTF regulations. Here are some examples of small businesses that may be subject to AML-CTF compliance. Financial Institutions This category includes banks, credit unions, money services businesses, MSBs, payment processors, and other financial entities, regardless of their size. Money Services Businesses MSBs are entities that offer services like money transmissions, currency exchange, check cashing, and prepaid cards. Even small MSBs may be required to comply with AML-CTF regulations. Real Estate Agents and Brokers In some countries, real estate agents and brokers are required to adhere to AML-CTF regulations to prevent money laundering through property transactions. Precious Metal and Stone Dealers Small businesses involved in buying and selling precious metals, gems, or stones may be subject to AML-CTF compliance. Accountants and Tax Advisors In some jurisdictions, accountants and tax advisers may be classified as designated non-financial businesses and professions, and are obliged to comply with AML-CTF regulations. Lawyers and Notaries Similarly, lawyers and notaries may also be considered as designated non-financial businesses and professions, and subject to AML-CTF requirements. Casinos and Gambling Establishments Small casinos, gaming establishments, or online gambling platforms may have AML-CTF obligations. Dealers of High Value Goods Small businesses engaged in the sale of high value goods, such as luxury goods, art or antiques, may have AML-CTF compliance requirements. Non-Profit Organisations In some countries, certain non-profit organisations are also required to comply with AML-CTF regulations to prevent terrorist financing. It is essential for small businesses to research and understand the specific AML-CTF regulations that apply to their industry and jurisdictions. Compliance requirements may include customer due diligence, suspicious transaction reporting, employee training, record keeping, and appointing a compliance officer, among other measures. Well, there you have it. What is AML-CTF, what constitutes a small business, and what small businesses need to follow AML-CTF regulations. Please tell us in the comments section any other AML-CTF regulations small businesses have to follow, and any other topics you would like us to cover in the future. We have now launched our very own courses for you to take a more in-depth look at a variety of subjects, such as Introduction to AML, Beneficial Ownership, and Customer Risk Rating for example. So make sure you visit our website for further details, and let us help you connect the dots in KYC. Thank you for watching the video, and if you made it this far, don't forget to like and subscribe to watch more amazing videos.