Reporting of suspicions: Comments and recommendations by the NBB
One of the most important AML/CFTP obligations for financial institutions is the fact they have to report a suspicion to CTIF-CFI when they know, suspect or have reasonable grounds to suspect that funds, transactions or a fact of which they are aware are linked to ML/FT. Summarised below are the situations requiring the reporting of a suspicion (see point 1), the practical arrangements for reporting to CTIF-CFI (see point 2), the consequences of reporting suspicions (see point 3) and the relevant internal control measures to be implemented (see point 4).
1. Situations requiring the reporting of a suspicion to CTIF-CFI
1.1. Reporting ML/FT suspicions following the analysis of atypical facts or transactions
In accordance with Article 47, § 1, of the Anti-Money Laundering Law, financial institutions must report to CTIF-CFI when they know, suspect or have reasonable grounds to suspect that the following are linked to ML or to FT:
- funds held by their customers, regardless of the amount;
- transactions carried out or ordered by their customers; or
- facts, including attempted transactions, which they are aware of.
Reporting to CTIF-CFI is required when the analysis described on the page “Analysis of atypical facts and transactions” concludes that an atypical transaction, the relevant funds or the atypical facts concerned are suspicious.
1.2. Other situations requiring the reporting of suspicions
Article 47, § 3, of the Anti-Money Laundering Law empowers the King to determine, by Royal Decree deliberated in the Council of Ministers and adopted upon the advice of CTIF-CFI, situations in which funds, transactions and facts should in any case be reported to CTIF-CFI without requiring an analysis by the AMLCO to conclude that there is a suspicion of ML/FT.
Likewise, Article 54, § 1, of the Anti-Money Laundering Law empowers the King to extend the obligation to report to CTIF-CFI to funds, transactions or facts pertaining to natural or legal persons that are linked to jurisdictions whose legislation is considered insufficient or whose practices are deemed to impede the fight against ML/FT, without requiring these funds, transactions or facts to be analysed in order to confirm a suspected link with ML/FT.
However, no Royal Decree implementing these two provisions of the Law has been adopted as of yet.
The provisions of European Law imposing restrictive measures against certain countries in order to fight against the proliferation of weapons of mass destruction and its financing also provide for an obligation directly applicable to financial institutions to immediately notify their Financial Information Unit (FIU), in Belgium CTIF-CFI, of any situations in which there are reasonable grounds to suspect that funds or transactions could be linked to the financing of the proliferation of weapons of mass destruction. Such cases of obligatory reporting to CTIF-CFI are currently listed in Article 23(1), points (e) and (f) of Council Regulation (EU) 2017/1509 of 30 August 2017 concerning restrictive measures against the Democratic People's Republic of Korea and repealing Regulation (EC) No 329/2007.
For an overview of and comments on all possible situations in which a reporting should be submitted to CTIF-CFI, the NBB invites financial institutions to consult the guidelines of CTIF-CFI regarding the reporting of information to it.
2. Arrangements for reporting to CTIF-CFI
2.1. Territorial scope of the obligation to report suspicions to CTIF-CFI
The obligation to report to CTIF-CFI applies to all financial institutions referred to in Article 5, § 1, of the Anti-Money Laundering Law, i.e. to financial institutions governed by Belgian Law and to Belgian branches of foreign financial institutions, as well as to certain financial institutions governed by the law of another EEA Member State which are subject to the Belgian Anti-Money Laundering Law on the grounds that they offer services in Belgium through (tied or independent) agents or distributors. In this respect, please refer to the page "Scope”.
Moreover, Article 47, § 2, of the Anti-Money Laundering Law stipulates that when the financial institution operates in another EEA Member State without having any establishment there, suspicions regarding transactions carried out under the freedom to provide services in relation to customers established in that other Member State should also be reported to CTIF-CFI (as the FIU of the home country).
However, when a financial institution carries out activities on the territory of another EEA Member State through a subsidiary, a branch or another form of establishment (particularly agents or, in the case of electronic money institutions, distributors representing the institution in that Member State) this establishment on the territory of the other Member State is not subject to the Belgian Anti-Money Laundering Law but to the anti-money laundering legislation of its host country. Suspicious facts and transactions detected locally in accordance with this legislation should therefore be reported to the FIU of the host country. Neither the establishment on the territory of this host country nor its Belgian parent company can or may fulfil its legal reporting obligation correctly by reporting to CTIF-CFI with regard to the same facts or transactions. For this subject, please also refer to the page “Scope” and to the comments and recommendations formulated by the Bank on the page “Belgian parent companies” (chapter 3: Application of local legislation by branches and subsidiaries established abroad). These clarifications are without prejudice to the fact that information should be shared within groups whenever necessary (see the page “Belgian parent companies”, chapter 2, section 2.3.1 Internal information sharing procedure of the group) or that a Belgian establishment should take into account the suspicious facts or transactions detected by another entity in its group in order to adequately analyse the atypical facts or transactions which were detected by this Belgian establishment and are linked to the same persons (see the page “Analysis of atypical facts and transactions”, section 2.2. Responsibilities of the AMLCO).
2.2. Reporting entities
In accordance with article 49 of the Anti-Money Laundering Law, information should in principle be reported and submitted to CTIF-CFI by the AMLCO. However, the AMLCO may delegate this responsibility to members of his service, who perform this task under his supervision and direct responsibility. Furthermore, any manager, employee or representative of the financial institution or branch concerned should personally submit information to CTIF-CFI whenever the usual procedure through the AMLCO cannot be followed. This could be the case, for instance, when the AMLCO is unavailable to do so himself in a timely manner or when the persons in the obliged entities seem to be involved in a money laundering or terrorist financing activity and would impede the submission of information through the usual procedures.
European financial institutions that use agents or distributors in Belgium and which meet the criteria outlined on the page dedicated to central contact points, should in principle report and submit information to CTIF-CFI through the designated central contact point.
2.3. Reporting procedures
Article 50 of the Anti-Money Laundering Law specifies that the information referred to in Articles 47, 48 and 66 should be submitted in writing or electronically according to the procedures laid down by CTIF-CFI. These procedures are currently included in the guidelines of CTIF-CFI regarding the reporting of information to it.
In practice, the NBB recommends that financial institutions report their suspicions through the secure ORIS site launched by CTIF-CFI on 1 September 2006. For this purpose, the reporting entity receives one or multiple secure access codes under the responsibility of the AMLCO, which are then distributed internally without requiring CTIF-CFI to know the identity of the employee who submits the reporting. This way, the reporting is submitted in the name and on behalf of the reporting entity. Additionally, this system enables reporting entities to automate a part of the reporting process.
2.4. Content of the reporting
A reporting of suspicions should contain at least the following information:
the reporting entity’s identification information and business contact details;
the identification information of the customer and, where appropriate, of the beneficial owner who is the subject of the reporting as well as, where a business relationship has been established with the customer, the purpose and nature of this relationship;
the description of the transaction and the elements of analysis which led to the reporting;
the time limit for carrying out the transaction if this has not been done yet.
Financial institutions shall take care not to submit incomplete reportings which do not allow to ascertain the facts underlying the suspicion.
The description of the transaction and the elements of analysis which led to the reporting should mention noteworthy flows and/or the most significant amounts as well as the persons involved in these flows.
Where appropriate, the reporting of suspicions shall be accompanied by all other documents that are useful to CTIF-CFI (particularly bank statements, if possible in an electronically accessible format, documents related to the opening of an account or the signing of an insurance contract, etc.).
The NBB notes that it is essential that reportings of suspicions be drawn up correctly, regardless of the arrangements for submitting them. A clear, concise and accurate presentation of the information in the reporting is of particular importance for the efficiency of the AML/CFTP policy.
2.5. When to submit the reporting to CTIF-CFI
2.5.1. Principle of reporting before carrying out the transaction
In accordance with Article 51 of the Anti-Money Laundering Law, suspicions should generally be reported to CTIF-CFI immediately before the transaction is carried out, where appropriate indicating the time limit within which it should be carried out.
However, the reporting can occur immediately after carrying out the transaction in the following two cases:
- when it is not possible to delay carrying out the transaction due to its nature;
- when delaying the transaction could prevent prosecution of the persons benefiting from the money laundering.
The first derogation applies when the transaction is instantaneous. Such is the case with a manual foreign exchange transaction whereby currencies are exchanged immediately, or with a transaction that is carried out directly by the customer himself without any intervention from an employee of the financial institution, for instance by using a home banking or mobile application. This derogation can also apply when the transaction must be carried out within a very short time limit, which hinders a systematic a priori detection. This is the case, for example, with transactions of the banking sector, the investment and payment services sector and, more exceptionally, the insurance sector, which must be carried out immediately. In their AML/CFTP procedures, the institutions shall clarify for which transactions reportings must take place before or after the former have been carried out.
The second derogation also applies if delaying the transaction could prevent prosecution of the persons benefiting from the money-laundering, in particular if there are reasons to fear that delaying the transaction could alert the customer and encourage him to take immediate measures to hide his funds, which are suspected of having illicit origins, from the investigations of CTIF-CFI or of the judicial authorities.
In both cases, these derogations must be implemented strictly and CTIF-CFI should be informed of the reason why it could not be notified before the transaction was carried out.
2.5.2. Time limit for reporting after carrying out the transaction
After carrying out a transaction meeting the conditions set out in Article 51 of the Anti-Money Laundering Law, the reporting should be submitted “immediately” to CTIF-CFI. This provision introduces an obligation to act promptly, requiring each financial institution to ensure, regardless of its organisation and at any stage of its process leading, where appropriate, to a reporting, that the necessary steps are taken as quickly as possible. For instance, financial institutions shall ensure that they do not spend more time than strictly necessary on the investigations and analysis following the reporting of an atypical fact or transaction.
2.6. Additional reportings and requests for information by CTIF-CFI
Article 48 of the Anti-Money Laundering Law stipulates that financial entities are obliged to follow up on the requests for additional information submitted to them by CTIF-CFI within the time limits set by it.
Furthermore, any information that could invalidate, confirm or modify the information included in a reporting of suspicions should be reported immediately to CTIF-CFI, regardless of the amount and a fortiori if a customer carries out new suspicious transactions. When a first reporting of suspicions is followed by multiple transactions which should be brought to the attention of CTIF-CFI, the reporting entity may, for the sake of efficiency, bundle multiple transactions in a single additional reporting which pertains to a specific period of transactions determined on a case-by-case basis. In such a case, the additional reporting shall specify the procedure for bundling the transactions reported. If necessary, multiple additional reportings of suspicions may be submitted by the same obliged entity.
3. Consequences of reporting suspicions
The main consequences of reporting a suspicion to CTIF-CFI are:
prohibition of disclosure;
protection of reporting persons;
obligation to carry out an individual re-assessment of the customer’s ML/FT risks; and
obligation to retain documents related to the reportings submitted.
The third consequence mentioned above results from Article 22 of the Anti-Money Laundering Regulation of the NBB, which stipulates that when an obliged financial institution wishes to report suspicions pursuant to Article 47 of the Anti-Money Laundering Law, it shall carry out an individual re-assessment of ML/FT risks, in accordance with Article 19, § 2, of the Law, taking account of the specific fact that a suspicion has been raised about the customer concerned. On the basis of this re-assessment and its customer acceptance policy, the financial institution shall decide whether to maintain the business relationship subject to the implementation of due diligence measures adapted to such re-assessed risks, or whether to terminate it. The NBB highlights the fact that this must be an individual decision taken on the basis of the individual assessment of all available information on the customer and the business relationship with the customer. It considers that a decision in principle to systematically terminate business relationships when a suspicion has been reported to CTIF-CFI would not comply with Article 22 of the Anti-Money Laundering Regulation and would moreover lead to the customer being informed indirectly and implicitly of the fact that a suspicion against him has been reported to CTIF-CFI.
As regards the fourth consequence, documents on the transactions carried out by the financial institutions shall be retained for a period of ten years following the termination of the business relationship concerned. When applied to the reporting of suspicions, this retention obligation pertains to the copy of the reporting of suspicions and, where appropriate, of the accompanying documents as well as to the acknowledgement of receipt of the reporting by CTIF-CFI. For further information on this subject, see the page “Retention of data and documents”.
4. Internal control measures
Financial institutions are expected to periodically and permanently monitor the adequacy of the organisational measures implemented to comply with the legal obligation to report suspicions to CTIF-CFI. In this respect, the NBB expects financial institutions in particular to monitor their time limits for reporting suspicions.
Additionally, the NBB recommends that the internal audit function pay particular attention to:
the adequacy of the policy implemented by the AMLCO for reporting suspicions, for submitting additional reportings and for responding to requests for information by CTIF-CFI;
the adequacy of the time limits for reporting suspicions, in order to avoid late reporting of suspicions by the financial institution;
compliance with the instructions of CTIF-CFI regarding the arrangements for reporting suspicious transactions and regarding the information to be included in the reporting; and
compliance with the consequences of reporting a suspicious transaction to CTIF-CFI.