Point 7
A securities firm’s ongoing monitoring of account and transaction shall be in accordance with the following provisions:
1. A securities firm shall progressively make use of information systems to integrate the basic information and transaction information of the entire company’s customers so that the head office and branches may carry out inquiries for the purpose of prevention of money laundering and countering terrorism financing, so as to strengthen its ability to monitor accounts and transactions. A securities firm shall also establish internal control procedures for requests and inquiries as to customer information made by various units and shall exercise care to ensure the confidentiality of the information.
2. A securities firm shall establish policies and procedures for account and transaction monitoring using a risk-based approach, and use the information system to assist in the detection of suspicious money laundering or terrorism financing transactions.A securities firm shall review its policies and procedures for account and transaction monitoring based on AML/CFT laws and regulations, the nature of customers, business size and complexity, money laundering and terrorism financing trends and related information gathered from internal and external sources, and its internal risk assessment results, and update those policies and procedures periodically.
3. A securities firm shall review its policies and procedures for account and transaction monitoring based on AML/CFT laws and regulations, the nature of customers, business size and complexity, money laundering and terrorism financing trends and related information gathered from internal and external sources, and its internal risk assessment results, and update those policies and procedures periodically.
4. A securities firm’s policies and procedures for account and transaction monitoring shall include at least complete money laundering and terrorism financing monitoring indicators, parameter settings, monetary threshold amounts, alerts and monitoring operations, and examination procedures and reporting standards for monitored cases, and shall be documented.
5. The mechanism of the preceding subparagraph shall be tested, including testing for the following:
A. Internal control process: examine the roles and responsibilities of personnel or units relating to the account and transaction monitoring mechanism.
B. Correctness and completeness of data input and corresponding fields in the system
C. Detection scenario logic.
D. Model validation.
E. Data output.
6. The securities firm shall further examine the customer’s identity when the securities firm discovers or has reasonable grounds to suspect that its customer, customer’s funds, assets, or transactions that it plans to conduct or already has conducted are related to money laundering or terrorism financing regardless of the monetary amount or value, or whether the transaction is completed.
7. Suspicious types of transactions suggesting money laundering and terrorism financing are listed in the Appendix. However, the appendix may not be exhaustive. A securities firm shall choose or develop types of transactions that should be watch-listed by the securities firm as possible money laundering or terrorism financing activities based on the securities firm’s own asset scale, geographical distribution, business characteristics, the natures and transaction characteristics of its customer groups, and the securities firm’s internal risk assessment of money laundering and terrorism financing or information on normal transaction activities.
8. The reasonableness of identified watch-listed transactions under the preceding subparagraph shall be determined on a case-by-case basis, and records of the examination shall be preserved. (The determination of reasonableness may include determining whether there are situations such as transactions that are out of keeping with a customer’s identity, income level, or business scale, or transactions that are not related to the nature of a customer’s business, a customer’s business model, or have no reasonable economic purpose, use, or explanation, or an unclear or inadequately explained source of funds.) When a transaction is examined and determined not to be suspected of money laundering or terrorism financing, the reasons for the exclusion shall be recorded and analyzed. For any transaction for which suspicion of money laundering is found, the securities firm shall confirm the identity of the customer and keep related records for verification, and furthermore shall file a report with the MJIB within 10 business days from the date on which the securities firm internally discovers and confirms that there is a suspicion of money laundering or terrorism financing. This also applies to cases in which the transaction is not completed.
9. A securities firm shall identify via a risk-based approach which suspicious types of transactions suggesting money laundering and terrorism financing as listed in the Appendix require the firm to establish an information system to aid in their monitoring. Regarding types of transactions that are not included for monitoring by that information system, the securities firm shall also use other methods to help its employees identify suspicious types of transactions suggesting money laundering and terrorism financing. The information system cannot completely replace employee’s judgement. The securities firm shall continue to strengthen the training of its employees so that its employees are able to identify suspicious types of transactions suggesting money laundering and terrorism financing.
10. securities firm shall document its ongoing execution of monitoring of accounts and transactions, and maintain the records for a time period in accordance with Point 10.