Customer identification in currency exchange companies as per FATF recommendations
| DOI | https://doi.org/10.1108/JMLC-05-2019-0036 |
| Pages | 96-102 |
| Date | 15 January 2020 |
| Published date | 15 January 2020 |
| Author | Joel Harry Clavijo Suntura |
| Subject Matter | Financial compliance/regulation,Financial crime,Accounting & Finance |
Customer identification in
currency exchange companies as
per FATF recommendations
Joel Harry Clavijo Suntura
Department of Private Law, Universidad Técnica del Norte, Ibarra, Ecuador
Abstract
Purpose –The purpose of this paper is to determine if customersdue to diligence measures laid down in
Financial Action Task Force (FATF) Recommendation no. 10 can be applied to customers of currency
exchangecompanies.
Design/methodology/approach –Currencyexchange financial entitiesundertake financial transactions
with occasionalcustomers, for thisreason, this research work isaimed at carrying out a study of thecontent of
FATF Recommendationno. 10 regarding the applicabilityof due diligence measures to occasional customers.
For thispurpose, the analytical and interpretativemethods havebeen used.
Findings –FATF Recommendation No. 10 about customer due diligence measures has been
designed primarily for financial entities with regular customers, however, most customers of financial
currency exchange companies are occasional customers. For such financial entities, customer
identification is mandatory only for transactions above 15,000 USD/EUR, leaving a potentialrisk of
money laundering for financial transactions below that threshold. Furthermore, within currency
exchange companies, risk factor analysis and customers’identity verification are performed only on
regular customers.
Originality/value –Customer due diligence measuresin currency exchange financial entities should not
be subject to the transactionthreshold. Moreover, it is necessary to adopt a centralized controlsystem to avoid
currencyexchange companies infringement of their controlsystems.
Keywords Money laundering, Customer identification, FATF, Currency exchange companies,
Due diligence measures, Know your customer
Paper type Research paper
1. Introduction
Among the Recommendations of the InternationalFinancial Action Task Force (FATF) on
the prevention of money laundering,it is established that financial institutions have to apply
due diligence measures. In this context, it is essential to first identify and then know the
customer (Managers and Sullivan, 2015) to prevent and control financial transactions
involving money laundering(Toso Milos, 2017;Aliaga Mendez, 2010).
First of all, it should be determinedwhether currency exchange entities are consideredas
financial entities. According to the provisions of the European Directive of 2015 on the
prevention of money laundering, article 3 (2) states that currency exchange entities are
considered as financial entities.
Money laundering has been carried out in the traditional sectors of banking but it has
extended its field of actionto other sectors with less control (Unger and Den Hertog, 2012).
In the commercial transactions sector of currency exchange, cash capital outflow
facilitates the conversion of money from illegal sources into a solid, stable and
internationally recognized currency such as the funds can be assumed as legitimate in
another state (BlancoCordero, 2014;Caparros Fabián, 2014).
JMLC
23,1
96
Journalof Money Laundering
Control
Vol.23 No. 1, 2020
pp. 96-102
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2019-0036
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