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Avoiding AML and OFAC Risks
Question: How can the bank avoid the AML and OFAC risks of cover payments?
Answer: Cover payments involve two distinct messages that direct two separate funds transfers. In a cover payment, the originating bank sends a payment order to the beneficiary bank. This is called an MT 103 on the SWIFT system. The originating bank also sends a payment order, an MT 202 on the SWIFT system, to an intermediate bank. The intermediate bank will “cover” the payment from the beneficiary bank to the beneficiary. The result is that the MT 103 and MT 202 remain separate and are unlinked transfers.
Responsibility for ensuring the customer payment does not raise AML and OFAC concerns rests with the originating bank. Ensure your institution is in compliance with the following:
- Develop a clear and easily accessible compliance plan.
- Educate employees as to how money laundering is preformed through the banking system.
- Review with employees the danger of not filing a SAR when an activity is suspicious.
- Offer training for new employees and re-fresher courses on an annual bases.
- Maintain records of training completion for all employees.
The Edcomm Group
The Edcomm Group is a 19-year old multimedia training company specializing in the banking industry. The Edcomm Group offers programs such as Compliance, Teller, BSA, AML, EEO, Sexual Harassment, Elder Financial Abuse, Bank Risk, Credit Risk Management, Fraud Prevention, Security, Ethics, OSHA, Lending, Sales & Service, System Simulations, Retail Systems, System Conversions, Leadership & Operations Management. To learn more, please contact Dr. Linda Eagle, President of The Edcomm Group, at 888-433-2666 or linda.eagle@edcomm.com, and visit us on the web at www.bankersacademy.com.
First published on BankersOnline.com 3/10/08
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