As enacted

Contents

4. Replacement of section 2 of the principal enactment

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

Section 2 of the principal enactment is hereby repealed and the following section is substituted therefor: -

2. (1) Every Institution shall, subject to any rules, directions and guidelines issued by the Head of the Financial Intelligence Unit under this Act, identify, assess and understand its money laundering, terrorist financing and financing of proliferation of weapons of mass destruction risks, and apply a risk-based approach for allocating resources and managing and mitigating such risks.

(2)

For the purpose of the application of a risk-based approach, an Institution shall -

(a)

undertake an assessment of money laundering, terrorist financing and financing of proliferation of weapons of mass destruction risks associated with its customers, the countries and regions in which those customers are engaged in business, their products, services and delivery channels;

(b)

with the approval of its Board of

Directors or senior management, design, develop and maintain internal policies and procedures and systems for the management and mitigation of money laundering, terrorist financing and financing

“Risk based approach, customer due diligence, &c.

of proliferation of weapons of mass destruction risks identified pursuant to paragraph (a), in accordance with the requirements of this Act and the regulations, rules, directions and guidelines issued under this Act or any other law applicable to that Institution;

and

(c)

periodically review the assessment of risks referred to in paragraph (a)

to ensure that it is up-to-date and adequate measures are put in place to manage and mitigate such risks.

(3)

An Institution shall not open, operate or maintain an account, where the holder of such account cannot be identified, including any anonymous account or any account identified by number only, or any account which to the knowledge of the Institution is being operated in a fictitious or false name.

(4)

Where an Institution –

(a)

establishes a business relationship with a customer;

(b)

carries out an occasional transaction above the threshold as specified by rules, including a transaction consisting of a single operation or multiple operations that appear to be linked;

Financial Transactions Reporting

(c)

carries out an occasional transaction, being a wire transfer above the threshold as specified by rules;

(d)

in relation to any transaction, entertains reasonable suspicion of an act constituting the offence of money laundering, terrorist financing, financing of proliferation of weapons of mass destruction or any unlawful activity, regardless of any exemption granted or threshold as specified by rules; or

(e)

entertains doubts about the veracity or adequacy of customer identification documents or information already obtained, such Institution shall conduct customer due diligence.

(5)

For the purpose of conducting customer due diligence, subject to any rules issued by the Head of the Financial Intelligence Unit under this Act, such Institution shall -

(a)

identify each customer, whether permanent or occasional, or whether a natural person or legal person or legal arrangement, and verify such customer’s identity on the basis of any official document or other reliable source document, information or data;

(b)

in the case of a person purporting to act on behalf of a customer, verify that such person is authorized by such customer, and identify such person and verify such person’s identity on the basis of any official document or other reliable source document, information or data;

(c)

identify the beneficial owner of the customer, if any, and in order to satisfy itself of the beneficial owner of the customer, take reasonable measures to verify such beneficial owner’s identity on the basis of any official document or other reliable source document, information or data; and

(d)

understand and, as appropriate, obtain information using any other relevant document, material or data on, the nature and the purpose of the intended business relationship with a customer.

(6)

Subject to any rules issued by the Head of the Financial Intelligence Unit under this

Act, an Institution –

(a)

shall conduct enhanced customer due diligence where money laundering, terrorist financing or financing of proliferation of weapons of mass destruction risks are assessed as high;

Financial Transactions Reporting

(b)

may conduct simplified customer due diligence where money laundering or terrorist financing risks are assessed as low; and

(c)

shall ensure that measures adopted to manage and mitigate financing of proliferation of weapons of mass destruction risks are proportionate with the level of risks assessed.

(7)

An Institution may, subject to any rules issued by the Head of the Financial

Intelligence Unit under this Act, share any information obtained under paragraphs (a) to

(d)

of subsection (5) with another Institution in any of the circumstances specified in paragraphs (a) to (e) of subsection (4).

(8)

For the purpose of subsection (4),

“occasional transaction” in relation to cash or electronic fund transfer, means any transaction that is conducted by any person one-off or from time to time, but not on a regular basis.”.

Read on from s 5