SD-14.3 — Financial Crime Prevention

Business Domain: BD-14 Enterprise Risk, Control & Assurance (Cross-cutting — corporate) · Applies: BOTH

Purpose

Protects the firm from financial crime — money laundering, terrorist financing, sanctions breach, bribery and corruption. SD-14.3 is the Money Laundering Reporting Officer’s function — a statutorily distinct appointment from the compliance officer: it runs the firm’s anti-money-laundering programme, the know-your-customer and customer-due-diligence checks on the firm’s investors and counterparties, the screening of those parties against sanctions lists, the monitoring of cash flows for money-laundering typologies, and the suspicious-activity reporting the law requires. It is not the sanctions screening of portfolio issuers — that is SD-10.6, which screens what the portfolio holds; SD-14.3 screens the firm’s customers and counterparties. The subject decides the owner: the firm’s customers (SD-14.3) versus the portfolio (SD-10.6).

Financial crime is light for the in-house asset owner whose investor base is itself (a DB pension, sovereign wealth fund or endowment managing only its own money, with no external investors to onboard); it is heavy for the third-party manager, the hedge fund and the wealth manager, whose investor and counterparty populations drive the KYC, screening and transaction-monitoring load.

Service Operations

Run investor and counterparty KYC — the know-your-customer and customer-due-diligence checks on the firm’s investors, LPs and counterparties at onboarding and on review.
Screen against sanctions lists — screen the firm’s investors and counterparties against the OFAC, EU, UN and OFSI sanctions and prohibited-party lists.
Monitor transactions — monitor the firm’s cash flows and subscriptions for money-laundering typologies and suspicious patterns.
Report suspicious activity — investigate alerts and file the suspicious-activity / suspicious-transaction reports the law requires.
Run anti-bribery and corruption — maintain and enforce the firm’s anti-bribery-and-corruption programme.

Inputs and outputs

Inputs: the firm’s investor, LP and counterparty population; the sanctions and prohibited-party lists; the firm’s cash-flow and subscription activity; the FATCA / CRS data; the financial-crime regulation.
Outputs: the KYC and CDD record, the screening results, the transaction-monitoring alerts and the suspicious-activity reports — consumed by SD-13.2 Entity & Counterparty Master (the KYC data behind the golden record), the governing bodies, the financial-intelligence authorities and the regulators.

Entities

Consumes: E-01 Legal Entity (investors, LPs, counterparties); FO-04 Dealing Order (investor-flow monitoring — subscription and redemption patterns on FO-04 feed the transaction-monitoring function, which screens dealing activity for money-laundering typologies such as layering through rapid subscription and redemption cycles, structuring below threshold, or unusual cross-border dealing patterns); FO-10 ETF Creation/Redemption Order (AP primary-market activity monitoring — creation and redemption volumes, patterns and counterparty identities are monitored against financial-crime controls for unusual primary-market activity); FO-12 ETF Authorised-Participant Agreement (reads FO-12 to confirm the AP’s authorised status when monitoring primary-market activity against counterparty-risk and financial-crime controls — an FO-10 submitted by a party without a current FO-12 is an anomaly the financial-crime function flags).
Owns: the KYC / CDD record and the financial-crime case record — a process artefact.

Standards

The FATF Recommendations and the AML regimes — the EU AMLD, the UK Money Laundering Regulations, the US Bank Secrecy Act.
The sanctions regimes — OFAC, OFSI, UN, EU.
The anti-bribery regimes — the UK Bribery Act, the US FCPA.

Open extensions

The KYC / CDD record as an entity, shared with SD-13.2.
The transaction-monitoring and suspicious-activity-reporting sub-model.
The boundary with SD-10.6 — screening the firm’s customers versus screening the portfolio’s issuers.
The boundary with SD-15.11 Client & Investor Onboarding — SD-15.11 runs the commercial onboarding and triggers the KYC check; SD-14.3 runs it.