The Prevention of Money Laundering and Terrorist Financing Act, which recently came into effect, gives substance to customer due diligence. Financial institutions must at all times apply the basic criteria: know your customer and know your business. In other words: even if an institution’s employees are sound, they may unwittingly do business with dishonest customers.
Banks could be drawn into money laundering constructions engineered by criminal organisations that use complex methods to finance real estate with criminal gains. Besides “know your customer”, there are specific sanctions regulations aimed in part at preventing terrorist financing. Institutions must also take measures to prevent their misuse for financing weapons of mass destruction in countries such as Iran.