⚠️ LEGAL REQUIREMENT: This policy is mandated by FinCEN, OFAC, and international AML/CFT standards.
Violations carry severe criminal and civil penalties.
1. Introduction & Purpose
InvestHub is committed to preventing money laundering, terrorist financing, and other financial crimes.
This policy outlines our procedures for:
- Customer identification and verification (KYC)
- Beneficial ownership detection
- Suspicious activity monitoring
- Sanctions screening
- Enhanced due diligence for high-risk customers
- Reporting to authorities
2. Legal Framework
Applicable Laws & Regulations
- USA: Bank Secrecy Act (BSA), FinCEN regulations, PATRIOT Act
- FATF: Financial Action Task Force 40 Recommendations
- International: UN Sanctions, OFAC Lists
- Jurisdiction-Specific: Local AML/CFT requirements
3. Customer Identification Program (CIP)
3.1 Required Information
All customers must provide:
- Full legal name
- Date of birth
- Address (residential)
- Tax identification number (SSN, EIN, etc.)
- Government-issued photo ID
- Phone number
- Email address
3.2 Identity Verification
We verify identity through:
- Document verification (passport, driver's license)
- Knowledge-based authentication (KBA)
- Third-party data aggregators
- Database verification against known records
3.3 Timing of Verification
- Before account activation for trading
- Within 30 days of account opening (regulatory requirement)
- Ongoing periodic reverification
4. Know Your Customer (KYC) Enhanced Due Diligence
4.1 Customer Risk Classification
All customers are classified as:
| Risk Level |
Characteristics |
Enhanced Measures |
| Low Risk |
Individual, US resident, typical profile |
Standard CIP/KYC |
| Medium Risk |
Foreign national, higher transaction volume |
Enhanced verification, source of funds |
| High Risk |
High-risk jurisdiction, PEP, complex structures |
Enhanced due diligence, senior review, ongoing monitoring |
4.2 Enhanced Due Diligence (EDD) Triggers
EDD required for:
- High-Risk Countries: OFAC designated jurisdictions, high corruption/AML risk
- Politically Exposed Persons (PEPs): Government officials, their families, associates
- Complex Structures: Trusts, corporations, partnerships requiring beneficial ownership verification
- Legal Entities: Corporations, LLCs, partnerships with AML risk
- Unusual Patterns: Large transactions, frequent wires, rapid account activity
5. Beneficial Ownership Identification
5.1 Corporate Customers
For corporate accounts, we must identify:
- All owners with 25%+ ownership stake
- Officers and board members
- Business purpose and source of funds
- Ultimate beneficial owner (if different from legal owner)
5.2 Trust & Estate Accounts
- Trustee identification and verification
- Beneficiary identification (where knowable)
- Trust documentation review
- Source of funds verification
6. Source of Funds & Wealth Verification
6.1 When Required
- Initial large deposits (>$10,000)
- Sudden spike in account activity
- High-risk customer profiles
- International wire transfers
6.2 Acceptable Documentation
- Bank statements (last 3 months)
- Pay stubs or employment verification
- Tax returns (last 2 years)
- Business financial statements
- Real estate documents
- Investment account statements
7. OFAC Sanctions Screening
7.1 OFAC Compliance
We screen all customers against:
- OFAC Specially Designated Nationals (SDN) List
- OFAC Consolidated Non-SDN List
- BIS Entity List
- EU Sanctions Lists
- UN Security Council Lists
7.2 Screening Procedures
- Automated screening at account opening
- Ongoing periodic rescreening (monthly minimum)
- Transaction screening (real-time for wire transfers)
- Name-matching using fuzzy logic to catch variations
7.3 Blocked Customers
If a customer matches or potentially matches a sanctions list:
- Account is immediately frozen
- Customer is not allowed to trade or withdraw funds
- OFAC is notified within regulatory timeframe
- No transactions are processed
8. Suspicious Activity Monitoring
8.1 Red Flags
Transactions flagged for review if they involve:
- Large deposits followed by immediate withdrawal
- Frequent large round-number transactions
- Transactions with multiple parties in rapid succession
- Wire transfers to high-risk jurisdictions
- Structuring (deliberately avoiding $10,000 reporting threshold)
- Inconsistent with customer profile or history
- Multiple failed authentication attempts
- Unusual geographic origin of wires
8.2 Monitoring Systems
- Automated transaction monitoring algorithms
- Manual review of flagged transactions
- Behavioral analysis and machine learning
- Peer comparison analysis
9. Suspicious Activity Reporting (SAR)
9.1 SAR Filing Requirements
We file a Suspicious Activity Report (SAR) with FinCEN if:
- Transaction(s) involve suspected money laundering
- Transaction(s) involve suspected terrorist financing
- Transaction(s) appear to violate law or regulation
- Amount involved exceeds $5,000 (threshold)
- Aggregated transaction pattern is suspicious
9.2 SAR Timing
- Filed within 30 days of detection
- Not disclosed to the subject (confidentiality required)
- Filed electronically to FinCEN
- Maintained in our records for 5 years
9.3 SAR Example
Scenario: Customer deposits $30,000 via ACH, buys stocks, then requests $28,000 wire
to offshore account three hours later. Action: SAR filed for potential money laundering.
10. Currency Transaction Reports (CTR)
10.1 CTR Filing
For deposits/withdrawals ≥ $10,000 cash:
- Report filed with FinCEN within 15 days
- Aggregated transactions on same day count
- Applies to deposits, withdrawals, and exchanges
Note: ACH and wire transfers, while large, don't require CTR (already electronically reported)
11. Prohibited Activities
We do NOT serve customers engaged in:
- Money laundering or terrorist financing
- Drug trafficking or narcotics distribution
- Fraud or financial crimes
- Sanctions evasion
- Market manipulation
- Human trafficking or forced labor
- Corruption or bribery
12. Account Closure for AML Violations
We may close an account immediately if:
- Customer matches OFAC sanctions list
- Suspicious activity detected (without notice)
- KYC/CIP requirements cannot be satisfied
- Customer refuses enhanced due diligence
- Customer provides false information
Customer Notification
- Not required to disclose SAR filing (illegal to do so)
- Required to provide reason for account closure (except SAR-related)
- 30 days to close account and retrieve funds (unless legal hold)
13. Staff Training & Compliance
13.1 Training Requirements
- Annual AML/CFT training for all staff
- Quarterly updates on new sanctions lists
- Specific training for customer-facing staff
- Compliance officer certification
13.2 Compliance Officer
- Designated AML Compliance Officer
- Independent reporting line to senior management
- Authority to stop suspicious transactions
- Coordination with regulators and law enforcement
14. Record Keeping
We maintain for minimum 5 years:
- Customer identification documents
- KYC/CIP documentation
- Transaction records
- Sanctions screening results
- Suspicious activity reports
- Currency transaction reports
- Audit trails and system logs
15. Questions or Reports
AML/CFT Compliance Officer:
Email: aml@investhub.example.com
Phone: +1-555-0100
Hotline: 1-800-XXX-XXXX (confidential)
© 2026 InvestHub. This policy is legally required and cannot be waived.