Annual Employee Compliance Training 2020-2021

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Annual Employee Compliance Training 2020-2021

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Culture of Compliance Importance of Training Money Laundering & Terrorist Financing FASU & MSB PNG AML Laws AML / CTF Act 2015 Customer Identification Program (CIP) Customer Due Diligence (CDD) Suspicious Matter Reporting Consumer Fraud Prevention Risks of Non-Compliance Enforcement Action Trends Summary Conclusion

Training Topics

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Module 1. Culture of Compliance

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Digicel Financial Services compliance area has embraced the following guidance for Fostering a Culture of AML Compliance Globally:

Leadership must actively support and understand their organization’s compliance efforts. Management & The Board should set the tone of Compliance from the Top

Revenue interests should not compromise AML risk-management efforts. Compliance should have the authority and autonomy to work independently

Compliance staff should be given all relevant information. Compliance should make aware and communicate all AML risks affecting the company

Adequate budget, people and technological resources must be devoted to Compliance. The Compliance Department should be managed by knowledgeable persons

Independent testing is crucial. Periodic, unbiased, and independent reviews performed on the existing Compliance program

Management & the Board should know and instill an effective AML/CTF Program and communicate the reasons for why it’s important for the company to comply

Culture of Compliance

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Culture of Compliance

Digicel Financial Services' culture of Compliance Digicel Financial Services has incorporated these guidelines into their own compliance program. This training program is a prime example of Digicel’s commitment to fostering a culture of compliance by providing its employees with the information and knowledge required to identify the process of money laundering, the laws that make it a crime, why it is important and how to detect and report suspicious activity. In addition, employees gain a better understanding of their role and responsibilities regarding compliance within the organization.   Digicel’s Compliance Department is dedicated to developing and maintaining a compliance program consistent that will help mitigate the risks of being a Money Service Business (“MSB”) by constantly updating employees and the Board on issues as they arise to continuously foster the culture of compliance that is required.

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Importance of Training

This training is of utmost importance because Digicel (PNG) Financial Services Limited (DFSL) is registered with the financial Analysis Supervision Unit (FASU) as a Money Services Business (“MSB”), and as such, is required to comply with all laws and regulations related to anti-money laundering (“AML”) and combating the financing of terrorism (“CFT ”). One of the main requirements of having an effective AML /CTF program is that of compliance training. As an employee of DFSL (PNG) you must understand your role and responsibility as it pertains to these AML/CFT laws and regulations . These responsibilities include taking the compliance training and passing the exam, adhering to the compliance policies and procedures provided, and reporting any suspicious activity to compliance, among others .

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What guidelines Digicel Financial Services Compliance area is fostering to instill a Culture of Compliance globally? Who must actively support and understand their Organization’s compliance efforts and set the tone of Compliance Management? What must not comprise AML risk-management efforts Who is primarily responsible communicating all AML risks affecting the Company? What is crucial for an unbiased compliance program within the Organization?

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What is Money Laundering?

Money Laundering is the criminal practice of filtering ill-gotten gains or “dirty” money through a series of transactions, so that the funds are “washed” to look “clean” like proceeds from legal activities.   Worldwide Money Laundering amounts to approximately 2-5% of global GDP or anywhere between $800 million - $2 trillion USD a year. In most cases, it is associated with unlawful activities such as:   Drug Trafficking Human Trafficking Arms Trafficking Human Smuggling Tax Evasion Terrorism   Due to advances in technology such as the development of crypto currencies and widely used mobile communications, the speed and ease of moving money and value globally has made it easier to launder money and it has become harder to detect it. Wire transfers and prepaid cards, especially electronic cards are services often used by criminals to launder money.

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Stages of Money Laundering

There are three stages of money laundering:   Placement - placing the proceeds of crime in the financial system. (i.e. conducting a money transfer or loading a mobile wallet or a prepaid card, etc.)   Layering - converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise the audit trail and the source and ownership of funds (i.e. breaking up transactions into multiple small loads or transfers to the same beneficiary or various beneficiaries.) Integration - integrating the “laundered” funds back into the legitimate economic and financial system where it is assimilated with all other assets in the system. (i.e. using the funds received to purchase goods and services.)

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Terrorist Financing

W h a t i s t er r o r i s t f in a ncin g ? T err o r i s t f in a ncin g i s ch a r a c t er i z e d b y the following :   Funds aimed at sponsoring terrorist activities with the purpose of causing fear in a so c i ety .   The origin of the money may be legal or illegal.   May or may not be re la te d to money laundering.   The motivation behind terrorist financing is ideological and not the pursuit of economic benefits .   The difference is that money launderers send illegal funds through legal channels in order to conceal their criminal origins, whereas those who finance terrorism may send funds that may be legal and/or illegal in origin to disguise their ultimate criminal use.

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Module 3. Introduction to PNG AML Laws & Regulations

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The Financial Analysis Supervision Unit (FASU) is the financial intelligence unit or (“FIU”) in PNG. It provides government support in the detection, investigation, and prosecution of domestic and international money laundering, terrorist financing, and other financial crimes. Following are institutions that must register with FASU and comply with AML Laws & regulations: Commercial Banks, Financial Institutions, Merchant banks, Savings & loan societies, Superannuation funds, Insurance companies, Money remitters, Money changers, Foreign exchange dealers. Digicel (PNG) Financial Services Limited is registered with FASU as a mobile financial business. Its services include international (inward) money remittance and domestic mobile payments.

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The Proceeds of Crime Act 2005 was the first AML legislation enacted in 2005 and now refers to the series of AML laws and regulations that have been enacted over the past fifteen years. It was last amended in 2015 as the Proceeds of Crime (Amended) Act 2015 to include the fight against terrorist financing. Here are the highlights of the different legislation passed over the years starting with: Proceeds of Crime Act 2005, the POCA established requirements for ‘cash dealers’ to: - establish customer identification and verification - obtain customer information and maintain records - report the movement of money and monetary instruments of PGK10,000 and over by filing a Cash Transaction Report (CTR) - report the electronic movement of funds of PGK10,000 and over by filing an Electronic Funds Transfer Report (EFT) - report any suspicious transactions by completing a Suspicious Transaction Report (STR)

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FASU:- Who is FASU and what is their function? Who are the institutions that must register with FASU and comply with AML laws & regulations? Is Digicel Financial Services required to register with FASU as a Mobile Financial Business? Proceeds of Crime Act 2005:- Name 2 requirements under the Proceeds of Crime Act 2005 ? Give 2 examples of the process or procedure you perform in your area of duty that meet the 2 requirements? What is required when establishing identification and verification of a customer?

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Module 5: Customer Identification Program

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Customer Identification Program (CIP)

Pursuant to federal regulations, Digicel has developed a comprehensive CIP policy with corresponding identification verification to further enhance its customer due diligence program. When a customer wishes to establish an account with Digicel , the following guidelines will be followed for all new customer accounts :

US Federal Regulations

PNG Federal Regulations

New accounts will only be activated once the customer’s true identity has been satisfactorily verified New accounts will not be established for customers who refuse to provide identification Digicel will provide customers with adequate notice to comply with its identification verification procedures   If fraud or identity theft is suspected, Digicel will follow the established escalating and reporting procedures

New accounts will only be activated once the customer’s true identity has been satisfactorily verified New accounts will not be established for customers who refuse to provide identification Digicel will provide customers with adequate notice to comply with its identification verification procedures   If fraud or identity theft is suspected, Digicel will follow the established escalating and reporting procedures

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PNG Requirement ( CIP)

The following information is required from each customer prior to registering an account with DFSL (PNG) As part of its Customer Identification Program (CIP),and Know Your Customer (KYC), you must first identify and assess the level of risk you are faced with when dealing with a customer’s request to open an account. At a minimum the Financial Institution must obtain but not limited to: Full name, Unique identification number and photographic identification ( such as an identity card number, birth certificate number or a passport number, or where the customer is not a natural person, the incorporation number or business registration number) Existing residential address, registered or business address (as may deemed appropriate) and contact telephone numbers Date of birth, place of birth, incorporation or registration (as may deemed appropriate) Nationality or place of incorporation or registration (as may deemed appropriate) Where the AI is a company, the directors of the company and the beneficial owners of the company must be identified .

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PNG Regulations (CIP)

A Financial Institution must NOT open an account under the following circumstances: 1. Under an anonymous or fictitious name 2. Full Identification and verification process/procedures cannot be completed 3. Where there is suspicion of money laundering and terrorists financing activities linked to the customer 4. Customer is on Sanctioned Listing 5. Customer has a criminal record relating to fraud and or corruption

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Customer Identification Program (CIP):- What information is DFS required to obtain from an individual, before establishing a business relationship? What information is DFS required to obtain from a business, or company entity before establishing a business relationship? Under what circumstances should DFS NOT establish business relationship with a customer?

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Module 6. Customer Due Diligence - CDD Obligations

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AML / CTF Act 2015 – Obligation on Financial Institutions and Designated Non Financial Businesses and Professions

Anti-Money Laundering & Counter Terrorist Financing Act 2015 was made law in 2015, which made money laundering activities, including structuring of transactions to avoid reporting; and financing of terrorism a criminal offence under the Criminal Code (Money Laundering & Terrorist Financing) (Amendment) Act 2015. The AML/CTF Act 2015 established requirements for Financial Institutions and Designated Non-Financial Businesses and Professions. These requirements are highlighted in the headings as follows : CUSTOMER DUE DILIGENCE - conduct due diligence when an electronic fund transfer amount is equal to or greater than PGK 2,500. - conduct standard customer due diligence to obtain information on the purpose and nature of the business relationship, - conduct due diligence on electronic funds transfer customers whether domestic or international to obtain names, addresses, place birth , date of birth for a natural person; for a body corporate, its name, a unique reference or number, physical addresses, proof of incorporation, identity of its directors and beneficial owners

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AML / CTF 2015 – Obligations

ONGOING DUE DILIGENCE - maintain current and up to date information and records of customers and its beneficial ownership - ensure customers transactions are known and consistent with its products and services its business is associated with - ensure Politically Exposed Persons (PEP) transaction activities are monitored on an ongoing basis - ensure correspondent banking relationships are established subject to Senior Management approval and are maintained in adherence to the AML/CTF controls ENHANCED CUSTOMER DUE DILIGENCE - conduct enhanced due diligence on Politically Exposed Persons (PEP) or a customer from a high risk country, or involved in a high risk business or beneficiary of an insurance policy or if the person is not physically present for identification or to verify the source or wealth of the customer - must verify identity of a person or incorporated entity when carrying out an occasional transaction equal to PGK20,000 or greater

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AML / CTF 2015 – Obligations …cont’d

WHERE CUSTOMER DUE DILIGENCE CANNOT BE COMPLETED, A FINANCIAL INSTITUTION - must not establish any new business relationship - must cease any existing business relationship - must not carry out any occasional transaction - an ordering institution must not effect an electronic funds transfer equivalent to K2,500 or greater if it does not have the required customer identification information to transmit - an intermediary institution must assess whether to carry out, suspend or reject an electronic funds transfer equivalent to K2,500 or greater if it does not receive all the identification required to accompany the transaction - a beneficiary institution must assess whether to carry out, suspend or reject an electronic funds transfer of K2,500 if it does not receive all the identification information required to accompany the transaction from an ordering institution or an intermediary institution - must not establish any business relationship with a shell bank where it does not have a physical presence - must not establish or maintain business relationship with a correspondent bank that permits its accounts to be used by a shell bank

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Customer Due Diligence (CDD):- What is customer due diligence? What are the tasks involved in performing a customer due diligence? Ongoing Due Diligence (ODC):- What is ongoing due diligence? What are the tasks involved in performing an ongoing due diligence? Enhanced Customer Due Diligence (ECDD) :- What is enhanced customer due diligence What are the tasks involved in performing enhanced customer due diligence? Where Customer Due Diligence Cannot be completed (CDD):- What are some of the actions you must take when CDD cannot be completed ?

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Module 7. Reporting Obligations

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Financial Institution and Designated Non-Financial Businesses & Professions – Reporting Obligations

Reporting Obligation - compile and report cash transaction equivalent to or greater then PGK20,000 within ten (10) days of when the transaction transpired. - compile and report domestic electronic funds transfer equivalent or greater than K20,000 within ten (10) days of when the transaction transpired. - compile and report international money transfer equivalent or greater than K20,000 within ten (10) days of when the transaction transpired. - report any assets held of a designated person or entity - compile a suspicious transaction report if the nature surrounding one or more transaction does not make economic sense or is unusual in nature. Remember, any acts or omission done in good faith in discharge under obligations of this Act is protected from civil, criminal liability, action, claim or demand.

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What are Digicel Financial Services reporting obligations What is the threshold reporting limit for both domestic and international transactions? Are you protected from civil, criminal liability, action or claim or demand when you perform any acts or omission done in good faith in discharge under obligations of this Act?

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AML Regulations on Financial Institutions

The United National Financial Sanctions Act 2015 (PNG) sets out prohibitions on: - dealing with assets belonging to or owned by, held or controlled by (directly or indirectly) by a designated person or entity (‘asset freezes’) end, - making assets or financial services available directly or indirectly to, or for the benefit of a designated person or entity. A Financial Institution’s key roles are to implement: - Effective procedures in tracing/following assets - Effective KYC Practices - Effective CDD procedures including beneficial ownership information - Robust Asset freezing procedures in place - Processes for guiding against false positives in identification of designated persons/entities - Effective communication channels with and reporting to FASU and the Sanctions Secretariat

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Module 8. Suspicious Matter Reporting (SMR)

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Suspicious Matter Reporting

Suspicious Matter Report (SMR) A Financial Institution (FI) must report suspicious matters as soon as practicable or within maximum 5 working days . This applies where a FI has reasonable grounds to suspect that information known to it may: A. Be relevant to the detection, investigation or prosecution of a person for money laundering, terrorist financing or an offence under section 15 or 16 of the United Nations Financial Sanctions Act 2015 B. Be relevant to the detection, investigation or prosecution of a person for a foreign indictable offence; or concerning criminal property. C. It is an offence to intentionally or recklessly fail to comply with these reporting requirements. It is also an offence to provide false or misleading information or reports.

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Suspicious Activity: Structuring & Money Mules

Money mules also conduct similar tasks when structuring transactions. Money mules are either willingly recruited or unknowingly recruited through job vacancy and “work-from-home” ads or job and temp-for-hire websites The money mule is convinced to work for a fake company that may go as far as soliciting personal identifiable information through official-looking contracts or employment forms Once the money mule is recruited and activated, they receive illicit funds into their bank account The money mule is then instructed to remove the funds from their account and send them to another party, less a commission, using wire or money transfers. They can also take the funds and load them onto a prepaid card.

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Suspicious Activity Red Flags – Money Transmission

When interacting with the customer, reviewing activity or monitoring transactions, be on the lookout for suspicious activity that could include the following “Red Flags” for money transmission : Structuring of transactions by sending money to multiple beneficiaries on the same day or consecutive days Unusual transactions that are not in line with the customer’s profile   Multiple customers sending transfers to the same beneficiary on the same day or consecutive days Customers making multiple high dollar transfers to the same beneficiary on the same day or consecutive days A customer admits to criminal conduct

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Suspicious Activity Red Flags – Remittance

When interacting with the customer, reviewing activity or monitoring transactions, be on the lookout for suspicious activity that could include the following “Red Flags” for remittances:   A customer who is unwilling to provide information required by KYC A customer who presents unusual or suspicious identification documents that cannot be readily verified A customer uses different tax identification numbers with variations of his or her name High dollar deposits followed by numerous small withdrawals A Cardholder who makes multiple value loads on the same day at different load locations using multiple cards Transactions occurring in more than one state or country on the same day or with relative frequency Repetitive transactions occurring at the same time for the same amount each day or each week As an employee of Digicel Financial Services it is your responsibility to notify Compliance of any suspicious activity detected. You can contact the Compliance Department via email at: .

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Willful Blindness

Willful Blindness is avoiding or ignoring information, which could have led to the discovery of unlawful activity Ignoring “red flags” that indicate a customer could be involved in suspicious activity could lead to civil and criminal penalties for Digicel . A person committing an act of willful blindness can be held responsible for whatever knowledge an investigation would have revealed. According to the law, a person can be convicted of money laundering if it can be proven that they were “willfully blind” in their actions. Therefore, it is very important to recognize “Red Flags” and report them to Compliance immediately .

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Suspicious Matter Report :- When do you complete a Suspicious Matter Report (SMR)? Give 2 examples of a suspicious transaction? Money Transmission :- What is structuring of transactions? Give 2 examples of structuring transactions? Money Mules :- What is a money mule? Give an example of a money mule? Willful Blindness:- What is willful blindness? Give an example of willful blindness

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Module 9. Sanctions

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Why it’s important to understand Sanctions? Because you are an employee of Digicel it’s important to understand the obligations in relation to domestic and international sanctions, and how they may potentially impact the business before entering into arrangements with offshore customers and/or their agents . If you are to allow the following transactions you are at risk of a sanctions violation: • The customer make a payment directly to someone who is subject to a sanctions or embargoes program. • The customer make a payment to someone in a sanctioned country, even if their account is located in a non-sanctioned country. • The movement of funds and/or goods in your transaction involves a party who is subject to sanctions (for example airlines, banks, shipping vessels and ports). • The ultimate recipient of your goods/service may be subject to sanctions despite you only dealing with a non- sanctioned intermediary.

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As a licensed MSB, Digicel cannot conduct transactions on behalf of persons or entities that are on the sanctions lists. Therefore, if Digicel were to process a transaction for a name, country, entity, organization, or vessel that is found on the sanction list, there would be penalties imposed for non- compliance. Digicel has processes in place to monitor transactions against the names on the sanction list.   Failure to comply with sanctions Regulations can expose Digicel to severe civil and criminal penalties including : Cease & Desist Order preventing Digicel from conducting ANY transactions Monetary losses resulting from penalties & fines Substantial legal fees

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Digicel’s Sanction Compliance Program To ensure that Digicel does not process any transaction for any entity on the sanctions lists, it has established policies, procedures, and controls to screen customers prior to activating an account or processing a transaction. As part of its sanction program, Digicel does the following: Identify and review potential matches Timely obtains sanctions list updates File the appropriate reports when necessary Maintain license information as applicable Digicel uses Optima to screen all new account applicants in real time. In addition, Digicel screens all active account holders against the multiple sanctions lists on a bi-monthly basis. Any potential matches are reviewed and cleared as necessary. For those customers where a match cannot be cleared, a compliance alert is created and sent to the Compliance Officer for further review. If the alert cannot be cleared, the account is suspended or blocked until verification can be obtained.

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What to do if a true reportable match is detected-:   Depending on the Sanctions program, the transaction either must be rejected or blocked. For those transactions that must be rejected, Digicel will not allow the customer to establish an account or allow a money transfer to go through for payment. For those transactions that must be blocked, Digicel freezes the funds and does the following: Hold the funds in a segregated interest-bearing account Report the match within ten (10) days of the occurrence Report all blocked property to on an annual basis by September 30th for balances as of June 30th 9(what does that mean?) Retain all related reporting and supporting documentation for five (5) years

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What is a Sanctions List What is the AML System DFS use to screen accounts and transactions? What do you do if a true reportable match is detected? Why is it important to understand Sanctions

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Module 10. Consumer Risk

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Consumer Fraud Prevention

The Federal Trade Commission (FTC) reported in the 2019 Consumer Sentinel Data Report that during the previous calendar year, American consumers lost $1.48 billion to fraud and the average transaction was $375. Likely victims: any unsuspecting consumer but especially senior citizens 60+ years of age   Some of the most common scams: Relative in need or grandparent scam Government imposter scam (pretending to be an IRS or law enforcement agent) Romance Scams Employment or investment opportunity scams (“too good to be true”) Lottery or sweepstakes scams (“too good to be true”)   Millions of Americans fall victim to scams and are convinced by fraudsters to give-up their hard-earned money through deceit, trickery and deception.

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Consumer Fraud Prevention

Fraudsters contact their potential victims by phone (i.e. telemarketing scams) or via email or social media with a seemingly believable story that is “too good to be true” or requires them to URGENTLY send money via wire transfer or by loading a prepaid card . The FTC requires financial institutions to take reasonable steps to prevent fraudsters from using them to receive their victims ’ money.   If you suspect that a customer may potentially be a victim of fraud: Ask them questions: “Did anyone instruct you to send this money via phone, email?” “Did you check with your son/daughter to make sure your grandchild is actually in financial need?” Inform them that they may be a victim of fraud or a scam and should reconsider sending the money or loading the card. If your role in the company is to monitor transactions and you suspect a customer may be a victim of a scam, inform your Compliance Officer .

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What type of consumer fraud is Digicel Financial Services likely to face? How do you prevent these types of consumer fraud Are you familiar with the Dodd-Frank Act?

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PNG’s first National Risk Assessment (NRA) on AML/CTF was conducted between 1 June 2016 and 30 September 2017. In its findings, the NRA concluded the main predicate offences in PNG are: Corruption and Bribery Fraud against government programs and activities Illegal logging and fishing Taxation and revenue fraud Other Environmental Offences Illicit drug importation and distribution

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AML/CTF Predicate Offences in PNG…Cont’d

The sectors that are most vulnerable are: Domestic banks; Company/trust formation; Currency Transfer and Exchange Businesses Real Estate Agents, Lawyers and accountants engaged in commercial activities on behalf of clients; and Motor vehicle dealers The structural vulnerabilities in PNG were found to include: Porous borders A cash based economy and a significant informal sector Capacity & skills shortages within government agencies non-bank financial reporting entities in the DNFBP sector Weakness in the regulatory and legislative framework (such as lack of supervision of the NPO sector); and Lack of inter-agency co-ordination and co-operation

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What is a predicate Offence? What are the predicate offences in PNG? Which sectors are the most vulnerable to these offences? Is Digicel Financial Services vulnerable to these offences?