Anti-Money Laundering Policy
Last updated: 03/26/2020
Purpose, scope and responsibility
Principal and its subsidiaries/affiliates are subject to various anti-money laundering (AML) laws and regulations relevant to the specific business and jurisdiction where the business operates. This policy recognizes the need for awareness by the Company and its subsidiaries/affiliates to comply with such laws and regulations, as applicable, including risk-based Know Your Customer (KYC) policies and procedures.
This policy applies to all employees, including those of wholly and majority-owned entities of Principal. Subsidiaries, affiliates, and business units may adopt AML policies specifying additional AML compliance requirements and procedures in accordance with applicable laws of the locations where each does business or is located.
The Chief Compliance Officer (CCO) of Principal is the final authority for this policy.
Principal established this AML policy as part of its Corporate Ethics and Compliance Program to help detect transactions that may involve money laundering, terrorist financing, or other illicit activity, and to provide resources for reporting applicable situations as required by applicable law. This policy also helps ensure we satisfy all legal and regulatory requirements and maintain ethical business practices.
The companies of Principal are subject to various AML laws and regulations depending on the nature of the business and the country in which such company is domiciled or conducting business.
Entities of Principal outside the U.S. must comply with all requirements of the laws and regulations of relevant jurisdictions applicable to their business, including applicable U.S. laws. This policy, while illustrating AML issues and requirements of general application to the financial services industry, focuses on summarizing AML requirements under U.S. law.
The CCO of Principal monitors and supports compliance with the policy and regularly reports to senior management, including the Audit Committee of the Board of Directors.
U.S. Anti-Money Laundering Program Requirements
The Bank Secrecy Act was modified by the USA PATRIOT Act (Act), on Oct. 26, 2001, expanding the scope of federal law regarding requirements imposed on financial institutions to facilitate the prevention, detection, and prosecution of international money laundering and the financing of terrorism (collectively the “BSA”).
The BSA, requires U.S. financial institutions such as banks, securities broker-dealers, mutual funds, insurance companies, and other financial services businesses to establish formal AML programs. Subject to conforming to industry specific regulations, these AML programs are generally required to address the following:
- Collecting and verifying appropriate identifying information about customers, beneficial owners, and control persons (a control person is someone who has a level of control over, or entitlement to, the funds or assets that, as a practical matter, enable the person, directly or indirectly, to control, manage, or direct the account/or on whose behalf a transaction/activity is being conducted), and maintaining records of such information;
- Comparing the names of customers, beneficial owners, business associates, and payees with the lists maintained by the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department and the Office of Foreign Assets Control (OFAC) (and any other similarly mandated lists) and reporting any matches or otherwise complying with legal requirements;
- Refusing to accept funds from, or to do business with, shell banks or customers whose funds the company reasonably believes are derived from criminal activity or from a sanctioned source;
- Training employees, agents, and brokers to identify red flag activities and report them to their manager or as directed in their AML procedures;
- Designating an AML Compliance Officer who, in conjunction with applicable compliance personnel, will review red flag activities and determine appropriate measures to take, consistent with applicable law. Examples of measures include refusing to open an account, severing relations with the customer or vendor, closing or freezing accounts, and, when appropriate, filing a suspicious activity report (SAR) with FinCEN;
- Understanding the nature and purpose of the customer relationships and implementing appropriate risk-based procedures for conducting ongoing due diligence; and
- Conducting annual independent audits to evaluate the effectiveness of the Company's AML policies and procedures.
The U.S. based companies required to have written Customer Identification Program (CIP) procedures and an AML Program (including mandatory SAR reporting) include Principal Bank, Principal Trust Company, Principal Securities, Inc., Principal Funds Distributor, Inc., Principal Funds, and Spectrum Asset Management. Principal Life Insurance Company and Principal National Life Insurance Company are required to have an AML program applicable to “covered products” (certain individual fixed life insurance and annuity contracts).
The AML Compliance Officers for each of these entities and the BSA manager (for Principal Bank), in consultation with attorneys and the Corporate Ethics, Compliance, and Investigations (CECI) team, have developed and implemented AML programs tailored to address the risks specific to the particular entity’s business and customer base. Each entity’s AML program has been approved by the CCO and by either the Board of Directors or senior management of that entity (as required by applicable regulations).
Suspicious Activity Reporting/Company Contacts
Employees and company representatives should report any suspicious transaction to their leader or as directed in their applicable AML procedures. Leaders will coordinate suspicious transaction information with designated AML compliance contacts. If in the U.S., they’ll also involve the CECI team (CorpCompliance@principal.com) to determine appropriate actions and file reports when applicable.
For entities outside the U.S., leaders should coordinate suspicious transactions information with their designated compliance contact.
All employees and Company representatives are responsible for knowing and following all applicable AML, OFAC, and jurisdiction specific policies and procedures. They should:
- Be familiar with the AML, OFAC, and other policies in the jurisdictions where business is being conducted, which may include locations outside the U.S.
- Be familiar with their business unit's/area's AML, OFAC, and other procedures, including:
- All customer identification and verification (KYC and CIP) procedures for opening new accounts and servicing existing accounts.
- How to flag activities that may require special attention, have reporting requirements and/or need a leader’s approval, such as cash or cash equivalent (money orders, cashier's checks, wire transfers) transactions or certain international transactions.
- Report red flag activities or suspicious transactions as directed.
- Keep SARs strictly confidential and not reveal any aspect of such report to the customer or to any employees who aren’t directly responsible for compliance.