Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Guidelines

Introduction

Financial institutions and other entities subject to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations must adhere to strict guidelines to prevent money laundering and terrorist financing activities. These guidelines outline the requirements for customer due diligence, risk assessment, and ongoing monitoring.

Key Requirements for Customer Due Diligence

Initial Customer Due Diligence

Before entering into a business relationship or performing an occasional transaction, individuals or entities subject to due diligence must conduct initial due diligence according to specific guidelines (Article 5(1)(a) to (c)). This includes:

• Verifying Identity: Verifying the identity of both the contracting party and the beneficial owner
• Establishing Business Profile: Establishing a business profile
• Assessing Risk Factors: Assessing risk factors, such as country risk, product risk, and delivery channel risk

If these obligations cannot be fulfilled, entities may not enter into the relationship or perform the transaction.

Ongoing Customer Due Diligence

Continuous monitoring is required, with entities using risk-relevant information obtained during the course of the business relationship to assess risks individually.

Sources of Information

Entities subject to due diligence should refer to a variety of sources for identifying money laundering/terrorist financing (ML/TF) risks, including:

• European Commission’s Supranational Risk Assessments: European Commission’s supranational risk assessments
• National Risk Assessments: National risk assessments
• Supervisory Authorities’ Information: Supervisory authorities’ information
• Financial Intelligence Units: Financial intelligence units
• Law Enforcement Agencies: Law enforcement agencies

Identifying Risk Factors

This involves gathering individual information on customers, countries or geographical areas, products and services, and delivery channels, with the degree of detail depending on the assessed level of risk in the business relationship.

The guidelines underscore the importance of a holistic approach to customer due diligence, emphasizing continuous monitoring and the use of multiple sources for identifying ML/TF risks. By adhering to these guidelines, financial institutions and other entities can effectively prevent money laundering and terrorist financing activities.