Regulatory Body Calls for Enhanced Customer Due Diligence Measures
In a move aimed at strengthening anti-money laundering (AML) and counter-terrorism financing (CFT) measures, regulators have proposed new guidelines that require reporting entities to identify Politically Exposed Persons (PEPs), their family members, associates, and parties with common interests.
Enhanced Customer Due Diligence Procedures
Under the proposed regulations, reporting entities will be required to conduct enhanced Customer Due Diligence (CDD) procedures for these individuals. This includes:
- Identifying PEPs, family members, associates, and parties with common interests
- Conducting thorough background checks and verification of customer information
- Monitoring customer transactions more closely
The measures are designed to prevent the misuse of financial systems by PEPs and others who may pose a higher risk of money laundering or terrorist financing.
Additional Requirements
The proposed regulations also require reporting entities to obtain additional information from customers, including:
- Information about their business and source of funds
- Details about intended transactions
- Senior management approval for continuation of business relationships with high-risk customers
Monitoring of customer transactions will be stepped up, and arrangements with third-party introducers must be documented and available for review by supervisory authorities upon request.
Correspondent Banking Relationships
The regulations also cover correspondent banking relationships, requiring reporting entities to obtain information about the respondent institution’s reputation and supervision before establishing cross-border arrangements.
Industry Reaction
Industry stakeholders have welcomed the move, saying it will help to strengthen AML/CFT measures and prevent financial crimes. The regulations are expected to come into effect in [insert time frame].
Key Points:
- Reporting entities must identify PEPs, family members, associates, and parties with common interests
- Enhanced CDD procedures required for high-risk customers
- Monitoring of customer transactions to be stepped up
- Reporting entities may rely on third-party introducers, but ultimate responsibility remains with the reporting entity
- Correspondent banking relationships subject to new requirements
- Regulations expected to come into effect in [insert time frame]