Financial Crime World

Entities Can Outsource Due Diligence Measures to Third Parties

In an effort to streamline their operations and reduce costs, entities subject to anti-money laundering (AML) regulations can now outsource certain measures for due diligence to third parties. However, there are specific requirements that these third parties must meet in order to be eligible.

Eligible Third Parties

According to the AML/CTF Law, entities can entrust the implementation of various measures and activities to third parties, including:

  • Identification of clients
  • Verification of identities
  • Gathering information about business relationships

These third parties must meet specific requirements, including:

  • Being licensed for the activity they perform
  • Subject to control by a competent body
  • Fulfilling client due diligence measures
  • Keeping data in accordance with the AML/CTF Law

Some eligible third parties include:

  • Banks
  • Notaries
  • Companies for investment funds management
  • Investment funds
  • Companies for mandatory and voluntary pension funds management
  • Insurance companies carrying out life insurance activities

Outsourcing to Group Entities

Entities can also entrust the implementation of these measures to third parties within their own group, provided that:

  • The group applies the measures and activities
  • Monitors obligations related to keeping data
  • Has introduced and applies a program for preventing money laundering and financing of terrorism

Ineligible Third Parties

Some providers of services are not considered eligible third parties, including:

  • Service providers with which entities have concluded contracts
  • Entities established in high-risk countries

Additionally, continuous monitoring of business relationships and transactions is not allowed to be outsourced to third parties.

Exceptions for Low-Risk Entities

The AML/CTF Law also provides exceptions for certain entities that carry out financial activities on an occasional or limited basis and are determined to pose a low risk of money laundering and financing of terrorism. These entities are not required to apply the measures and activities for preventing money laundering and financing of terrorism, provided they meet specific requirements.

Conclusion

Outsourcing due diligence measures to third parties can be a valuable tool for entities subject to AML regulations. However, it is essential that these entities carefully select eligible third parties that meet the necessary requirements.