Financial Crime World

Bank Must Terminate Business Relationship with Customer if Identity Verification Not Completed within Reasonable Timeframe

In a move to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, a bank must terminate its business relationship with a customer if it fails to complete customer identity verification within a reasonable timeframe.

Background

The Bankers Association of the Republic of China has issued new guidelines aimed at strengthening AML/CFT measures in Taiwan. The guidelines require banks to establish a timeframe for completing customer identity verification upon establishing a business relationship with a customer.

Guidelines

According to the guidelines, banks must:

  • Establish a timeframe for completing customer identity verification within 30 days of establishing a business relationship with a customer.
  • Suspend all transactions and refrain from carrying out further transactions except to return funds to their sources if the verification is not completed within 30 days.
  • Terminate its business relationship with the customer if the verification remains uncompleted after 120 days.

Enhanced Due Diligence Measures

The guidelines also require banks to take additional measures when establishing a business relationship with:

  • Legal persons: Banks must understand whether the customer can issue bearer shares and ensure that the beneficial owners are identified.
  • Politically Exposed Persons (PEPs): Banks must utilize an in-house database or external source information to determine if customers, their beneficial owners, or persons holding senior management positions are PEPs entrusted by a domestic or foreign government or international organization. If a customer is found to be a high-risk PEP, the bank must take enhanced due diligence measures.

Customer Due Diligence (CDD)

The guidelines emphasize the importance of CDD and require banks to:

  • Perform CDD procedures for non-face-to-face customers and customers establishing business relationships through the internet.
  • Perform enhanced due diligence measures for certain types of customers, including:
    • Private banking customers
    • Customers rejected by other banks

Statement from Bankers Association

A spokesperson for the Bankers Association said, “These guidelines aim to ensure that banks in Taiwan comply with international standards for AML/CFT and protect the financial system from money laundering and terrorist financing threats.”