Financial Crime World

Financial Stability: Banks Take Extra Precautions with CSO Clients

In a move to boost financial stability, banks are taking extra precautions when dealing with clients from non-cooperative tax jurisdictions and offshore zones.

Enhanced Customer Due Diligence

According to the International Bank for Settlements (IBS), Enhanced Customer Due Diligence (CDD) is necessary when dealing with high-risk transactions. This includes:

  • Obtaining senior management approval
  • Establishing the source of funds and wealth
  • Examining the background and purpose of transactions
  • Conducting enhanced ongoing monitoring of relationships

Identifying Non-Cooperative Jurisdictions

The Tax Justice Network has highlighted several “tax heavens” and offshore zones that are not cooperating with international tax authorities. The European Union has also identified these jurisdictions as being non-cooperative in terms of tax matters.

Armenian Regulations

In Armenia, banks are required to:

  • Provide financial information to regulatory authorities and public officials under certain circumstances
    • Providing information to criminal prosecution authorities
    • Financial system mediators
    • Tax authorities
    • Foreign financial intelligence agencies
  • Receive or access customer information during control visits
  • Exchange information with each other or credit organizations to ensure the safety of their activities and recoverability of loans

Protecting Client Privacy

Banks are required to:

  • Guarantee the maintenance of bank secrecy
  • Undertake safety measures to prevent violations
  • Violations of this regulation can result in fines and criminal liability

Dealing with High-Risk Clients

The report also highlights the need for enhanced due diligence when dealing with clients from Russia due to the ongoing sanctions. Banks are adopting various policies to ensure that money transfers are not being used to bypass sanctions.

Conclusion

Overall, banks are taking a proactive approach to financial stability by implementing stricter regulations and enhanced due diligence measures. This includes:

  • Providing financial information to regulatory authorities
  • Protecting client privacy
  • Conducting thorough background checks on high-risk clients
  • Implementing policies to prevent money laundering and terrorist financing

By taking these extra precautions, banks can help ensure the financial stability of their institutions and the integrity of the global financial system.