Tighter Banking Regulations: Authorized Agents and Beneficial Owners Under Scrutiny

The [Authority] has recently issued new guidelines to strengthen anti-money laundering (AML), combating the financing of terrorism (CFT), and counter proliferation finance (CPF) regulations. These measures aim to enhance due diligence, transparency, and accountability in the financial sector.

Identification of Authorized Agents and Beneficial Owners

According to the new rules, all financial institutions, including banks and other financial services providers, are required to identify every person acting on behalf of a customer or occasional customer. This includes verifying their identity using reliable documents, data, or information as outlined in Annexure I and II.

• Financial institutions must verify the authority of authorized agents to act on behalf of customers or occasional customers.
• Banks are required to identify beneficial owners and take reasonable measures to verify their identity, including using reliable documents, data, or sources of information as outlined in Annexure I and II.

Enhanced Due Diligence

The guidelines also require financial institutions to apply enhanced due diligence (EDD) in certain circumstances, including:

• Business relationships with natural and legal persons from high-risk jurisdictions
• Transactions with PEPs and their close associates and family members

Additional Requirements for Legal Persons or Arrangements

For legal persons or arrangements, financial institutions must identify the customer and verify its identity by obtaining additional information, including:

• Name
• Legal form
• Proof of existence
• Powers that regulate and bind the entity
• Names of senior management officials

Additionally, banks are required to identify and verify the beneficial owners of legal persons, which includes identifying natural persons who have ultimate effective control over the entity.

Requirements for Trusts and Other Types of Legal Arrangements

For trusts and other types of legal arrangements, financial institutions must identify:

• Settlor
• Trustee(s)
• Protector (if any)
• Beneficiaries or class of beneficiaries
• Any other natural person exercising ultimate effective control over the trust

Prohibitions on Fake Identity Documents

The guidelines prohibit banks from opening or maintaining numbered accounts and conducting transactions on fake identity documents. Additionally, banks are required to ensure that account relationships with abbreviated names or titles are in accordance with the constituent documents of the entity.

Conclusion

The new guidelines aim to strengthen AML/CFT/CPF regulations by ensuring that financial institutions have a better understanding of their customers’ identities and the risks associated with their business relationships. The move is expected to enhance transparency and accountability in the financial sector.

Sources:

• [Authority], “Anti-Money Laundering, Combating the Financing of Terrorism, and Counter Proliferation Finance Regulations”
• Annexure I and II, [Authority], “Guidelines for Authorized Agents and Beneficial Owners”