International Banks Must Identify Beneficial Owners of Client Accounts

In an effort to strengthen anti-money laundering and combating the financing of terrorism (AML/CFT) measures, international banks are now required to identify the beneficial owners of client accounts opened by professional intermediaries. The Reserve Bank of Vanuatu has issued Prudential Guideline No.9 - International Banks, which outlines the requirements for identifying beneficial owners.

Identifying Beneficial Owners

According to the guideline, where funds held by an intermediary are not co-mingled at the bank but have “sub-accounts” that can be attributable to each beneficial owner, all beneficial owners must be identified. In cases where funds are co-mingled, banks should look through to the beneficial owners.

However, there may be circumstances where banks do not need to look beyond the intermediary, such as when the intermediary is subject to the same regulatory and AML/CFT legislation and procedures as the bank. Banks must also assess the due diligence process of intermediaries and apply criteria set out in the guideline to determine whether a professional intermediary can be relied upon.

Politically Exposed Persons

The guideline emphasizes the importance of identifying and verifying politically exposed persons (PEPs) as customers. Banks must have in place risk-based systems and controls to identify, verify, and understand whether a customer or their beneficial owner is a PEP or an immediate family member of a PEP or close associate.

Non-Face-to-Face Customers

The guideline highlights the challenges posed by non-face-to-face customers, such as those who conduct business via postal, telephone, and electronic banking. Banks must apply equally effective customer identification procedures and ongoing monitoring standards for these customers as for those available for interview.

To mitigate risks associated with non-face-to-face customers, banks should consider:

• Certification of documents presented
• Requisition of additional documents
• Independent contact with the customer
• Third-party introduction
• Seeking verification of the source of funds

Correspondent Banking

The guideline also emphasizes the importance of due diligence in correspondent banking relationships, particularly where respondent banks have no physical presence in the jurisdiction. Banks must apply an appropriate level of due diligence to such accounts to prevent risks associated with non-face-to-face customers.

Conclusion

Overall, the guideline aims to enhance AML/CFT measures and prevent financial institutions from being used for illicit activities. International banks are expected to adhere to these guidelines to ensure compliance with Vanuatu’s AML/CFT regulations.