CSPs Fall Short on Beneficial Ownership Identification and Verification
A recent thematic review by the Financial Intelligence Analysis Unit (FIAU) has revealed that some Customer Service Providers (CSPs) have shortcomings in identifying and verifying beneficial ownership information.
Identification of Beneficial Ownership
The review noted that CSPs often relied on the senior managing official as the beneficial owner (BO) without exhausting all possible means to identify a BO. In some cases, CSPs recognized the senior managing official as the BO after failing to identify a natural person exercising control over the customer through other means.
Verification of Identity Details
The review found that most CSPs had detailed procedures for verifying the identity details of BOs, but there were instances where this was not done consistently. In some cases, CSPs failed to obtain proof of beneficial ownership information being registered with a designated beneficial ownership register, as required by law.
Recommendations for Improvement
To improve their beneficial ownership identification and verification processes, CSPs are advised to:
- Conduct independent research to verify the information on the structure chart obtained from customers
- Only recognize the senior managing official as the BO after exhausting all possible means to identify a BO in accordance with Tier 1 and Tier 2, and only if there are no grounds of suspicion
- Retain records of actions taken to try to identify a BO in terms of Tier 1 and Tier 2
- Ensure that written procedures define which sources meet the criteria of “independent” and “reliable” when obtaining identity verification documentation
Ongoing Monitoring
As part of ongoing monitoring obligations, CSPs are expected to ensure that documents, data or information obtained in fulfillment of customer due diligence obligations are kept up-to-date. The FIAU has clarified the ongoing monitoring obligations on beneficial ownership information, emphasizing the need for subject persons to enquire whether changes have taken place within the shareholding or structure of a body corporate.
By following these recommendations and guidelines, CSPs can improve their beneficial ownership identification and verification processes, ensuring compliance with anti-money laundering regulations.