Financial Crime World

Swedish Business Operators Must Conduct Customer Due Diligence

Introduction

The Swedish Financial Authority has reiterated the importance of customer due diligence for all business operators in the country. According to new guidelines, businesses must verify the identity and authorization of their customers, including legal persons and natural persons, as well as identify beneficial owners.

Importance of Customer Due Diligence

Customer due diligence is a crucial step in preventing money laundering and terrorist financing. To achieve this, businesses must conduct thorough investigations into their customers’ identities, ownership structures, and risk profiles.

Investigation Requirements

For legal persons:

  • Representatives must be identified and verified through the same procedures as for other customers.

  • The representative’s authorization to represent the company must also be checked against power of attorney documentation or appointment certificates.

  • Businesses must investigate whether the customer has one or multiple beneficial owners, defined as individuals who own or control the company. This information can be obtained from the Swedish Companies Registration Office’s register of beneficial owners.

Exceptions

Exceptions to the investigation obligation apply to companies listed on regulated markets in Sweden, the EU, or equivalent markets outside the EU. In such cases:

  • Businesses must appoint an alternative real principal if the investigation reveals that there is no real principal or if the identified real principal does not ultimately own or control the company.

Identification of Politically Exposed Persons (PEPs)

Businesses must take adequate measures to determine the origin of assets belonging to PEPs or their relatives. This includes:

  • Identifying PEPs and their family members or known co-workers.
  • Gathering information about the purpose and nature of the relationship, including the customer’s business activities and how they will use the products or services provided.

Risk-Based Approach

The scope of the investigation depends on the assessed risk attributed to the business relationship. Higher-risk customers require more in-depth investigations, while lower-risk customers may only require simplified measures.

Ongoing Evaluation

Businesses must continuously evaluate their existing relationships to ensure that customer due diligence is current and adequate to handle the assessed risks for money laundering and terrorist financing.

Consequences of Non-Compliance

Failure to conduct customer due diligence can result in serious consequences, including fines and even criminal charges. As a result, it is essential for all businesses operating in Sweden to comply with these guidelines to maintain a safe and secure financial environment.

Key Takeaways

  • Verify the identity and authorization of customers, including legal persons and natural persons.
  • Identify beneficial owners and investigate their ownership structures and risk profiles.
  • Apply a risk-based approach to customer due diligence investigations.
  • Continuously evaluate existing relationships to ensure that customer due diligence is current and adequate.
  • Failure to comply with these guidelines can result in serious consequences.