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Due Diligence: A Must for Financial Institutions

The Central Bank of Oman has emphasized the importance of due diligence in identifying and verifying the identity of individuals involved in trust or legal arrangements. According to Article 13 of the Law, financial institutions must ensure that documents, data, and information collected are kept up-to-date and relevant.

Whom to Identify

Financial institutions should identify and verify the following:

• Trustees, managers, directors, or persons in equivalent positions
• Settlors, founders, or persons in equivalent positions
• The trust or legal arrangement, including any persons settling assets into the trust or legal arrangement
• Protectors or persons in equivalent positions exercising ultimate effective control over the trust
• Beneficiaries or persons in equivalent positions
• Signatories

Beneficiaries Without Defined Identity

Beneficiaries who have not been defined at the time of establishing a business relationship with a financial institution should be identified when possible. No disbursement should be made until their identity is verified.

Customer Due Diligence

Financial institutions must apply customer due diligence measures to determine whether transactions or activities appear unusual or suspicious. This includes increasing monitoring and analysis of the business relationship and related transactions.

Enhanced Due Diligence

Enhanced due diligence measures should be applied when dealing with countries identified by the Committee as posing a higher risk of money laundering or terrorism financing.

Record Keeping

Financial institutions must maintain records of customer due diligence processes, transactions, and business relationships for at least ten years. These records must be kept in an official accounting system and made available to judicial authorities, the Center, and supervisory authorities upon demand.

Internal Policies and Controls

Financial institutions should develop and implement Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) policies, controls, and procedures to ensure compliance with the Law and relevant instructions. These policies must be approved by the board of directors or senior management and regularly reviewed for effectiveness.

Conclusion

In conclusion, due diligence is a crucial aspect of financial institutions’ operations, ensuring that transactions are legitimate and compliant with regulations. Financial institutions must prioritize customer due diligence, record keeping, and internal policies to maintain a secure and transparent environment.