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Financial Institutions Urged to Enhance Due Diligence Measures
In order to combat money laundering and terrorist financing, financial institutions have been urged to step up their due diligence measures. These measures aim to ensure that transactions being conducted are consistent with the knowledge of the customer, business, and risk profile.
New Regulations Require Enhanced Due Diligence
According to new regulations, obliged entities must apply each of the customer due diligence measures provided for in a previous article on a risk-sensitive basis depending on the type of customer, business relationship, product or transaction. This means that institutions may determine the degree of application of these measures based on the level of risk involved in a particular transaction.
Prior Risk Analysis and Written Measures
The regulations also require obliged entities to conduct a prior risk analysis and set down the extent of the measures in writing. Additionally, institutions must implement due diligence measures when there is suspicion of money laundering or terrorist financing, regardless of any derogation, exemption or threshold.
Enhanced Due Diligence for Existing Customers
Financial institutions are expected to apply due diligence measures not only to new customers but also to existing ones on a risk-sensitive basis. This includes applying additional measures to existing customers who contract new products or conduct transactions that are significant for their volume or complexity.
Casinos and Electronic Gaming Operators
Casinos and operators of gambling conducted by electronic means are also required to identify and verify the identity of all persons intending to participate in such activities, as well as to apply due diligence measures when conducting transactions worth €2,000 or more.
Relying on Third Parties
Financial institutions may rely on third parties to apply due diligence measures, subject to certain conditions. However, they must maintain full responsibility for the business relationship or transaction and ensure that the third party is compliant with the relevant regulations.
Strengthening the Fight Against Money Laundering and Terrorist Financing
The new regulations aim to strengthen the fight against money laundering and terrorist financing by ensuring that financial institutions have robust customer due diligence measures in place. Compliance with these regulations will be essential for financial institutions seeking to operate in a safe and secure environment.
Key Takeaways
- Financial institutions must apply due diligence measures on a risk-sensitive basis depending on the type of customer, business relationship, product or transaction.
- Obliged entities must conduct a prior risk analysis and set down the extent of the measures in writing.
- Institutions must implement due diligence measures when there is suspicion of money laundering or terrorist financing.
- Financial institutions may rely on third parties to apply due diligence measures, subject to certain conditions.
Sources
- Directive (UE) 2015/849 of the European Parliament and of the Council of 20 May 2015
- Regulation [insert regulation number]
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