Financial Crime World

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Financial Institutions Mandated to Disclose Beneficial Owners

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Financial institutions are required to identify and verify the beneficial owners of their customers under new regulations aimed at combating money laundering and terrorist financing.

Identifying Beneficial Owners

The regulations, which came into effect on [date], require financial institutions to determine whether there are natural persons who hold more than 25 percent of the ownership interests in a legal entity or association. This includes identifying individuals who control the entity through shareholdings, unit holdings, or membership, as well as those who have the right to appoint or remove more than half of the directors.

Enhanced Customer Due Diligence Measures

Financial institutions are required to apply enhanced customer due diligence measures when dealing with customers who pose a high risk of money laundering or terrorist financing. This includes:

  • Obtaining and verifying information on the customer, beneficial owners, and the purpose and intended nature of the customer relationship.
  • Gathering sufficient information on the respondent institution to understand its business, reputation, and supervision, as well as assessing its measures to combat money laundering and terrorist financing.

Prohibitions

Financial institutions are prohibited from establishing correspondent relationships with shell banks. A shell bank is defined as a bank that lacks adequate customer due diligence measures in place to prevent money laundering and terrorist financing.

Documenting Responsibilities

Financial institutions are required to document the responsibilities of each institution in a correspondent relationship, including:

  • Documenting the roles and responsibilities of each institution in the relationship.

These regulations aim to ensure that financial institutions have adequate knowledge of their customers, beneficial owners, and correspondent relationships to prevent the misuse of financial institutions for money laundering and terrorist financing.