Financial Crime World

PORTUGAL: Know Your Customer (KYC) Procedures for Banks and Financial Institutions

Overview of AML Regulations in Portugal

The Portuguese financial sector is subject to strict regulations regarding the know your customer or know your client (KYC) guidelines, which aim to verify the identity, suitability, and risks involved with maintaining a business relationship. The AML Law 83/2017, dated August 18, 2017, as amended in December 2021, sets forth the legal framework for anti-money laundering (AML) and combating the financing of terrorism (CFT).

Supervision and Oversight

The Bank of Portugal, CMVM, Insurance and Pension Funds Supervisory Authority (ASF), and Tax Authorities are responsible for overseeing AML controls. Financial entities are subject to the supervision of these authorities, while non-financial entities fall under the jurisdiction of their respective sectoral supervisors.

KYC Identification Process in Portugal

To conduct a typical KYC identification process, financial institutions in Portugal typically require customers to present physical identification documents, such as:

  • ID cards
  • Passports
    • Which must include information such as:
      • Name
      • Date of birth
      • Nationality
      • Taxpayer number

Legal persons must provide commercial registration certificates, which should include details like:

  • Legal name
  • Corporate purpose
  • Address
  • Ultimate beneficial ownership (UBO) information

Outsourcing Customer Due Diligence

The Portuguese AML Law also allows financial institutions to rely on third parties who are obliged by law to comply with AML regulations to meet customer due diligence requirements. These third parties can perform identification and due diligence duties on behalf of the financial institution.

However, outsourcing customer due diligence to non-oblige entities is not explicitly permitted under current legislation. The Bank of Portugal is expected to issue further guidance on this matter.

Permitted Third-Party Service Providers

In cases where outsourcing is allowed, credit institutions and equivalent entities may engage third-party providers who have obtained a license or registration requirement. Some examples of entities that can be relied upon as third-party service providers to comply with AML regulations include:

  • Postal services
  • Branches of credit institutions
  • Auditors
  • External accountants
  • Tax advisors
  • Notaries
  • Independent legal professionals
  • Trust or company service providers
  • Estate agents
  • Traders of high-value goods
  • Gambling services providers

Conclusion

In conclusion, financial institutions in Portugal must adhere to strict KYC procedures to prevent money laundering and terrorist financing. Understanding the requirements and regulations is crucial for banks and other financial institutions operating in the country.