Dominican Republic Tightens Know Your Customer (KYC) Requirements for Financial Services
Introduction
In a move to combat money laundering and terrorist financing, the government of the Dominican Republic has strengthened its know your customer (KYC) guidelines and regulations for financial services. The new rules require professionals in the sector to verify the identity, suitability, and risks involved with maintaining a business relationship.
Background
The Know Your Customer (KYC) requirements are now more stringent than ever, thanks to Law 155-17, which went into effect in August 2017. This legislation is the primary regulatory framework for anti-money laundering (AML) in the country. Financial regulators have incorporated these laws into their sectors through specific regulations.
Conduct of a Typical KYC Identification Process
The conduct of a typical KYC identification process varies depending on the sector, with some sectors being more advanced than others. However, the minimum standard for the process is to identify the client and/or its representative, as well as identification of the final beneficiary. The methods used to accomplish these requirements differ between sectors.
Key Steps
- Identify the client and/or its representative
- Verify the identity of the client and/or its representative
- Conduct due diligence on the client and/or its representative
- Assess the risks involved with maintaining a business relationship with the client and/or its representative
Outsourcing Customer Due Diligence
The possibility of relying on third parties who are obliged by law to comply with AML regulations depends on the sector. However, even if a regulated entity outsources customer due diligence to a third party, it does not exempt them from responsibility in case of any breach of regulation.
Considerations
- Ensure that the third party is reliable and trustworthy
- Verify that the third party has the necessary expertise and resources to perform customer due diligence effectively
- Establish clear lines of communication with the third party
- Monitor the third party’s performance and address any concerns or issues that arise
Digital Onboarding and Third-Party Providers
Some sectors permit digital onboarding, including the KYC process, while others do not have specific regulations regarding this. For instance, banking allows for digital onboarding with restrictions related to contracting third parties, even if they are not obliged to meet AML regulations.
Benefits
- Increased efficiency and speed of the onboarding process
- Reduced costs associated with manual verification processes
- Improved accuracy and reliability of customer data
Entities That Can Be Relied Upon
Several entities are recognized as third parties that can be relied upon to comply with AML regulations, including credit institutions, financial institutions, auditors, external accountants, and tax advisors. Other entities such as notaries, independent legal professionals, trust or company service providers, estate agents, and those trading high-value goods are also considered reliable.
Conclusion
The strengthening of KYC requirements in the Dominican Republic is part of a broader effort to combat money laundering and terrorist financing. As financial services become increasingly digital, it’s essential for regulatory bodies to stay ahead of emerging trends and technologies while maintaining the integrity of financial systems.