Financial Institutions in Lesotho: New Requirements for Beneficial Ownership Verification and High-Risk Client Management

Introduction

In a bid to combat money laundering and terrorist financing, financial institutions in Lesotho are now required to take additional measures to verify the identity of beneficial owners and exercise caution when dealing with clients from high-risk countries. These new requirements aim to strengthen the country’s anti-money laundering and counter-terrorist financing efforts.

Verification of Beneficial Ownership

According to the Money Laundering and Proceeds of Crime Regulations, 2019, financial institutions must identify the natural person or persons who ultimately have a controlling ownership interest in a legal person. This requirement is designed to ensure that financial institutions understand the true identity of their clients and are not inadvertently providing services to individuals involved in illegal activities.

• Financial institutions must take reasonable measures to verify the identity of beneficial owners.
• If there is doubt about the identity of the beneficial owner or if no natural person exercises control through ownership interest, the institution must identify the natural person or persons exercising control over the legal person or through other means.

Dealing with High-Risk Clients

The regulations also require financial institutions to exercise caution when dealing with clients from high-risk countries. This includes:

• Gathering sufficient information about correspondent banking relationships with institutions from high-risk countries.
• Assessing the anti-money laundering and counter-terrorist financing controls of respondent institutions or service providers before establishing a new relationship.
• Terminating business relationships with clients who fail to provide sufficient information on identification data, intended nature and purpose of the relationship, or source of funds or wealth.

Enhanced Due Diligence

Financial institutions are also required to have regard to information available on the level of country risk from which the intermediary or third party operates. This means that they must assess the risks associated with doing business with clients or service providers from high-risk countries and take appropriate measures to mitigate those risks.

Sector Supervision and Guidance

Sector supervisory authorities and the Unit may issue directives, instructions, or pronouncements to financial institutions or service providers under their authority to apply enhanced measures to clients from high-risk countries. These measures are designed to ensure that financial institutions comply with international standards and best practices in anti-money laundering and counter-terrorist financing.

By implementing these new requirements, Lesotho’s financial institutions can help to prevent money laundering and terrorist financing, while also maintaining the confidence of their customers and the wider public.