New Regulations Aim to Combat Money Laundering and Terrorist Financing
In an effort to strengthen efforts against money laundering and terrorist financing, the government has introduced new regulations requiring financial institutions to identify and verify the identity of beneficial owners.
Identifying Beneficial Owners
Under the new rules, financial institutions are obliged to determine whether there are natural persons who hold more than 25% of the ownership interests in a company or association, control over 25% of the votes, have the right to appoint or unseat more than half of the directors, or exercise control through an agreement. These individuals will be considered beneficial owners and must be identified.
The regulations also apply to:
- Foundations
- Foreign legal arrangements
- Other associations
In these cases, financial institutions must identify the natural persons who control or exercise significant influence over the organization.
Enhanced Due Diligence Measures
The new rules require financial institutions to conduct enhanced due diligence measures when dealing with high-risk customers, such as:
- Politically exposed persons
- Close family members of and associates of such individuals
These measures will help prevent illegal activities from being committed through the financial system.
Prohibiting Correspondent Relationships with Shell Banks
The regulations also prohibit correspondent relationships with shell banks, which are banks that lack a physical presence in their country of incorporation and may be used for illegal activities. This move aims to improve transparency and accountability in the financial sector.
Benefits of New Regulations
The new regulations aim to:
- Improve transparency and accountability in the financial sector
- Strengthen efforts against money laundering and terrorist financing
- Enhance public trust in the financial system
- Reduce the risk of illegal activities being committed through the financial system
Overall, the new regulations represent a significant step forward in the fight against money laundering and terrorist financing. They will help to ensure that the financial sector is used responsibly and for legitimate purposes.
What Financial Institutions Must Do
Financial institutions must take several steps to ensure compliance with the new regulations:
- Identify beneficial owners and verify their identity
- Conduct enhanced due diligence measures for high-risk customers
- Apply enhanced scrutiny when dealing with politically exposed persons and close family members of and associates of such individuals
- Prohibit correspondent relationships with shell banks
Failure to comply with the regulations may result in penalties, including fines and even license revocation.