Financial Crime World

Customer Due Diligence: A Vital Tool Against Money Laundering and Terrorist Financing

In the fight against money laundering and terrorist financing, the Seychelles government has implemented various measures to ensure that financial institutions and businesses operating in the country conduct thorough customer due diligence. This article provides an overview of the regulations surrounding customer due diligence and its importance in preventing illicit activities.

What is Customer Due Diligence?

Customer due diligence refers to the process by which financial institutions and businesses verify the identity of their customers, assess the risks associated with doing business with them, and monitor their transactions for suspicious activity. This process is designed to prevent money laundering and terrorist financing, as well as other criminal activities.

Simplified Customer Due Diligence

In certain situations, financial institutions and businesses may be able to apply simplified customer due diligence measures. These measures include:

  • Verifying the identity of the customer and beneficial owner after establishing a business relationship
  • Reducing the frequency of customer identification updates
  • Reducing the degree of ongoing monitoring and scrutiny of transactions

However, these simplified measures are only applicable in cases where there is a low degree of risk associated with the business relationship or transaction. In all other situations, financial institutions and businesses must apply enhanced customer due diligence measures to ensure that they are conducting thorough due diligence.

Enhanced Customer Due Diligence

Enhanced customer due diligence measures are designed for situations where there is a higher degree of risk associated with the business relationship or transaction. These measures include:

  • Conducting more in-depth assessments of the customer’s identity
  • Assessing the risks associated with the business relationship or transaction
  • Monitoring transactions for suspicious activity

In determining whether enhanced customer due diligence measures are necessary, financial institutions and businesses must consider a range of factors, including:

  • The customer’s risk profile
  • The type of product or service being offered
  • The geographical location where the business is being conducted

Geographical Risk Factors

The geographical location where a business is being conducted can also pose significant risks. Financial institutions and businesses must be aware of countries that are identified by credible sources as having ineffective systems to counter money laundering or terrorist financing activities, including:

  • Countries subject to sanctions, embargos, or similar measures issued by the European Union or the United Nations
  • Countries featuring on non-compliant lists (black and grey lists)

Conclusion

Customer due diligence is a critical tool in the fight against money laundering and terrorist financing. Financial institutions and businesses operating in Seychelles must ensure that they are conducting thorough customer due diligence to prevent illicit activities.

By understanding the regulations surrounding customer due diligence, financial institutions and businesses can ensure that they are compliant with relevant laws and regulations, and can help to prevent criminal activities from taking place.