Due Diligence Measures for Preventing Money Laundering and Terrorism Financing

Importance of Customer Identification and Verification

In order to prevent money laundering and terrorism financing, reporting entities must implement due diligence measures that ensure the identification and verification of customers’ identity. This section outlines the requirements for customer identification and verification.

Key Requirements

• Identification of Customers: Reporting entities must identify their customers through documents, data, or other means that provide sufficient information to determine the customer’s true identity.
• Verification of Identity: The entity must verify the customer’s identity by checking the authenticity of the provided documents or information.
• Ongoing Monitoring: Entities must continuously monitor customer activity and update their records as necessary.

Definitions

• Reporting Entity: An entity that is required to implement anti-money laundering (AML) measures, such as banks, financial institutions, and other organizations that engage in financial transactions.
• Beneficial Owner: The individual who ultimately owns or controls a customer or an organization.

Practical Application

In practice, reporting entities must ensure that they have implemented effective systems for identifying and verifying customers’ identity. This includes:

• Documentary Evidence: Obtaining documents such as passports, driver’s licenses, or other identification documents.
• Data Verification: Verifying the customer’s data through various means, including checks with government agencies or credit bureaus.
• Ongoing Monitoring: Regularly reviewing customer activity to detect and prevent suspicious transactions.

By implementing these measures, reporting entities can effectively prevent money laundering and terrorism financing while maintaining compliance with relevant laws and regulations.