Conducting Thorough Customer Due Diligence: A Key Measure to Combat Money Laundering and Terrorist Financing

Introduction

The Swedish Companies Registration Office has emphasized the importance of conducting thorough customer due diligence for business operators in order to prevent money laundering and terrorist financing. In this article, we will delve into the requirements for business operators to identify and verify their customers, including beneficial owners, politically exposed persons (PEPs), and other high-risk individuals.

Identifying and Verifying Customers

• Business operators must identify and verify the representative of a legal person through the same procedures as for physically present customers.
• The investigation should include verifying the identity of beneficial owners, defined as individuals who own or control the customer. This information can be obtained from the Swedish Companies Registration Office’s register of beneficial owners.

Limited Exceptions

• Limited companies whose shares are traded on a regulated market in Sweden, within the EEA, or in a corresponding market outside the EEA are exempt from the investigation obligation.

Politically Exposed Persons (PEPs)

• Business operators must identify and verify PEPs and their relatives.
• Adequate actions must be taken to determine the origin of assets owned by PEPs.
• A continuous and enhanced evaluation of business relations with PEPs is required.

Conducting Investigations

• Gather information about the purpose and nature of the business relation, including what products or services will be used and how they will be utilized.
• This information serves as a basis for assessing the customer’s risk profile and determining which activities and transactions are expected to take place within the framework of the relationship.

Risk-Based Approach

• The scope of investigation depends on the assessed risk attributed to the business relation, with higher-risk customers requiring more in-depth investigations.

Continuous Evaluation

• Business operators must conduct continuous evaluation of current business relations to ensure that customer due diligence is up-to-date and adequate to handle risks associated with money laundering and terrorist financing.
• Failure to comply with these requirements can result in legal consequences.

Proactive Approach

According to the Swedish Companies Registration Office, it is crucial for business operators to take a proactive approach to preventing money laundering and terrorist financing by conducting thorough customer due diligence. By following these guidelines, business operators can reduce the risk of being involved in illegal activities and ensure compliance with regulations.